July 21, 2015

By regulations.gov and email: e-OED@dol.gov

Mr. Joe Canary, Director

Office of Regulations and Interpretations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Ave., NW, Room N-5655

Washington, D.C. 20210

Attention: RIN 1210–AB32; ZRIN 1210-ZA25

Re: Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement 

Investment Advice; Proposed Best Interest Contract Exemption

To Whom It May Concern:

The PNC Financial Services Group, Inc. (“PNC”) appreciates this opportunity to provide

comments on the proposed regulation by the Department of Labor (“Department”) under the 

Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which is intended 

to redefine the term “fiduciary” under section 3(21) of ERISA and section 4975(e) of the Internal 

Revenue Code of 1986, as amended (the “Code”), and on the Best Interest Contract Exemption 

(“BIC Exemption”), and other proposed exemptions and revisions to current exemptions 

(collectively referred to in this letter as the “Proposal”).

1 We share the Department’s goal of 

protecting retirement plan participants and beneficiaries and individual retirement account 

(“IRA”) owners. However, we believe that revisions to the proposed definition of “fiduciary” 

and to the BIC Exemption are essential to ensure that retirement investors continue to have 

access to the investment education, advice and services that are essential to achieving retirement 

security. 

PNC is a diversified financial services company with $353.9 billion in assets and 

$239.7 billion in deposits, as of June 30, 2015. PNC is a main street banking organization 

focused on domestic business activities in retail banking, corporate and institutional banking, 

 

1 Department of Labor, Employee Benefits Security Administration, Definition of the Term “Fiduciary”; Conflict 

of Interest Rule—Retirement Investment Advice, 80 Federal Register 21,928 (April 20, 2015) (“Fiduciary 

Proposal”); Proposed Best Interest Contract Exemption, 80 Federal Register 21,960 (April 20, 2015) (“BIC 

Exemption Proposal”).
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July 21, 2015

Page 2

asset management, retail brokerage, and residential mortgage banking. PNC provides many of 

its products and services nationally and others in the primary geographic markets of PNC Bank, 

National Association, (“PNC Bank”), which currently operates in 19 states and the District of 

Columbia in the Northeast, Midwest and Southern United States. We provide deposit, lending, 

cash management and investment services to more than 6 million consumer and small business 

customers. 

PNC provides trust, custody, recordkeeping, asset management, brokerage, banking and 

other services to more than 1,500 ERISA-governed employee benefit pension plans, more than 

75,000 trust accounts and more than 580,000 IRAs through PNC Bank, as well as PNC 

Investments, LLC (“PNCI”), PNC’s dually registered retail broker-dealer/investment adviser, 

and other affiliates. Our clients span the spectrum of small to large, but we focus on main street 

investors, mid-size companies, municipal governments, and small to mid-size ERISA plans. 

With regard to ERISA plans, PNC provides a wide range of services, which include:

• Traditional trust and custody services

• 401(k) plan recordkeeping and other support services

• Asset management and general brokerage

• Traditional banking services

With regard to IRAs, PNC Bank serves as IRA custodian for our retail banking 

Traditional and Roth IRAs, and as custodian and investment manager for our wealth 

management Traditional, Roth and SEP IRAs (with a self-directed option available). PNCI 

focuses on helping PNC’s banking customers meet their long-term investing goals and offers 

Traditional, Roth, SEP and SIMPLE IRAs (with custody and clearing provided through an 

unaffiliated custodian). IRAs are available both in transactional brokerage accounts and in 

several managed account “wrap” programs.

In addition, PNC operates as the custodian of Health Savings Accounts (“HSAs”), but 

does not operate in a fiduciary capacity with respect to HSAs. 

1. Support of Best Interest Standard and General Concerns with the Proposal

PNC shares the public policy goals of the Department in amending the definition of 

“investment advice” in section 2510.3-21 of the Department’s regulations to ensure financial 

institutions are working in the best interests of retirement investors.2 PNC has a long history of 

acting as a fiduciary for retirement investors when we provide trust and investment management 

services to customers, whether such status is imposed by ERISA, the Code, or another legal 

regime. Even when not acting as a fiduciary, we strive to act in the best interest of customers in

what we do every day, even during the sales process, across all of our businesses for all of our 

 

2

 Fiduciary Proposal at 21,956 amending 29 C.F.R. 2510.3-21.
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July 21, 2015

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customers. Accordingly, we welcome the opportunity to work with the Department to clarify the 

meaning of “fiduciary” as it pertains to retirement investors, and to clearly distinguish where it is 

appropriate for financial institutions to be held to a “best interest of the customer” standard and 

the circumstances that give rise to fiduciary status.

The Proposal, if adopted in its current form will be transformative in the way PNC 

interacts with customers across many lines of business. Retirement investors, institutional clients 

and ERISA plans have long looked to PNC for our banking products, investment products, 

retirement planning, investor education, and brokerage and advisory services in order to achieve 

financial security in retirement for themselves and their participants. The regulations will impact 

a range of services we provide retail customers, including the retail brokerage services provided 

by PNCI, the wealth management and trust services provided through our Asset Management 

Group (“AMG”), and, potentially, the deposit products we provide through our retail bank. 

Furthermore, the Proposal will impact the services we provide to institutional and corporate 

customers, including the services we provide to institutional customers through AMG and the 

deposit services we provide to labor unions, company pension plans and other corporate 

customers through our corporate and institutional bank. 

While we broadly share the Department’s policy goals, we believe it is of paramount 

importance that the Department significantly revise several aspects of the Proposal before issuing 

final regulations. We are concerned that the expanded definition of “investment advice” has the 

potential to chill unnecessarily the healthy, upfront discussions and interactions financial 

institutions ordinarily have today with retirement investors. Furthermore, while we appreciate 

that the Department has proposed the BIC Exemption as way to permit financial institutions to 

continue to collect third-party and/or differential compensation, the exemption is in several 

respects unworkable as proposed. Failure to address the issues associated with the BIC 

Exemption will reduce its effectiveness as a way for financial institutions to continue to provide 

retirement investors with a range of high quality products and services at an efficient price. 

The Proposal also is not clear on its applicability to, or treatment of, bank savings 

accounts, certificates of deposit, and other deposit products and sweep services we regularly 

offer to retail customers, businesses and labor unions. We believe the Department needs to 

clarify the Proposal’s applicability to such products, and to the banking services that are 

regularly provided to HSAs, Archer Medical Savings Accounts (“MSAs”), and Coverdell 

Education Savings Accounts (“CESAs”). 

The Department proposes several helpful carve-outs to the definition of “investment 

advice” that will help financial institutions comply with the expanded definition. However, we 

recommend several revisions to the proposed platform provider, investment education, and 

valuation carve-outs in order to ensure the more effective delivery of services to retirement 

investors.
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July 21, 2015

Page 4

We also believe the timeline for implementation of the Proposal announced by the 

Department is unworkable if the regulation and exemptions are adopted as proposed. Given the 

administrative and operational challenges that this transformational rule would present, we 

recommend that the Department adopt an implementation period of at least 18 months.

Finally, we recognize and appreciate that the Department has engaged in extensive 

consultation with other Federal agencies, including the Securities and Exchange Commission 

(“SEC”), Internal Revenue Service, and the Commodity Futures Trading Commission.3

However, it is important to underscore that the Proposal would not result in the highly desirable 

outcome of a coordinated fiduciary standard applicable to the provision of investment advice in 

all circumstances. The SEC has authority to impose new fiduciary standards on broker-dealers 

that provide investment advice and SEC Chair Mary Jo White has announced her support for 

such a standard. The manner in which financial institutions provide advice to investors under 

revised and expanded fiduciary standards should be consistent, regardless of whether the 

particular customer – or, importantly, one account of several maintained by the same customer –

is subject to the Department’s authority. Absent coordination with the SEC, the Proposal is 

likely to result in substantial customer confusion. PNC agrees with the recommendation made 

by the Financial Services Roundtable (“FSR”) in its comment letter on the Proposal that any 

expansion of fiduciary standards by the Department should be informed by the information the 

SEC’s Office of Compliance Inspections and Examination will gather through its RetirementTargeted Industry Reviews and Examination Initiative.4

2. Upfront Marketing, Sales, Rollover and Distribution Discussions

PNC personnel across multiple lines of business regularly engage in in-depth 

conversations with customers to help identify appropriate retirement investing products and 

services and make referrals across lines of business as needed to best meet the customer’s needs.

5

When engaging in such conversations, we endeavor always to act in the best interest of our 

customers. However, the Proposal is unclear as to whether, and to what extent, these types of 

conversations with customers and prospective customers would trigger fiduciary status under 

ERISA or the Code. In particular, the Proposal seems to apply earlier in the sales process than 

would be beneficial to or reasonably expected by our customers.

 

3

 See Fiduciary Proposal at 21,937-38.

4 Letter from the Financial Services Roundtable, dated July 21, 2015, Appendix A, Section XII (“FSR Comment 

Letter”). 

5

 The American Bankers Association (“ABA”) raises concerns in its comment letter that referrals by employees 

of a bank and its affiliates could constitute fiduciary activities under the Proposal. Letter from the American 

Bankers Association, dated July 21, 2015, Section III.A.2.d (“ABA Comment Letter”). We concur with 

ABA’s position that such referrals should not give rise to fiduciary status, and the Department should clarify 

this in the final rule. 
Office of Regulations and Interpretations

July 21, 2015

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As a result, conversations that are not deemed fiduciary conversations today, and that 

would typically be viewed more as a part of a customer’s comparison shopping and preliminary 

due diligence, may be deemed actionable fiduciary advice under the Proposal, subject to all of 

the ensuing requirements, limitations and liability. Conversations that could be potentially 

subject to fiduciary requirements include: 

 Sales conversations in which PNC describes its products and services to a retirement 

plan fiduciary, IRA owner, or investor considering opening an IRA;

 Responses to requests for proposal (“RFPs”) from small employer-sponsored plans; 

 Investor-initiated conversations with our call centers; 

 Delivery of neutral and factual educational information regarding plan distribution 

and rollover options upon retirement or death of a retirement plan participant or IRA 

owner; and 

 Presentation of required minimum distribution options. 

We are concerned that fiduciary liability may also attach to certain of our advertising materials, 

product brochures, lists of investments and financial research. 

PNC by no means suggests that these interactions should not be subject to a standard of 

care, but, to be workable, the standard applicable to these interactions should be mutually 

understood and appropriate for the activity. For example, it is not possible for a financial advisor

to adhere to a fiduciary standard that requires acting in the sole interest of a customer (to the 

exclusion of the firm’s interest) while suggesting that a customer purchase her firm’s products or 

services. Furthermore, when a financial institution understands it will be acting in a fiduciary 

capacity, it can take appropriate steps (i.e., consent, disclosures, fee leveling, etc.) to address any 

prohibited transaction concerns.6 However, the Proposal includes only a limited carve out for 

investment education and no carve out for sales conversations with small retirement plans and 

IRA owners. Moreover, the Proposal includes all retirement plan and IRA rollover and 

distribution conversations under its definition of “fiduciary advice” – seemingly including a 

conversation about changing IRA custodians, because it involves a distribution and rollover or 

transfer between IRAs (typically the threshold question before an investment discussion is even 

 

6 FSR presents the crux of this issue well, stating: “[t]he breadth of the Proposal is such that one could assert that 

any seller of any good, product or service is providing ‘investment advice.’ It is likely that, in the context of 

negotiating the sale, the seller of the good or product would make suggestions as to why it would be beneficial 

for the purchasing Retirement Investor to effect the purchase. Such person would receive consideration in 

connection with the transaction that could be sufficient to meet the conditions of the proposal. If the purchaser 

makes its decision in part in reliance on the suggestions made by the seller, the seller might be providing 

investment advice. Ordinarily, the provisions of Section 408(b)(2) would provide a prohibited transaction 

exemption for the provision of services, and Section 408(b)(17) might apply to the sale of a good. However, if 

the person is providing investment advice as a fiduciary, which would appear to be the case under the Proposal,

then these exemptions would not be available.” FSR Comment Letter at Appendix A, Section XII b.
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July 21, 2015

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initiated) – with no exemptive relief for fees or compensation. Consequently, the Proposal would 

severely limit the type of helpful guidance PNC could provide during the sales process, leaving 

customers to sort through a series of complex products and rules on their own, with potentially 

detrimental results from a retirement savings, investment and tax perspective if the customer 

makes inappropriate choices. 

We believe it is important to address these concerns for a number of reasons. First, a

large portion of PNC’s client base falls outside of the large plan definition under the “seller’s 

exception” – even in our institutional business. Many plans for which PNC provides services 

(including plans with less than 100 participants or whose fiduciary manages less than 

$100 million in assets, so called “small” plans under the Proposal) will issue RFPs to identify

potential investment managers and other service providers and obtain sufficient information from 

those potential investment managers and service providers to enable the plan fiduciaries to make 

informed decisions. The RFPs generally require us to submit information about our capabilities, 

service standards, and suggested investment strategy (which may require sample portfolios), as 

well as costs. Similarly, individual retirement customers often seek to engage us in a detailed 

discussion regarding potential investment strategies and rollover or distribution options, as well 

as costs, prior to making a hiring the decision. Additionally, we may engage in general cash 

management discussions with our deposit/business banking clients without necessarily 

specifically discussing that the customer may include its employee benefit plans among the 

assets that will benefit from the advice. In each of these circumstances, PNC operates in the best 

interests of the prospective customer and we would not object to working with the Department 

on a regulation that imposes a best interest standard on financial institutions during these upfront 

interactions. 

It is important to recognize, however, that prospective customers are not commonly

relying on the sales information as “advice” and would not expect financial institutions to adhere 

to the extremely high standard applied to fiduciary, which might absurdly require the financial 

institution to compare its own products and services to those provided by other financial 

institutions. Instead, they are considering whether they will choose PNC to obtain the advice. 

Absent such detailed sales discussion, potential customers cannot make informed hiring 

decisions.

We believe that FSR’s proposed Simple Investment Management Principles and 

Expectations Proposal (the “SIMPLE PTE”) is a good start to achieving a workable standard. 

The SIMPLE PTE incorporates the ERISA prudence standard but not ERISA's “solely in the 

interest” fiduciary standard, which as we have discussed above is very problematic, particularly 

in the marketing and sales context.7 We also recommend that the Proposal be revised to retain 

the standards of “mutual understanding” and “reliance” from the current regulatory definition of 

investment advice. In eliminating three of the five elements in the current five-prong test for an 

 

7 FSR Comment Letter at page 9 and Appendix A, Section XII.
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July 21, 2015

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ERISA investment advice fiduciary, the Proposal significantly expands the categories of business 

activities that would result in fiduciary status, to the potential detriment of our customers (and 

potential customers), as described above. We believe that the definition of “fiduciary” instead 

should relate to situations where the parties agree that the recommendations will play a 

significant role in the investor’s decision-making.

8

Furthermore, PNC strongly urges the Department to broaden the seller’s exception to 

include sales activities to retail investors, including IRAs and other retail accounts, and to cover 

all retirement plans (including small plans). We also believe the Department should include 

services, in addition to assets, under the seller’s exception. Under the Proposal, a financial 

institution offering its services to a retirement investor likely would be deemed to be offering 

investment advice simply by virtue of offering its services to the investor. This does not appear 

to be consistent with the Department’s intent under the exception. 

In addition, we make the following recommendations:

 The proposed definitions of “recommendation” and “fee or other compensation, 

direct or indirect” should be revised consistent with SIFMA’s suggestion in its 

comment letter on the Proposal;

9

 The regulation should permit a fair and balanced discussion of plan and IRA 

distribution and rollover options subject to a best interest standard, consistent 

with FINRA’s guidance, set forth in Regulatory Notice 13-45; and 

 The regulation should include a time proximity standard between a 

recommendation and a sale.

10

 

 

8 The Securities Industry and Financial Markets Association (“SIFMA”) also discusses the importance of keeping 

these standards in the definition of investment advice. Letter from The Securities Industry and Financial 

Markets Association regarding the Fiduciary Rule Itself, July 20, 2015, at 27-33 (“SIFMA Fiduciary Letter”). 

PNC supports SIFMA’s comments on retaining these standards and, in particular, we agree with SIFMA’s 

comment that the “. . . elimination of the concept of a meeting of the minds opens the door to potentially false 

but nearly indefensible claims. This standard would allow a person who has not received fiduciary advice to 

later claim that he “understood” that it was investment advice, or that the financial professional ‘understood’

that the information was targeted to the person, leaving the financial firm with an impossible task of proving 

that the claimant could not have so understood the statement.” Id. at 28. We would expect that the cost of 

compliance with the proposed re-definition would result in a significant reduction in available products and 

services and increased costs passed to customers.

9 SIFMA urges the Department to revise the definition of “recommendation” to mean “a communication that, 

based on its content, context, and presentation, would reasonably be viewed as a call to action or specific 

endorsement that the advice recipient engage in or refrain from taking a particular course of action. 

Recommendation does not include communications that merely suggest actions or course of actions for 

consideration with no call to action to engage in the action or course of action. A communication that would 

not be a recommendation within the meaning of applicable FINRA rules will not be deemed a recommendation 

under this section.” SIFMA Fiduciary Letter at 59-60. PNC agrees with this recommendation.

10 We agree with the proximity test recommended by SIFMA when it says that “[i]f a financial professional 

unsuccessfully attempts to sell an IRA to a plan participant, but months or years later, the participant on his or 
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July 21, 2015

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3. Best Interest Contract Exemption

As the Department notes in the notice proposing the BIC Exemption, a variety of forms 

of compensation commonly received by retail broker-dealers and their financial advisers are 

prohibited under ERISA and the Code.11 PNC appreciates the Department’s proposal of the BIC 

Exemption as a way to permit retail broker-dealers and other financial institutions to continue 

providing transactional services to retirement investors, as defined in the BIC Exemption 

Proposal, without completely restructuring their relationships with third-party product providers 

and the longstanding forms of compensation paid to their financial advisers. We believe, 

however, that certain features of the BIC Exemption, as proposed, could result in a reduction in 

the services available to retirement investors or be detrimental to the overall investing experience 

for customers seeking to invest their retirement assets. 

We focus below on a few aspects of the proposed BIC Exemption with respect to which 

PNC may offer a unique perspective. Numerous other aspects of the proposed exemption are 

troubling, however. For example, we agree with SIFMA that the point of sale disclosure 

required by the BIC Exemption Proposal would be extremely difficult to accomplish for firms 

and could slow execution for customers.12 Moreover, as FSR notes in its letter, the extensive 

detailed compensation disclosures required under the proposed exemption would be exceedingly 

costly and burdensome to comply with.13 We also question whether the point of sale disclosures 

would truly benefit retirement investors. It seems equally, if not more likely, that such 

disclosures, along with the lengthy new contract that would be added to the stack of paperwork 

and disclosures investors currently receive at account opening, would simply exacerbate further 

an already significant information overload problem facing retail investors.14 We embrace the 

comments of SIFMA and FSR on these aspects of the proposed BIC Exemption. 

 

her own, opens an IRA at the financial institution (not through that same financial professional) and that 

financial institution receives a fee, the future looking receipt of compensation definition is drafted to make the 

financial institution into a fiduciary without any exceptions or carve-outs.” Id. at 10, footnote 9.

11 BIC Exemption Proposal at 21,961.

12 Letter from The Securities Industry and Financial Markets Association regarding the Proposed Best Interest 

Contract Exemption, July 20, 2015, at 27-30 (“SIFMA BIC Exemption Letter”). As discussed in more detail 

below, PNCI has expanded its ability to provide high quality investment services to customers by developing 

several call centers. It is unclear how the point of sale disclosure requirement could be satisfied though this 

important service delivery channel. 

13 FSR Comment Letter, Appendix A, Section VII. 

14 SEC Chair White described this phenomenon in a 2013 speech: “When disclosure gets to be ‘too much’ or 

strays from its core purpose, it could lead to what some have called ‘information overload’ – a phenomenon in 

which ever-increasing amounts of disclosure make it difficult for an investor to wade through the volume of 

information she receives to ferret out the information that is most relevant.” Mary Jo White, Chair, “The Path 

Forward on Disclosure,” Speech before the National Association of Corporate Directors – Leadership 

Conference 2013 (Oct. 15, 2013). 
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July 21, 2015

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A. The structure of the contract could make certain service channels unavailable to 

retirement investors

PNCI has for several years worked to develop new ways to deliver investment services to 

all of our retail customers. In particular, PNCI has sought ways to deliver high quality 

investment services, including investment advice, to customers with relatively low levels of 

investable assets. In this vein, PNCI has expanded the investment services available to retail 

investors through the creation and continued development of the PNC Investment Center. The 

PNC Investment Center is comprised of three separate call centers through which teams of 

investment professionals provide brokerage and advisory services to hundreds of thousands of 

retail investors. By servicing accounts with centralized teams of investment professionals –

rather than assigning each account to a single financial adviser in a branch office – PNCI has 

been able to increase the level of service provided to customers with relatively low levels of 

investable assets. 

While PNC embraces a duty to act in the best interest of its customers and, we believe, 

meets this standard in providing services through the PNC Investment Center, we are concerned 

that the proposed structure of the BIC Exemption would stifle our ability to creatively expand the 

range of investment services available to retirement investors. As proposed, the contract 

required under the BIC Exemption would be a three-party agreement among the retirement 

investor, the financial institution, and the adviser. This three-party contract structure is 

completely inconsistent with the design of service delivery channels like the PNC Investment 

Center, which is premised on the idea that high quality investment services can be provided at 

greater convenience and lower cost to more investors by assigning accounts to a team of 

investment professionals, rather than an individual adviser. Moreover, and importantly, this 

method of service delivery is the preferred method of many of our customers, who prefer to 

speak with an advisor at a time and from a location of their choosing, rather than scheduling an 

appointment and in many cases traveling to a branch office to meet with an adviser. 

While we focus here on the reduction in services offered through call centers that could 

result from the three-party structure of the proposed Best Interest Contract, we note that the 

structure gives rise to numerous other questions and would seem to create a variety of significant 

problems. As discussed in SIFMA’s comment letter, these include questions about providing 

service to accounts when the adviser who signed the contract is out of the office or unavailable, 

reassignment of accounts when an adviser’s employment with the financial institution ends, and 

team coverage of accounts outside the call center context.15

B. The warranties required in the contract could force broker-dealers to offer a 

reduced range of products to retirement investors

 

15 SIFMA BIC Exemption Letter, pages 11-13.
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July 21, 2015

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Section IV(a) of the proposed BIC Exemption requires firms that offer a limited range of 

investment options to retirement investors to meet certain requirements. For example, firms 

would be required to make a specific written finding that any limitations do not prevent the firm 

or its financial advisers from making recommendations in the best interest of their retirement 

investor customers. Clear written notice of any limitations would need to be provided to 

retirement investors before any recommendations are made. While we appreciate the 

Department’s effort to provide a means for firms to offer a scaled-down menu of investment 

options to retirement investors, we are concerned that such scaled-down offerings are likely to 

become the rule, rather than the exception, as a result of the warranties proposed to be included 

in the Best Interest Contract, resulting in a reduction of investment options for retirement 

investors. 

The proposed BIC Exemption would require firms to warrant to customers that they have 

policies and procedures in place that include “specifically identified Material Conflicts of 

Interest and adopted measures to prevent violations of the Impartial Conduct Standards,” and that 

neither they, nor their affiliates or related entities use any compensation structures that “would 

tend to encourage individual Advisers to make recommendations that are not in the Best Interest 

of the Retirement Investor.”16 While the Department stated its intention to permit broker-dealers 

and advisers to continue to receive “compensation common in the retail market, such as 

brokerage or insurance commissions, 12b-1 fees and revenue sharing payments,”17 the required 

warranties described above would leave firms and advisers at substantial risk if they retain any 

element of differential compensation (to the broker-dealer or the adviser) across products. The 

Department pointed favorably to “level-fee” structures, but stopped short of mandating them.18 

Anything short of such a “level-fee” structure, however, would leave firms and advisers at risk 

that any recommendation other than the lowest cost product (or the product that pays the lowest 

fee to the firm and the adviser) could be second-guessed as a violation of the warranties made by 

the firm and the adviser. 

To mitigate this risk, firms are likely to consider ways to level the compensation they and 

their advisers receive across the range of products offered to retirement investors. Because this 

would be an enormous exercise to undertake with respect to the broad range of products offered 

 

16 Proposed BIC Exemption, Sections II(d)((3), (4). We note that the Department also expressed a favorable view 

of asset-based compensation. We agree that, in many circumstances, asset-based fees are a good way to align 

the interests of the firm, the adviser, and the retirement investor. To that end, PNCI offers several managed 

account programs to retirement investors in its capacity as a registered investment adviser. Asset-based fees are 

not the best option for all retirement investors, however. Depending on their needs and financial circumstances, 

some customers, particularly those with low levels of investable assets and no need to effect regular 

transactions, are best served by paying a one-time transaction fee, rather than a recurring asset-based fee. See, 

e.g., National Association of Securities Dealers Notice to Members 03-68 (Nov. 2003) (reminding members that 

fee-based accounts are not appropriate for all customers in all circumstances). 

17 BIC Exemption Notice at 21,961.

18 Id. at 971.
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July 21, 2015

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by full-service broker-dealers,19 a likely result is that firms will dramatically reduce the range of 

products offered to retirement investors. A limited menu of products for retirement investors 

would give firms a manageable universe of products for which they could ensure that both the 

firm and the advisers receive level compensation. 

We think it would be possible to create such a limited menu and comply with the 

requirement that the range of options still “enable an Adviser to make recommendations to the 

Retirement Investor with respect to all of the asset classes reasonably necessary to serve the best 

interest of the Retirement Investor in light of the Retirement Investor’s objectives, risk tolerance 

and specific financial circumstances.”

20

 We question, however, whether this outcome – reducing 

the range of choices available to retirement investors in order to eliminate perceived conflicts of 

interest – is truly in the best interest of retirement investors. Furthermore, we are concerned

about the customer confusion that would likely result. If, for example, an adviser believes 

purchasing a financial instrument excluded from the limited menu is in a customer’s best 

interest, how will the adviser explain that he recommends the customer purchase the financial 

instrument, but that it can only be sold to the customer outside of his or her IRA?21

For these reasons, we urge the Department to strike these proposed warranties in the Best 

Interest Contract. We believe that recommendations made to retirement investors should be 

judged on their merits. While we recognize that differential compensation may be evidence that 

a financial institution or adviser had interests other than the retirement investor’s in mind when 

making a recommendation, it is certainly not always dispositive evidence. The proposed BIC 

Exemption unnecessarily prescribes both a standard of conduct –by requiring financial 

institutions to act only in their customers’ best interests – and, for all intents and purposes, the 

means achieve that standard – by essentially forcing firms to eliminate all conflicts of interest 

that might arise from their compensation structures. This approach would largely undermine the 

Department’s declared goal of allowing broker-dealers to retain longstanding forms of 

compensation. 

C. The definition of “Asset” limits choice for retirement investors 

As proposed, the BIC Exemption would be available only with respect to advice relating 

to certain “Assets.” We believe the proposed definition is too narrow and would disadvantage 

 

19 Even focusing only on mutual funds, PNCI, for example, offers many hundreds of mutual funds in various share 

classes offered by an extremely large array of fund companies. 

20 BIC Exemption Notice at 21,975.

21 While PNC’s focus in this letter is on the impacts of the Proposal on retirement investors, we note that to be 

subject to entirely different and duplicative sets of paperwork and disclosure requirements, policies and 

procedures, compensations structures, asset restrictions and systems requirements, depending on whether or not 

the customer, in the context of a particular account relationship, is a retirement investor, is an exceedingly 

burdensome, costly and confusing approach, both for broker-dealers, and more importantly, for customers who 

have multiple accounts with the institution. 
Office of Regulations and Interpretations

July 21, 2015

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retirement investors by limiting the range of financial instruments in which they could invest 

their retirement assets. Retail broker-dealers provide advice to a wide variety of retirement 

investors who have very divergent needs. Whether a particular investment product is appropriate 

for any particular retirement investor depends on a variety of factors, and a product that may be 

inappropriate for one retirement investor may be ideal for another retirement investor. We see 

no reason why the BIC Exemption should be available for some assets and not for others. As 

with the impact of the proposed warranties discussed above limiting the benefits of the BIC 

Exemption, the limited definition of Asset also would likely cause customer confusion. 

We echo the views expressed by SIFMA22 and FSR23 that the Department should not 

create a pre-determined list of assets it believes to be appropriate for retirement investors. If 

investment advisers are to be required to act in their customers’ best interests, they ought to be 

tasked with determining whether a particular class of investments is appropriate for a particular 

retirement investor (or retirement investors generally). In addition, the exclusion of unit 

investment trusts from the definition of “Asset” is troublesome. Unit investment trusts are 

widely used vehicles that can be entirely appropriate for retirement investors who are made fully 

aware of their features and risks. More generally, PNC would be concerned that a static list of 

permissible investments might not be readily amended to keep up with innovations expanding 

the universe of available products, to the detriment of retirement investors. 

4. Bank products

A. Bank Deposits.

PNC Bank’s personnel routinely engage in dialog with retail customers and prospective 

customers about the deposit products we offer (e.g., savings account, certificates of deposit), 

including customers who want to invest retirement assets into deposit accounts. This sometimes 

includes providing a list of bank products, discussing investment yield and answering procedural 

questions. Bank personnel do not, however, discuss individual retirement needs or provide 

recommendations as to investments, account type or disposition – but they may refer customers 

to personnel at AMG, PNCI or others at PNC to discuss the benefits of retirement savings. The 

Proposal is not clear on its applicability to, or treatment of bank deposit products. 

We ask that the Department confirm that a bank’s disclosures and communications in 

connection with deposit products offered by a bank to its IRA and other customers are within 

section 408(b)(4) of ERISA and, provided the conditions of that section are met, are excluded 

from the scope of the Proposal. Absent such exemption, banks may deem the burden and cost of 

compliance to be too onerous, leaving customers with only higher priced investment 

 

22 SIFMA BIC Exemption Letter at pages 6-11.

23 FSR Comment Letter, Appendix A, Section VII(b).
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July 21, 2015

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management accounts for their IRA and other retirement savings (versus more modestly priced 

bank deposit accounts).

B. Sweep Products 

In a similar fashion, PNC provides our corporate and other business clients with bank 

deposit-related products, which we refer to as “treasury management services.” Included are 

products designed to assist our business clients with their liquidity needs, such as overnight 

investment sweeps into money market mutual funds and other short term investments. If such 

products are not expressly excluded from the scope of the Proposal, banks may cease offering 

sweep services to covered account types (as not administratively feasible/cost effective), which 

could leave employee benefit plans with a narrower set of liquidity alternatives with potentially 

less favorable short-term rates than those available to other corporate clients, or to the same 

client, in their non-ERISA accounts.24

C. HSAs, MSAs, and CESAs 

PNC offers HSAs through various channels, including to the employees of its Treasury 

Management clients, and to individuals via the PNC HSA website. PNC operates as the 

custodian of the HSA, but does not operate in a fiduciary capacity. The HSA is comprised of an 

interest bearing FDIC-insured bank account portion and an investment portion that involves a 

menu of mutual funds which the account owner can access once a minimum account balance of 

$2,000.00 is achieved. The account owner has exclusive responsibility for and control over the 

investments in the HSA. We do not currently offer MSAs or CESAs to customers; however, our 

advisors may need to consider these account types in overall wealth or financial planning. 

We are concerned that the Proposal explicitly covers HSAs via its definition of IRA, 

which is defined as “any trust, account or annuity described in Code section 4975(e)(1)(B) 

through (F), including, for example, an individual retirement account described in section 408(a) 

of the Code and a health savings account described in section 223(d) of the Code.” We believe 

that this definition of IRA is too broad. HSAs are established to address medical and educational 

needs, with generally much short investment time horizons and very different considerations 

than retirement accounts, and should be excluded from coverage under the Proposal. By the 

same token, while PNC does not offer MSAs and CESAs, we believe they too should be 

excluded from the Proposal for the same reasons.25

5. Retirement Plans

PNC provides trust, custody, investment, education, recordkeeping and other 

administrative services to clients who sponsor employee benefit plans, including corporations, 

non-profits, municipalities and labor unions. PNC acts in a fiduciary or non-fiduciary capacity 

 

24 See ABA Comment Letter at section III.A.1. 

25 See id. at section III.A.6.
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July 21, 2015

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depending on the particular service being provided, but always endeavors to act in the best 

interests of its customers. PNC, through its sales conversations, service agreements, and 

disclosures, makes clear to its customers which of the aforementioned services PNC provides as 

a fiduciary (e.g., discretionary trustee and investment management services) and which services 

it provides in a non-fiduciary capacity (e.g., custody, plan recordkeeping, and education 

services). Although the Proposal includes several carve-outs intended to be helpful to retirement

plan service providers, we believe those carve-outs require a number of revisions and/or 

clarifications in order to ensure that PNC can continue to provide the most effective and efficient 

services to our retirement plan customers.

A. Platform Provider and Selection and Monitoring Carve-outs

The Department has carved-out from the general definition of fiduciary a platform 

provider that markets and makes available a platform of investment alternatives for participantdirected plans. Further, the Proposal provides that the identification of investment alternatives 

that meet objective criteria specified by a plan fiduciary or the provision of objective financial 

data and comparisons with independent benchmarks by a platform provider to assist the plan 

fiduciary with its investment selection and monitoring duties will not be treated as investment 

advice. 

PNC provides recordkeeping and directed trustee services to retirement plans, many of 

which are small to mid-sized plans. PNC offers these customers a platform of investments that 

includes hundreds of mutual funds from which plan fiduciaries can build a diversified menu of 

investment options for their retirement plans. While PNC does not provide investment advice to 

these customers, it does help plan fiduciaries narrow the universe of investment options that are 

available on the platform through the use of objective third-party tools that rely on quantitative 

data. We recommend that the Department revise the Proposal to permit the use of these 

objective tools by platform providers to help make the investment selection and monitoring 

process more manageable for plan fiduciaries. 

PNC also provides services to retirement plans that are not participant-directed and 

participant-directed plans that include contribution sources (e.g., employer nondiscretionary 

contributions) that are invested by plan fiduciaries. We see no reason for these types of plans 

and contribution sources to be treated differently than participant-directed plans for purposes of 

the platform provider and selection and monitoring carve-outs, and it would be difficult for PNC 

to continue to service some of these plans if they are not included in the carve-outs. Therefore, 

we ask that the Department extend the platform provider and selection and monitoring carve-outs 

to cover non-participant directed plans and contribution sources.

B. Investment Education Carve-out

PNC differentiates itself as a retirement plan service provider by offering a suite of robust 

employee education services for retirement plan participants. These services are valued by plan 
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July 21, 2015

Page 15

sponsors who recognize the importance of helping their employees achieve retirement readiness 

and by the plan participants who directly benefit from the investment education PNC provides. 

This education comes in the form of newsletters, targeted mailings, webinars, on-site meetings, 

one-on-one sessions, and interactive investment tools, all of which are geared toward 

encouraging retirement planning and plan participation. These tools have been developed within 

the framework of the Department’s existing guidance on investment education under Interpretive 

Bulletin 96-1.26 This guidance has served retirement plan participants and sponsors well for 

nearly 20 years, yet the Proposal aims to significantly narrow the current definition of investment 

education in a manner that will be harmful to retirement investors. 

In a departure from current guidance, the proposed carve-out for investment education 

provides that education materials may not reference “specific investment products, specific 

investment managers or the value of particular securities or other property” and investment 

allocation models may not identify specific investment products available under a retirement 

plan or IRA. While we believe that useful investment education materials should be broadly 

available to all retirement investors, this limitation is particularly confounding as it relates to 

participant-directed retirement plans. It makes no sense to prohibit the identification of the 

specific investment funds that comprise the menu of investment options selected by a plan’s 

fiduciaries. Today, plan participants who receive PNC’s employee education services have 

access to asset allocation models that are populated with the investment funds they may choose 

to invest in under the retirement plan offered by their employer. This is actionable, effective 

investment education that employees can use to help them make good retirement investing 

decisions.27 

Under the narrower definition of investment education in the proposed carve-out, 

employees could only be provided with a generic asset allocation model and would have to rely 

on their own, often limited, investment knowledge or other sources to identify the funds 

available under their retirement plan that fall into each asset category. We believe that 

employees who participate in the plans PNC services benefit greatly from the education PNC 

provides about the differences between the investment options available under their plans. If the 

 

26

 29 C.F.R. 2509.96-1.

27 Relatedly, PNCI offers an online portfolio builder tool that enables customers to generate a tailored asset 

allocation, based on responses to a risk tolerance questionnaire. The tool assists customers in narrowing the 

universe of mutual funds available to populate the allocation by applying a series of objective screening criteria 

that is fully disclosed to the customer. We do not believe this screening tool results in a “recommendation” to 

the customer and FINRA staff has reviewed the tool and given no indication that they believe it generates 

recommendations to which FINRA’s suitability rule applies. By indicating that an asset allocation tool that 

refers to any specific securities is providing investment advice, the Department has departed from the “useful 

standards and guideposts for distinguishing investment education from investment advice” provided by 

FINRA’s guidance. (Fiduciary Proposal at 21938.) Whether or not a communication is a “recommendation” 

should not be judged by a different standard simply because the communication is made in connection with the 

provision of an asset allocation. 
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July 21, 2015

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Proposal takes effect, these employees will likely have to turn to a Google search or guessing 

based on the names of the investment funds to make an investment decision. Surely many will 

take no action at all out of frustration, fear or lack of time. In our view, this would represent a 

giant step backwards in the evolution of employee investment education, severely undermining 

its value.28

We ask that the Department revise the proposed carve-out for investment education so 

that it does not narrow the current definition of investment education under Interpretive Bulletin 

96-1 that has served retirement investors well for nearly 20 years. At a minimum, we ask that 

the carve-out be expanded to permit those delivering investment education to retirement plan 

participants to reference in the investment education materials, including asset allocation models, 

those specific investment products chosen by the plan’s fiduciaries as investment options under 

the plan. 

C. Valuations Carve-out

The Proposal includes within the definition of investment advice statements concerning 

the value of securities or other property if provided in connection with a specific transaction or 

transactions involving the acquisition, disposition, or exchange of such securities or other 

property by a plan or IRA. The Proposal also contains a carve-out for an appraisal, fairness 

opinion or a statement of value to an ESOP regarding employer securities, to a collective 

investment vehicle holding plan assets, or to a plan for meeting reporting and disclosure 

requirements. It is not clear whether the Department intends to include within the definition of 

investment advice routine statements of value provided by trustees, custodians and record 

keepers with respect to retirement plan and IRA assets. Because such statements of value are an 

integral part of every customer relationship, regardless of whether PNC is acting in a fiduciary 

capacity, we request that the Department clearly exclude from the definition of investment 

advice all routine statements of value delivered to retirement investors. In addition, we request 

that the Department clarify that the carve-out for providing statements of value to pooled funds 

covers the calculation of daily net asset values for single plan unitized investment pools within 

participant-directed plans.

29

 

28 In this regard, we concur with the points made in the ABA Comment Letter on these issues. ABA Comment 

Letter, section II.C.4.

29 In the SIFMA Fiduciary Letter, the organization states that “valuation information is not a recommendation and 

should not be fiduciary advice. The point of the regulation is to capture the person recommending the 

investment, not the person providing the market values from market sources.” SIFMA Fiduciary Letter at 12. 

PNC agrees with the Department that investment advice should hinge on whether a recommendation or call to 

action or an explicit endorsement has been made. However, we also agree with the SIFMA that valuation 

opinions or information, by contrast, are not recommendations and therefore should not fall within this 

definition.”
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July 21, 2015

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6. Timing of Implementation

The Department announced that the final rule would be effective 60 days after 

publication in the Federal Register and the requirements would generally become applicable 

eight months after publication of a final rule.30 We believe that such a short implementation 

period is unworkable for regulations that would have wide-ranging impacts across financial 

institutions and transform the way investors and financial institutions interact today. As 

discussed above, the Proposal will have a direct and significant impact on multiple lines of 

business at PNC, including the operations, technology, human resources and risk organizations

that support our businesses. Implementation of the Proposal will require significant revisions to 

business processes and compensation practices and possibly require substantial revision to 

existing and longstanding contracts with customers and product providers.

The Consumer Financial Protection Bureau (“Bureau”) and other Federal banking 

agencies that have authority to issue regulations relating to financial disclosures typically provide 

implementation periods of more than 18 months when requiring new financial disclosures. For 

example, the Bureau has provided an implementation period that will likely last almost 

20 months for new disclosures relating to residential mortgage lending.31 Similarly, the SEC 

recently provided 1-year and 2-year implementation periods for two separate aspects of 

amendments to its rules governing disclosures related to asset-backed securities.32 

Given the transformational nature of the Proposal, we request that the Department 

provide no less than an 18 month implementation period from the date the final regulations are 

published in the Federal Register. We believe that any shorter implementation period runs the 

risk of financial institutions simply scaling back the advisory services they provide to investors. 

This outcome would make advisory services more expensive, a result that clearly would be 

counter to the Department’s objectives in issuing this regulation.

* * *

Thank you for your consideration of these comments. PNC hopes to have the 

opportunity to work with the Department to fashion standards that ensure that financial 

institutions are delivering investment services to retirement investors that are in their best 

interests while continuing to promote a diverse and deep marketplace of financial advisers and

innovation in the delivery of retirement services to investors. We urge the Department to issue 

regulations that help make the conversations financial advisers have with retirement investors 

 

30

 See Fiduciary Proposal at 29,950.

31 See Consumer Financial Protection Bureau, 2013 Integrated Mortgage Disclosures Rule Under the Real Estate 

Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) and Amendments; 

Delay of Effective Date, 80 Federal Register 36,727 (June 26, 2015).

32 Securities and Exchange Commission, Asset-Backed Securities Disclosure and Regulation, 79 Fed, Reg. 57184 

(Sep. 24, 2014). 
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July 21, 2015

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more valuable, but not more complicated and costly. Moreover, in crafting these new standards, 

we also believe that it is important that the Department consider carefully the impact its 

regulations have on not just the larger firms, but also main street financial advisers. 

If you would like to discuss any aspect of this letter, please do not hesitate to call me at 

(215) 585-5670. 

Sincerely,

Linda R. Manfredonia

Chief Fiduciary Officer 

PNC Asset Management Group