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Conclusion

From a policy standpoint, retirement in America has moved to an area where plan participants need to
be responsible for their own retirement. Participants should be given all the tools necessary to
navigate the retirement landscape, whether invested through an IRA or a 401(k) plan. As the DOL
correctly points out, asset allocation is a major, if not the major, tool to be utilized in that process and
it is imperative that participants in 401(k) plans have access to the tools they need. By taking the
burden off of the plan sponsors to adopt these programs, the significant barrier facing participants in
obtaining advice would be removed. We strongly urge Congress and the DOL to consider taking this
next very important step to accomplish the goal of making advice available to all plan participants.

Wells Fargo appreciates the opportunity to provide this written commentary. We believe the
proposed rule provides a good step towards helping more employees obtain the assistance they need
when saving for retirement. We also believe that, for the reasons stated herein, there is a significant
opportunity to reach a larger universe of participants through further legislative and regulatory help.
Thank you again for your time and consideration of our views. We would welcome any opportunity
to discuss this with you further. If you have any questions, please do not hesitate to contact me at the
above address.

Sincerely,

John Papadopu a

President — Wells Furgo Retirement
704-383-0485

john.papadopulos@wachovia.com


‘Wells Fargo Retirement

MAC D1050-140
WELLS ‘Three Wachovia Center
FARGO 401 S. Tryon Street, 14" Floor

Charlotte, NC 28288-1156
wellsfargo.com/retirement

May 5, 2010

Via Email: e-ORI@dol.gov

Office of Regulations and Interpretations,
Employee Benefits Security Administration,
Room N-5655,

U.S. Department of Labor,

200 Constitution Avenue, NW,
Washington, DC 20210

Re: 2010 Investment Advice Proposed Rule
Ladies and Gentlemen:

Wells Fargo & Company and its affiliates (“Wells Fargo”) appreciate this opportunity to provide
comments to the Department of Labor (“DOL”) regarding its proposed rule on investment advice for
participants and beneficiaries. Wells Fargo includes Wells Fargo Retirement, a division of Wells Fargo
Bank, N.A., and Wells Fargo Advisors, both leading providers of retirement solutions to businesses,
institutions and individuals throughout the United States. In combination, Wells Fargo ranks first in
annuity distribution, fourth in IRA assets and seventh in retirement plan recordkeeping.’

Wells Fargo Retirement is a national leader in providing total retirement management, investments
and trust and custody solutions tailored to meet the needs of institutional clients. Since 1952, Wells
Fargo Retirement serviced the entire scope of institutional retirement clients; from single participant
401(k) plans to complex billion dollar defined contribution plans for America’s Fortune 500
companies. Wells Fargo Retirement is recognized as an industry thought leader and innovator in
participant level education, communication and advice.”

Wells Fargo Advisors, the third largest provider of retail brokerage services, administers more than $1
trillion in client assets. It accomplishes this task through 15,600 full-service financial advisors in 1,100
branch offices in all 50 states and 5,900 licensed financial specialists in 6,610 retail bank branches in
39 states.? Affiliates of Wells Fargo Advisors assist employers in sponsoring retirement plans, and our
financial advisors work with countless investors as they move from active work life into retirement.

Wells Fargo is dedicated to helping individuals plan for a secure retirement in an age of increasing life
spans and individual responsibility. Wells Fargo offers a range of services from simple education
programs to full service advice products. As a result, the DOL’s proposed regulation on investment
advice is of great importance to Wells Fargo, its affiliates and the 401(k) industry as a whole.

As of December 31, 2009.

2 Wells Fargo was the top winner at the 2009 Profit Sharing/401(k) counsel of America (PSCA) annual awards ceremony,
winning seven signature awards and two honorable mentions for its retirement plan communication and education

* Wells Fargo Advisors includes a number of brokerage operations that have combined as the result of the 2008 purchase of
Wachovia Corporation by Wells Fargo & Company. For the ease of discussion, this letter will use Wells Fargo Advisors to refer to
all of those brokerage operations.

Together we'll go far

Wells Fargo Bank, N.A.



Page 2 of 4

We strongly support the efforts of the DOL to make investment advice broadly available to
participants in employee benefit plans. While much of the legislative and regulatory work done will
help achieve that goal, we believe there is an opportunity to greatly expand the availability of advice
beyond that current framework. Accordingly, we urge Congress and the DOL to consider the following
in furthering the availability of participant investment advice.

The Core Issue: Plan Sponsors are Not Making Advice Programs Available to Participants

As a basic premise, we agree with the DOL’s conclusion that asset allocation is a very important
component of any retirement planning program for participants. We also agree that although many
participants need that help, they are not able to get it. We believe that one of the key reasons that
participants are not able to get the help they need is that the current legislative and regulatory
framework places significant fiduciary risk on plan sponsors to make advice programs available to
their participants. Generally, service providers have developed a myriad of advice programs that are
accessible by IRA holders but are not generally accessible to participants in 401(k) plans. The reason
for this is that plan sponsors must make an affirmative election to make the advice program available
in the retirement plan. In making that decision, the plan sponsor is required to make a fiduciary
determination, as it does for all investment options made available to its participants, as to the
prudence of the program and the suitability for its participants. This analysis must be done upon
making the program available and periodically thereafter. This is a significant undertaking for most
plan sponsors that are not equipped with the expertise to make that determination. Unlike selecting
an investment line-up consisting of a suite of mutual funds, collective funds, and other investment
options, advice programs do not have readily ascertainable or measurable performance data to assist in
the analysis. Fund information is easily obtained via the internet or with comparative information
obtained from the service providers themselves. The unavailability of comparative information
regarding advice products leaves plan sponsors in a precarious position when trying to analyze the
prudence of the program.

Asa result, the current legislative and regulatory framework (including this current proposal) provides
no incentive for plan sponsors to make advice programs available to their participants. Simply put, it

is easier and less risky for plan sponsors to just not offer an advice program at all.

The Core Solution: Take Plan Sponsors Out of the Advice Equation

We believe the best way to provide participants with an opportunity to obtain advice within a 401(k)
plan is to allow the participants to obtain advice directly from programs offered by service providers.
Plan sponsors should no longer be required to undertake the significant fiduciary risk of selecting and
monitoring the advice program. As mentioned above, this is something most plan sponsors are not
equipped to do anyway.

Many service providers have developed advice programs for 401(k) participants utilizing existing
guidance issued by the DOL (e.g, Advisory Opinion 2001-09A). The issue is that the current
guidelines, including the proposed rule, continue to rely on plan sponsors for adoption. By removing
the plan sponsor from the advice equation, asset allocation and other advice programs will become
available to significantly more participants. Some may perceive that this approach could create
additional risk for plan participants by removing a layer of fiduciary protection (i.e., the plan sponsor).
However, we believe that the current regulatory and legislative framework regarding the requirements
for the advice programs (e.g., computer models and fee leveling), along with the fiduciary status of


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service providers in providing the advice, would continue to allow participants to enjoy the fiduciary
protections afforded under ERISA.

Current Proposal: Specific Concerns

With respect to the current proposed rule, we believe there are a number of areas of concern that the
DOL should consider as it finalizes the rule. The following briefly summarizes those concerns:

Recordkeeping Requirements

Initially, we believe that the recordkeeping requirements need modification. The recordkeeping
requirements would be a significant challenge for firms the size of Wells Fargo. A plan could be asked
to approve multiple advice models since each participant may have a different advice arrangement.
The recordkeeping would be quite cumbersome where a plan has thousands of employees. Firms
would need to have a limited standardized advice platform in order to track and maintain records of
advice provided to individual plan participants. We ask the DOL to consider modifying the
recordkeeping requirements to allow participants broad access to advice models.

Certification Requirement

The requirement that a certified independent expert “certify” the advice model also creates a number
of questions. One such question is that the proposal does not clearly define who can qualify as the
certified independent expert. We would request that further clarification be included in the final rule.
In addition, the proposed rule requires the entity certifying the model to be a fiduciary. Under section
412 of ERISA, every fiduciary to a plan must be bonded, regardless of whether that fiduciary handles
plan assets, unless an exemption applies. The DOL should issue an explicit statement exempting the
entity certifying the model from the bonding requirements.

Audit Requirements

It will be important for the DOL to provide more clarification on the audit of investment advice.
Critical to this clarification is gaining an understanding of what form that audit takes. For example, it
would be helpful to know if the audit could be a sample of the participant advice given. Some may
contend, and the proposal is unclear on this point, that the audit must extend to the advice given to
every participant. Such an approach would be extremely onerous on the providers and would not be
consistent with most audits in the securities industry. Accordingly, we urge the DOL to clarify that
the audit would only require a review of a sampling of the advice given.

Advice and Rollovers

A final concern arises from advice and rollovers. There is confusion over whether offering advice to a
plan participant would prohibit an advisor such as Wells Fargo Advisors from accepting a rollover into
a firm account. Given the need for advice throughout the retirement structure, it likely does not
benefit investors overall if such a prohibition on rollovers is imposed. Accordingly, we urge the DOL
to clarify that this prohibition does not apply. Conversely, if the DOL believes that such a prohibition
is needed, we would urge that the DOL make it time limited, no more than 24 months from the first
time advice is given.