[TYPE TEXT]

Victoria E. Fimea

Senior Vice President, General Counsel and Secretary

4350 Westown Parkway | West Des Moines, IA 50266

Ph: 515-221-4770 

Fax: 515-221-4813

Phyllis Borzi, Assistant Secretary

Employee Benefits Security Administration

Office of Regulations and Interpretations

U.S. Department of Labor

200 Constitution Avenue, NW

Room N-5655

Washington, DC 20210

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

Retirement Investment Advice

RIN 1210-AB32

Dear Assistant Secretary Borzi:

Sammons Financial Group (“SFG”), on behalf of itself and its subsidiary 

companies, is pleased to provide these comments with respect to the Department of 

Labor’s notice of proposed rulemaking concerning the definition of the term “fiduciary” in 

the context of an employee benefit plan and the related proposed new exemptions and 

exemption modifications.

SFG is a financial services holding company made up of member companies that 

offer a variety of investments and retirement services through multiple distribution 

channels. Our member companies potentially impacted by the proposed rulemaking 

include Midland National Life Insurance Company, North American Company for Life 

and Health Insurance, Sammons Retirement Solutions, Inc. ("SRS") and Sammons 

Financial Network, LLC ("SFN").

The Department of Labor (the “Department”) has recently re-proposed a 

package of changes to relevant regulations, new exemptive relief and changes to 

published exemptions (the "Proposal") focused on re-defining who would be a fiduciary 

of an employee benefit plan under the Employee Retirement Income Security Act of 

1974 (“ERISA”) as a result of giving investment advice to the plan or its participants or 

beneficiaries. Among other changes, the Proposal expands the scope of who would be 

an investment advice fiduciary under section 4975 of the Internal Revenue Code of 

1986, as amended ("Code"), to include certain advisors to an individual retirement 

account (“IRA”). 

We applaud the Department's efforts to strengthen the standard of care for 

investment professionals serving clients participating in retirement plans and IRAs. The

vast majority of the financial services industry serves its clients well by helping them 

SAMMONS FINANCIAL GROUP | 4350 WESTOWN PARKWAY | WEST DES MOINES, IA 50266
save more, grow their retirement savings and better understand the retirement financial 

landscape based on their individual facts and circumstances. The Proposal contains a 

number of provisions that may enhance investor protections. SFG’s concerns regarding 

this Proposal are that in an effort to prevent potentially bad behavior by a few 

individuals, the Proposal will have various unintended consequences detrimental to 

many retirement clients. 

SUMMARY

• Platform Provider Carve-out for IRAs

• The platform provider carve-out should be expanded to include IRA 

platform providers. The necessary protections exist, devoid of conflicts. 

A third-party fiduciary assists the IRA investor. The investment options are 

diversified and well-chosen.

• Platform providers for IRAs do not make "recommendations." The 

IRA platform provider does not have retail client sales relationships that 

should be the focus of any standard of care.

• Assistance provided by platform providers for IRAs is neither 

"individualized" for recipients, nor "specifically directed" to 

recipients. The IRA platform provider cannot have the knowledge of the 

circumstances of an IRA investor needed to become an investment advice 

fiduciary.

• New Impartial Conduct Standards in revised PTE 84-24 should be clarified 

to enhance its usefulness. Being admonished only to act in the "Best Interest" 

of an IRA investor and to not mislead such an investor circumscribes the relief 

provided by 84-24 without clearly conveying how conduct should change.

• Maintain the level playing field between commission-based compensation 

(that is in the best interests of the client) and fee-based arrangements.

Significantly disadvantaging commission-based arrangements increases costs to 

IRA investors, greatly reduces available investment professionals and investment 

choices, and decreases access to retirement education, particularly for small, 

middle income IRA investors. The onerous conditions in the Proposal should be 

harmonized with the current regulatory schemes. The timing and form of any 

written contract should be reconsidered.

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PLATFORM PROVIDER CARVE-OUT FOR IRAS

The platform provider carve-out in proposed Labor Regulations section 2510.3-

21(b)(3) (the "Platform Carve-out") is limited by its terms to a "person [who] merely 

markets and makes available to an employee benefit plan" a qualifying platform or 

similar mechanism from which a plan fiduciary can select and monitor investment 

alternatives. For the following reasons, the Platform Carve-out should be extended to 

include certain platform providers to IRAs with full confidence that the interests of IRA 

investors will be protected as contemplated by the Proposal.

Characteristics of IRA Carve-out Providers

Platform providers to IRA investors ("IRA platform providers") are not uniform in 

their design or operation. IRA platform providers with the following characteristics 

provide, in conjunction with investment professionals who will be investment advice 

fiduciaries under the Proposal, a variety of protections for IRA investors that are at least 

commensurate with (if not superior to) the protections provided to participants and 

beneficiaries under a plan whose provider would be able to use the Proposal's Platform 

Carve-out. These important characteristics are:

• The platform would provide only a menu of pre-selected investments (e.g., 

certain mutual funds) as investment options. 

• The IRA platform's investment options would be well-diversified. The IRA 

platform provider would include investments on the platform using various 

factors, including, but not limited to, the following: comprehensive ongoing 

coverage of important asset classes, multiple quality options in each important 

asset class, investment strategy, manager history and tenure, performance 

against selected benchmarks, type of securities being offered, class of security 

being offered, fees charged by the investment option's manager and service 

providers, and geographic location of the securities’ issuers.

• The platform would make available a wide variety of investment options and 

managers. The platform must offer investments from many sources, not merely 

those sponsored by the platform's provider. 

• No person affiliated with the platform would be involved in recommending 

investments to an IRA investor. Investments included on the platform would be 

among those reviewed and potentially recommended by an unaffiliated third 

party investment professional to specific IRA investors. 

• The IRA platform provider and its platform would not have any sales relationships 

with IRA investors. There would be no sales contracts between an IRA investor 

and the IRA platform or its provider. The provider would never sign-off on 

investor suitability or appropriateness. For investment recommendations and 

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sales, the IRA investor relationship would be between the investment 

professional and the IRA investor.

• The IRA platform provider would have a contract with the IRA investor only to 

provide administrative services required to maintain the IRA (e.g., trade 

confirmations and annual statements). The IRA platform provider would receive a 

fee directly from the IRA investor or the IRA for these administrative services. All 

of these administrative fees would be unrelated to the investment decisions by 

the IRA investor.

• The IRA platform provider and the platform would not be affiliated with the 

investment professional making investment recommendations to an IRA investor, 

other than through an IRA platform contract giving the investment professional 

access to the IRA platform. 

• The IRA platform provider would pay the unaffiliated investment professional a 

flat percentage of the dollar value of the assets invested by all of the investment 

professional's clients in the investment options offered on the platform. The 

investment professional's compensation from the IRA platform provider would not 

differ based on any individual IRA investor or specific investment.

• The IRA platform provider would receive no compensation from the investment 

professional. 

• The IRA platform would not generate any sales or promotional materials 

promoting any investment offered on the platform over another. 

• The IRA platform would not unilaterally prepare any recommendations made by 

an unaffiliated investment professional to an IRA investor. During the sales 

process, it would have no personal information about any IRA investor or about 

the individualized needs of any IRA investor. Using information provided by an 

investment professional, it may provide limited, clerical assistance to the 

investment professional preparing a recommendation (such as information 

regarding historical returns and portfolio characteristics of the investment options 

offered on the platform), but it would never create its own portfolio 

recommendation. Model allocations generated by an unrelated third-party 

investment advisor could also be available to the investment professional through 

the platform.

• The IRA platform provider would disclose to both the investment professional and 

through the investment professional, to the IRA investor that it is not offering 

investment advice by making the platform investment alternatives available, it is 

not a fiduciary as a result of providing the platform, and the platform has not been 

designed or operated with any single IRA investor or relationship in mind.

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An IRA platform provider meeting the criteria described above (an "IRA Carveout Provider") should not be an investment advice fiduciary for a number of reasons, 

some of which are discussed later. Most importantly, there is no apparent conflict of 

interest that would taint the platform. The IRA Carve-out Provider has wholesaled the 

platform to unaffiliated investment professionals. There is no retail sales relationship or 

responsibility to IRA investors. The unaffiliated investment professional, inevitably an 

investment advice fiduciary under the Proposal, would be functionally equivalent to a 

plan fiduciary under the Platform Carve-out. The investment professional would narrow 

the available platform options for the IRA investor and make such recommendations as 

it considers appropriate in its fiduciary role. With this structure, there is no perceptible 

deviation from the protections offered the client by the Proposal's Platform Carve-out 

that would justify denying the same relief to an IRA Carve-out Provider.

Investment advice fiduciaries for IRA investors must have access to coordinated 

investment offerings in order to serve their clients. Independent IRA Carve-out 

Providers are that source for IRA fiduciaries in many situations. IRA Carve-out 

Providers need to be encouraged, not discouraged. Imposing fiduciary status on mere 

IRA Carve-out Providers would reduce client investment options, weaken investment 

decisions and prevent clients from seeking the advice they should get, all to avoid 

conflicts that are for carve-out providers only a mirage.

The "IRA Carve-out Provider" is not a hypothetical. SFG, acting through SRS as 

an administrator and offering investment options through SFN, would qualify as an IRA 

Carve-out Provider under this proposal. SFG asks that the Platform Carve-out in 

proposed Labor Regulations section 2510.3-21(b)(3) be expanded to add a new Section 

2510.3-21(b)(3)(ii) to expressly include another Platform Carve-out for an IRA Carve-out 

Provider to unaffiliated investment professionals for use with IRA investors.

IRA Carve-out Providers Do Not Give Recommendations, and the Proposal 

Should Reflect That.

Under proposed Labor Regulations section 2510.3-21(a)(1), an investment 

advice fiduciary has to be a person rendering investment advice by giving a 

"recommendation" concerning (i) the "advisability of acquiring, holding, disposing or 

exchanging...property," (ii) the "management of...property," or (iii) "a person who will 

receive...compensation for providing [the preceding two] types of advice." 

An IRA Carve-out Provider does not provide even a suggestion in any of those 

areas, and the Proposal should be modified to recognize that reality.

An IRA Carve-out Provider is not involved - even indirectly - in any sales 

relationship with the IRA investor. The relationship exists between the unaffiliated 

investment professional providing the advice and the IRA investor. The IRA Carve-out 

Provider will not independently know the identity, characteristics or needs of any 

prospective IRA investor or the pre-existing investments owned by the IRA investor in 

84685526\V-3 5
retirement plans or other IRAs. As a result, the IRA Carve-out Provider cannot, even 

indirectly, comment on whether the IRA investor should or should not acquire, hold or 

sell any investment, much less one on its platform. The IRA Carve-out Provider: 

-does not recommend an investment professional to the IRA investor; 

-has no relationships with IRA investors (other than to provide administrative 

services after the IRA investor agrees to use its platform); 

-does not market itself directly to the retail IRA investor community; 

-does not on its own initiative provide suggestions about managing the 

investments of any IRA, whether or not invested through its platform; and 

-does not make “recommendations” within the meaning of the Proposal. 

The Platform Carve-out, as it is currently used, necessitates our request for this 

second platform carve-out. With the same design described above, a platform provider 

for a plan might rightly conclude it is not an investment advice fiduciary and be content. 

Nevertheless, the Proposal includes the Platform Carve-out to dispel any uncertainty 

that these plan platform providers are not fiduciaries. IRA Carve-out Providers deserve 

the same assurance, either through regulatory recognition that the IRA Carve-out 

Provider does not provide “recommendations” to the retail IRA community and/or 

through the requested expansion of the Platform Carve-out to include an IRA Carve-out 

Provider. Further, the narrow scope of the Platform Carve-out, as drafted, raises the risk 

that the courts and other regulatory bodies may conclude that the Department intended 

that all platform providers -- except for those expressly carved out -- should be treated 

as fiduciaries. If the Department does not intend this result, then the Department must 

clarify the Program Carve-out by including IRA Carve-out Providers.

IRA Carve-out Providers Cannot Give Specifically Directed, Individual Investment 

Advice.

A related part of the proposed regulation in the Proposal requires that any 

recommendation must be "specifically directed to" an IRA or an IRA investor or be 

"individualized" advice to an IRA or an IRA investor. The IRA Carve-out Provider in this 

comment does not take either action. It does not know the identities of any prospective 

IRAs or IRA investors considering offerings on its platform. It does not know the age of 

the IRA investor or what her investment objectives or risk tolerance may be. It does not 

personally interact with her. It does not generate any paperwork (e.g., create a 

brokerage account or document suitability) especially for them (other than IRA custodial 

documentation if she creates an administrative relationship). The IRA Carve-out 

Provider does not tailor any of its administrative documentation for any specific IRA 

investor. The IRA Carve-out Provider cannot know who might ultimately see its product. 

The IRA Carve-out Provider delivers nothing to retail clients promoting any particular 

84685526\V-3 6
platform investment over any of the platform’s other investments. For these reasons and 

the reasons explained in the preceding comments, SFG requests regulatory recognition 

that the IRA Carve-out Provider does not provide “individualized” advice “specifically 

directed to" IRA investors and/or the expansion of the Platform Carve-out to include an 

IRA Carve-out Provider requested earlier.

84-24’S IMPARTIAL CONDUCT STANDARDS ARE TOO VAGUE.

While SFG supports continuing all insurance product coverage under 84-24, it is 

concerned about the lack of clarity regarding the new “Impartial Conduct Standards” 

under proposed 84-24. For those IRA providers that would be fiduciaries of an IRA 

under section 4975(e)(3)(B) of the Code, 84-24 (as proposed) would require them to 

adhere to standards of conduct predicated on ERISA's fiduciary standards (with a 

kicker) and not to be misleading about matters relevant to an IRA investor's investment 

decisions. 

IRA providers already seek to not mislead, and they have little familiarity with 

ERISA's fiduciary standards or how they would change under new 84-24. A lack of 

clarity regarding appropriate precautions under the new regime will have the effect of 

driving investment professionals to utilize solutions that are less desirable for the client 

only in order to seek greater compliance certainty, instead of using an appropriate 

solution which may not be recommended for fear of the ambiguity of new 84-24. 

Clarify the Diligence Required by an Investment Professional.

Clarifying under 84-24 the type and amount of required diligence and a means by 

which to determine what would be a reasonable number of investment alternatives to 

evaluate and present would be a helpful beginning for investment professionals in 

guiding their choices. Because of the vast number of annuity contracts in the 

marketplace today, it is impractical to expect that an IRA investment professional could 

be as knowledgeable as an ERISA plan fiduciary should be about the features and 

benefits of every annuity. 

There is also no practical way to effectively evaluate each and every annuity 

product. Some investments may be more conducive to assessment only because they 

have explicit objectives, past performance history, stated fees, stated risk parameters 

and volatility measures. The prospective benefits of certain guarantees are much more 

difficult to quantify and compare. Additionally, investment professionals have different 

registrations and licenses that will impact the investment options they are eligible to 

recommend. The standard should make clear that the Impartial Conduct Standards do 

not require an investment professional to recommend investment options the 

professional cannot recommend due to her licensing or registration restrictions or due to 

limits imposed by her institutional distribution agreements. Providing guidelines or even 

safe harbors concerning the scope of these aspects of due diligence under new 84-24 

will be necessary to achieve the Department’s goals.

84685526\V-3 7
Clarify the New "Reasonable Compensation" Standard.

Clarifying “reasonable compensation” in light of the Impartial Conduct Standards 

would help investment professionals gravitate to appropriate solutions, not ones that 

simply have the fewest chances of running afoul of nonspecific rules. The Proposal’s 

failure to propose a clearer definition of what would be “reasonable compensation” will 

have the effect of continuing to drive investment professionals to not service IRA 

investors or to recommend fee-based managed accounts even if a commission-based 

alternative may be more appropriate and less expensive. Grafting the vague 

requirements of the Impartial Conduct Standards to this historically slippery 

determination will accelerate that move. As acknowledged in the Department’s 

Regulatory Impact Analysis, the existing regulatory framework already requires 

compensation to be fair and reasonable. The report states “[c]ourt decisions and SEC 

guidance also require a BD’s [sic] compensation for services generally to be fair and 

reasonable based on all the relevant circumstances. Financial Industry Regulatory 

Authority (“FINRA”) rules and guidance also prohibit charging customers unfair 

compensation. Charging an unfair commission would be viewed as violating principles 

of trade under FINRA rules.” 

Investment professionals are aware of what is acceptable based on the current 

regulatory scheme so simply changing the language to a standard like “reasonable and 

customary” would provide a greater level of certainty. In addition, greater detail about 

what the Department considers “reasonable compensation” to be for an IRA fiduciary 

subject to the Impartial Conduct Standards would give much-needed assistance to 

those seeking to make recommendations to IRA investors.

MAINTAIN THE LEVEL PLAYING FIELD BETWEEN COMMISSION-BASED 

TRANSACTIONS (THAT ARE IN THE BEST INTERESTS OF THE CLIENT) AND 

FEE-BASED ARRANGEMENTS.

Access to Human Investment Professionals Matters.

It is widely accepted that investors who work with an investment professional 

save more and are more confident in their ability to have a secure retirement. Over time, 

the differences between those who work with an investment professional and those who 

do not grows. Analysis shows that for essentially identical investors (income, age, etc.), 

investors who work with an investment professional instead of going it alone1:

-Have 58% more assets after 4-6 years;

-Have 99% more assets after 7-14 years; and

-Have 173% more assets after 15 years.

84685526\V-3 8
Investment professionals address many needs of clients, including investments, 

budgeting, savings guidance, asset management, retirement risks, and managing or 

paying down debt. A 2014 client survey indicated that pre-retirees who work with an 

investment professional are more likely to complete key planning activities.2 Those 

clients who work with an investment professional are more likely to:

-Calculate the amount of assets available for retirement;

-Determine income in retirement; 

-Determine what expenses will be in retirement;

-Estimate how many years assets will last in retirement; and

-Identify activities planned and their likely costs.

Today, there are avenues of financial guidance other than investment 

professionals (including online advice), but these tools have not been proven to 

increase client confidence in a secure retirement and generally fail to meet the needs of 

many clients. A 2012 study3 found that 60% of 18-34 year olds used online financial 

tools, but only 19% of clients 65 and older said they used such tools. A 2015 study 

found that investors of all generations preferred human advisors over computer 

algorithms. Millennials and Gen-Xers preferred the human advisor 60% of the time, 

Boomers favored the human advisor 70% of the time, and Mature Investors preferred 

the human advisor 76% of the time.4 So-called “robo-advisers” currently serve only a 

miniscule number of clients today. Investment professionals, currently and in the future, 

will play a key role in helping clients prepare for a secure retirement.

The Right to Compensate with Commissions Affects Access.

It is generally acknowledged and understood that in certain instances, fee-based 

managed accounts are the appropriate solution for certain clients, while commissionbased products are the appropriate choice for others. The Department would not have 

allowed commission-based products to be presented at all by a fiduciary if this were not 

the case. The Securities and Exchange Commission (‘SEC”) also recognized this when 

it revealed that it was looking into cases of “reverse churning” where managed accounts 

were recommended to clients who were better served in their existing commissionbased account. It was acknowledged that in instances where the client had less need 

for ongoing monitoring and/or they were focused on a “buy and hold” strategy that 

managed accounts resulted in unnecessary fees to the client. A study showed that the 

average fee charged for managed accounts under $250,000 was 1.26%.5 The 

Consumer Federation of America agreed that commission-based accounts are 

sometimes appropriate when it stated “all forms of compensation involve conflicts [but] 

investors sometimes have sound reasons for preferring to pay for advice through sales 

fees.” 6

84685526\V-3 9
A significant concern arising from the Proposal's approach to commission-based 

compensation is the effect it would have on small, middle income investors' access to 

an investment professional, specifically regarding their IRA investments. While the 

Proposal allows commission-based transactions, the Proposal's conditions make it 

largely impractical for investment professionals to serve small, middle income investors 

with commission-based products. Fee-based managed accounts generally have such 

high minimums that they are not affordable or practical for small to medium sized 

accounts. A study by management consulting firm Oliver Wyman7 based on the 

Department's original proposal examined the effect that eliminating commission-based 

transactions would have on IRA clients. The study concluded that if commission-based 

transactions were eliminated, small and medium investors interested in receiving advice 

regarding their IRA would have less access to investment professionals for guidance 

and support, making it less likely that they would even open an IRA. Those that do work 

with a fee-based investment professional would likely pay significantly higher cumulative 

fees on their IRA than they would pay for investments managed outside of fee-based 

accounts. In addition to the higher cumulative fees, the transaction charges assessed 

by many fee-based managers would be more significant to small, middle income 

investors. Large account owners and high income individuals who value the features 

and benefits of the fee-based managed account would continue to receive investment 

advice and thus may not be adversely impacted. But even large account owners who 

value working with an investment professional but do not want to pay the ongoing fees 

and charges associated with a fee-based managed account may find themselves on 

their own regarding their IRA rollover. Keeping access to investment professionals 

affordable for small, middle income investors should be an important consideration of 

any regulatory framework. While the Proposal assumes that commission-based 

transactions are allowed and virtually unaffected, the current Proposal does significant 

damage to established business models that currently serve millions of IRA investors.

Other findings from the Oliver Wyman study were that 18 million small IRA 

investors would lose access to their investment professional if commission-based 

transactions were eliminated, that nearly one million fewer new IRAs would be opened 

each year, that small businesses could stop setting up new 401(k)s and that the overall 

impact would be the loss of $240 billion in retirement savings over the next 20 years. 

Clearly this is not a desirable outcome as the current levels of retirement savings are 

already a major problem facing this country and its citizens. Nearly 40% of IRAs in the 

Oliver Wyman study sample had less than $10,000, and 98% of investor accounts with 

less than $25,000 were in brokerage relationships. The Proposal could curtail access to 

meaningful investment services for over 7 million IRAs. Maintaining access to a wide 

range of investment options for IRA investors by small, middle income investors should 

be a critical element of any revisions to the Proposal. 

84685526\V-3 10
The Right to Compensate with Commissions Affects Investment Choices.

The Best Interest Contract Exemption (“BICE”) is a well-intentioned exemption 

that would allow fiduciaries to continue to receive compensation that would otherwise be 

prohibited under the Proposal. Unfortunately, the BICE would create an unlevel playing 

field which would likely result in more fee-based managed accounts even if a 

commission-based product would more appropriately meet the needs and goals of the 

client. This is due to its onerous conditions placed on commission-based sales that do 

not apply to fee-based managed accounts. It seems illogical that when fee-based 

managed accounts and commission-based transactions are held to the same legal 

standard under ERISA, the conditions for commission-based products would be so 

much more onerous. The Proposal seeks to harmonize the standard but creates a 

significantly greater burden on commission-based products (even after the investment 

professional warrants that they are acting in the best interest of the client). 

A major concern with the Proposal is that if commission-based sales were 

significantly curtailed, that would also limit choices available to investors. Fee-based 

managed accounts generally offer a certain menu for investors, but numerous other 

financial alternatives may not be available in a fee-based account. Due to the 

substantial cost and complexity of implementing the requirements of the BICE, 

eliminating commission-based products in IRAs would be an easier way for investment 

professionals to implement the Proposal, but with the corollary of limiting investors to 

fee-only managed accounts. Ironically, the commission-based investments could be 

more appropriate for the IRA investor and may result in lower cumulative fees over time. 

For instance, a front-end loaded mutual fund would likely result in lower long term costs 

relative to a mutual fund in a fee-based account. Also, many investments that offer 

significant guarantees (e.g., lifetime income, death benefits) such as annuities are either 

not as appealing in a fee-based account or simply cannot be offered in a format that fits 

a fee-based platform.

The Right to Compensate with Commissions Affects Leakage.

It would appear that one of the more significant objectives of the BICE is to 

ensure that plan participants understand their options and make informed decisions. 

One of the tragedies today is that uninformed workers who cash out of a retirement plan 

have to face taxes and penalties on the distribution because they do not put that money 

toward the original purpose of retirement. This has a devastating impact on retirement 

readiness for millions of Americans. According to a 2012 study8 of all workers who 

terminated their employment in 2011, 40% took cash distributions instead of remaining 

in their current plan, rolling their balance over to a new defined contribution plan or 

rolling over to an IRA. Another 2012 study9 showed that for tax year 2010, there were 

$123.9B of taxable distributions from retirement accounts to taxpayers under age 55. Of 

these taxable distributions, $46B was subjected to a penalty tax. These cash outs are a 

84685526\V-3 11
major issue for Americans, and their impact clearly should have been included in the 

Department’s cost-benefit analysis. 

Employees are less likely to take cash distributions of their retirement savings if 

they can discuss their options with a call center or investment professional upon 

employment termination. One company found that terminating employees with account 

balances between $35,000 and $50,000 were approximately 3.2 times less likely to 

cash out their retirement savings if they were to receive a call from an investment 

professional representative of the company compared to similarly situated employees 

who received only written communications.10 The same study also suggested that cash 

outs could increase from $20-$32 billion annually if investment professional access 

were curtailed. While it is difficult to judge whether that number is correct, it is 

indisputable that cash outs would likely increase.

It is crucial that this Proposal not harm access to investment professional 

guidance. One of the best ways to modify the Proposal to ensure adequate access to 

an investment professional is to return to a level playing field between fee-based and 

commission-based solutions, particularly regarding the BICE conditions.

BICE Disclosure Requirements Ignore the Existing Regulatory Framework and 

Create Inequitable Barriers to Commission-Based Solutions.

The disclosure requirements under the BICE are especially troublesome. The 

disclosure conditions are complex and overlap with existing disclosures required in the 

current regulatory framework. BICE adds an enormous amount of disclosure and by so 

doing, creates unprecedented and commercially unworkable requirements that 

effectively render the BICE impractical to use. The conditions would require a massive 

amount of information that is effectively of little use to the client in assessing the 

investment professional’s financial interests. The material that must be made available 

to the Department could be requested in a manner other than as a condition to receiving 

the protections afforded under the BICE. Far more data and disclosure are required 

under the Proposal with respect to a small IRA than are required to be provided to a 

retirement plan with thousands of participants. 

1. The BICE disclosure conditions are onerous. These disclosures are complex and 

overlap with existing disclosures required in the current regulatory framework. These 

requirements place further burdens on investment professionals who seek to do 

what is in the best interest of the client if that calls for a commission-based solution. 

This further incentivizes investment professionals to not serve small and middle 

income investors. These conditions will cause many investment professionals to 

conclude that commission-based sales are not practical at all, even if they are in the 

best interests of the client.

There currently exists significant disclosure requirements to IRA investors at the 

initial transaction and thereafter. At the initial transaction, disclosing fees and 

84685526\V-3 12
compensation is already part of the existing regulatory framework. Ongoing 

statements show assets, purchases and sales and the applicable price. In addition, 

fees are disclosed on an annual basis. By adding additional disclosure, little value is 

added, but complexity and cost for all parties to the client’s engagement with the 

investment professional is increased substantially. 

SFG is not aware of any current systems in the financial services industry that can 

deliver the disclosures (as proposed) today. Massive systems changes would have 

to be implemented in order for these disclosures to be produced. Once again, this is 

a significant disincentive to offering commission-based solutions even if they are 

more appropriate for the investor than a fee-based account. These disclosure 

requirements will take an estimated tens of millions of dollars to build, as all aspects 

of the financial services supply chain will have to provide information in a yet to be 

determined standardized format in order for these conditions to be executed. The 

significance of these conditions will put undue burden on smaller firms that do not 

have the financial resources to execute the conditions. The costs shown in the 

Proposal were wildly low and demonstrate that the magnitude of these requirements 

is clearly not understood by the Department. Also, it would be impractical for these 

conditions to be implemented in less than 3 years and possibly even longer.

The most practical solution is to establish a uniform best interest standard and 

harmonize with the current requirements of the SEC and FINRA regarding 

disclosure of fees of investing and investment professional compensation and 

eliminate the additional and onerous BICE disclosure conditions.

2. The BICE webpage requirement is impractical. The additional webpage conditions of 

the BICE add little value to the IRA client, but put a hefty cost and administrative 

burden on investment professionals to comply. This would be a massive build and 

will undoubtedly put an undue burden on smaller investment professionals who 

already struggle to stay afloat while assisting their clients due to current regulatory 

and compliance costs. 

In addition, the requirement to show compensation on any product that could 

possibly be purchased is highly impractical if not impossible. Ironically, this condition 

incents a financial firm to reduce the number of investments it allows its investment 

professionals to offer. This further reduces investment choice for the client. The goal 

of the Proposal should be to provide better outcomes for the client. This condition 

does not advance that goal. 

Due to the coordination of systems required to execute this condition as proposed, 

the expected costs shown in the Proposal are wildly low. This condition alone could 

possibly take at least 3 years to implement due to the number of systems that would 

have to sync up to provide the mandated information. 

84685526\V-3 13
Again, the most practical solution would be to rely upon the existing regulatory 

disclosures which currently require compensation disclosure. By harmonizing the 

BICE's webpage disclosures to the existing regulatory scheme, the Proposal could 

be implemented with far less client confusion, less cost, far less time and with far 

less disruption to the current business models which serve clients today.

BICE Contracts Should Allow Negative Consent or Signing at the Time of a 

Transaction. 

The BICE will make contracts mandated and commonplace. By requiring the 

BICE contract in order to purchase a commission-based investment, the Proposal has 

placed an enormous burden on the client. Contract interpretation requires a great deal 

of skill and understanding. The vast majority of prospective clients are most likely not 

equipped to comprehend the terms and conditions that may be included in the BICE 

mandated contract. The goal of enhancing client protections is not being served by 

enabling fraudulent bad actors through an environment where potentially dangerous 

contract terms (such as powers of attorney) can be included in contracts "required by 

law," unbeknownst to clients, in order to simply receive investment services. The bad 

actors that will benefit from prospective clients that have been desensitized to the 

serious nature of legal contracting will most likely not be concerned with the 

consequences associated with violations of regulatory rules.

As proposed, the BICE currently would require a contract to be entered into prior 

to engaging the client in a discussion regarding their retirement investment options. This 

contract timing is simply unworkable. At that time of the relationship, the investment 

professional will not be certain he/she will need to rely on the BICE or another 

exemption. Entering into the contract prior to even starting a discussion could also have 

the effect of alienating retirement clients. In many instances, the investment 

professional will not yet have a relationship with a client, because the client is 

determining if they want to begin working with the investment professional. Yet, before 

even having a relationship, the investment professional would have to put a BICE 

contract in front of the client that could intimidate and/or drive away the client. This is 

clearly not the outcome the Proposal seeks to achieve. These requirements place 

further burdens on investment firms and investment professionals who seek to do what 

is in the best interest of the client if that calls for a commission-based solution. This 

further incents investment professionals to not serve small, middle income investors. 

This BICE requirement will cause many investment professionals to conclude that 

commission-based sales are not practical, even if the investment is appropriate and the 

investment professional is acting in the best interest of the client.

Assuming the BICE can be modified to serve all of the clients’ interests, the 

simple and practical implementation would be to either require the BICE contract to be 

signed at the time of an investment (when the investment professional would be eligible 

to receive compensation), allow for negative consent to the BICE contract or simply 

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permit the investment professional to make unilateral representations and warranties. 

The investment professional would be certain to deliver the binding document; 

otherwise, they would not be able to rely on the BICE.

* * *

We thank the Department for the opportunity to comment on the Proposal. 

Please address any questions to the undersigned.

Sincerely yours,

Sources/Exhibits 

1. Centre for Interuniversity Research and Analysis on Organizations, “Econometric Models on the 

Value of Advice of a Financial Advisor.”

2. LIMRA Secure Retirement Institute 2014 Consumer Survey.

3. Study sponsored by TIAA-CREF and cited in a MarketWatch article -“Retirement Planning Advice for 

the Wise” (11-12-2012).

4. Charles Schwab’s "Man and Machines" report (May 2015).

5. Report at /www.wealthmanagement.com (June 2015) "Compensation Survey 2015."

6. Consumer Federation of America, "DOL Delivers on its Promise: Conflict of Interest Rule Proposal 

Provides Needed Protections for Retirement Savers, Flexibility for Financial Firms" (2015).

7. 2011 study by management consulting firm, Oliver Wyman - "Assessment of the impact of the 

Department of Labor’s proposed “fiduciary” definition rule on IRA consumers."

8. AON-Hewitt study cited in an article on CNBC.com – "Stop Juggling That Handful of 401(k)s and 

IRAs" (9-19-12). 

9. Argento, Bryant and Sabelhaus, cited in April 9,2014 study by Quantria Strategies, LLC, “Access to 

Call Centers and Broker Dealers and Their Effects on Retirement Savings.”

10. April 9, 2014 study by Quantria Strategies, LLC, “Access to Call Centers and Broker Dealers and 

Their Effects on Retirement Savings.”

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