Washington | New York 

1101 New York Avenue, 8th Floor | Washington, DC 20005-4269 | P: 202.962.7300 | F: 202.962.7305 

www.sifma.org | www.investedinamerica.org 

April 12, 2011 

The Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Attn: Proposed Definition of Fiduciary Regulation 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, N.W. 

Washington, DC 20210 

Re: Proposed Definition of Fiduciary Regulation 

Ladies and Gentlemen: 

The Securities Industry and Financial Markets Association (“SIFMA”) is pleased to 

provide additional comments regarding the Department of Labor’s (“Department”) proposed 

regulation under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) 

that will 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”).1

 We appreciate the opportunity to 

comment and to testify, as well as for the extended comment period after the hearing and 

publication of the transcript. This supplemental comment will respond to the questions the 

Department posed during the hearing and respond to certain other comments made by others who 

testified. 

We appreciate the Department’s stated willingness to make changes to the proposal, 

which we feel are absolutely necessary, as well as the Department’s openness to discussion of 

prohibited transaction relief that may be necessary should the Department move forward on its 

proposal. However, given the number of comments received by the Department to date and the 

Department’s own acknowledgement that the Proposed Regulation’s language may have drafting 

issues, we remain concerned that unless we and other interested parties have the opportunity to 

review the new version, and provide feedback, the final regulation could still result in a 

significant disruption to and a very material cost impact on retirement accounts and retirement 

savings. For that reason, we continue to believe the Department should re-propose this proposal 

after reviewing the comments and suggestions made by ourselves and others. This regulation, 

which is fundamental to ERISA’s regulatory scheme, is too important to rush. We urge the 

 

1

The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds 

of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, investor opportunity, 

capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, 

with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association 

(GFMA). For more information, visit www.sifma.org.
 2

Department to take the time to vet these issues so that the regulation does not unduly harm 

participants. 

Brokers Will Need to Assume They May Be Fiduciaries if Current Proposal is Finalized

The Department asked why brokers would decide to act as fiduciaries, rather than attempt 

to meet the requirements for nonfiduciary status under the proposed regulation. The answer lies 

in risk management. If the test for being a fiduciary is vague, subjective or one-sided, while the 

penalty for engaging in transactions that violate the prohibited transaction provisions of ERISA 

and the Code are extraordinarily high – reversal, reimbursement of losses, guarantee of a 

portfolio rate of interest on the value of the transaction, disgorgement of profits, and a 15% 

annual excise tax – a prudent business decision would be to avoid that risk and revise the 

business model. That decision would be made on a risk/reward/cost continuum; the greater the 

risk and the higher the potential cost of an error, the lower the reward in attempting to retain the 

current business model. 

Thirty-five years of experience with the current definition has resulted in a familiarity 

with the “rules of the road,” and compliance and training system which we and our clients can 

understand and can rely upon. Where brokers act as fiduciaries, they clearly state that status in 

their documents, and systems are built to ensure that prohibited transactions do not occur. We do 

not seek a rule that allows a person who agrees he is acting as a fiduciary to later claim the 

contrary. But where brokers do not agree to act as fiduciaries, there is a set of client and service 

provider expectations which strike a balance between adequate market and investment education 

information on the one hand and efficient execution on the other. 

If that same market and investment information is subject to a standard where it is more 

likely than not that a client would prevail if he or she sued claiming that he or she might have 

considered the information provided to be a recommendation, no reasonable business would take 

the risk of guessing where the line is. The words the Department chooses are the words that 

move the balance -- there is a long way between “a primary basis” and “any potential basis at 

all” which is what “may consider” can be read to mean

2

. 

Restricting the Selling Exception from Applying to Participant Advice Will Hurt Participants 

SIFMA also wants to respond to the views expressed in comments and at the hearing that 

the selling exception should not apply to participant recommendations. We believe that such a 

limitation on the selling exception would be a mistake and would hurt participants. The type of 

market color and investment information that participants receive currently from brokers that 

may qualify as a recommendation if the Department’s proposal is adopted as proposed will 

 

2

The Department suggests that commenters are reading the regulation too broadly and the exceptions too narrowly. 

The rules of statutory construction may well require a court to do the same, and in the end, the decision regarding how to 

organize a broker-dealer business requires a realistic assessment of a court’s likely reading of a remedial statute.
 3

simply stop. The only way that type of information can be provided to participants is in the 

context of the selling exception. Without it, brokers will likely advise participants that they can 

either pay for fiduciary advice and more costly securities execution, or brokers can execute their 

transactions if they call the broker but the brokers are prohibited by ERISA from having a 

conversation about their options. 

Today, a service provider may provide information of a kind that is not described in 

Interpretative Bulletin 96-1, but still not have a mutual agreement and understanding to provide 

fiduciary advice. Where any participant education that falls outside the safe harbors in 

Interpretative Bulletin 96-1 will automatically be deemed to be fiduciary advice, we fear that 

those entities now providing participant education may be hesitant to do so in the future. We 

urge the Department to consider the cost of limited participant education on participant choice, 

as well as the cost of fiduciary advice on the $4.3 trillion of assets in participant directed 

accounts in 401(k) plans. 

Additional Exemptive Relief Would be Necessary if the Regulation is Finalized

The Department posed several questions regarding applicable prohibited transaction 

exemptions to SIFMA and to others. Mr. Hauser and Mr. Strasfeld both suggested that in light 

of PTE 84-24 and PTE 86-128, they were curious what other exemptions might be required if all 

brokers were deemed fiduciaries. As we noted in our original comment, if a broker were deemed 

to be a fiduciary (or agreed to be a fiduciary because of the risks inherent in a vague, one-sided 

or subjective standard), it would likely charge an advisory fee, both to cover the additional 

training, compliance, systems enhancement and insurance that would be required, and also to 

facilitate a broad range of product offerings, such as that described in DOL Advisory Opinion 

2005-10A. 

In addition, the Department’s section 408(b)(2) interim final regulation requires every 

covered service provider to state whether it is acting as a fiduciary under ERISA or the 

Investment Advisers Act of 1940. With that in mind, we note that many practitioners have raised 

issues about whether any section 406(b) relief is provided by PTE 84-24 where the fiduciary is 

not “an inadvertent fiduciary” or where the fiduciary is providing investment advice for a fee and 

not simply for commissions. As noted earlier, if the final regulation uses the “may consider” 

standard, we believe most brokers who continue to serve these markets will agree to act as 

fiduciaries only if they are paid an asset-based fee to cover the added costs and private plaintiff 

litigation risks of acting as a fiduciary, if they agree to deal with plans, and especially small plans 

and IRAs at all. While we would appreciate the Department’s clarification that our concerns are 

without basis, we are concerned that PTE 84-24 would not provide relief for the sale of annuities. 

Unless additional relief is provided, neither IRAs nor plans could purchase annuities, 

significantly interfering with the Department’s encouragement of investment options which 

provide lifetime retirement income. In addition, the Department has noted that PTE 84-24 does 

not provide relief for the purchase of mutual funds to any broker or pension consultant other than 

a principal underwriter. While practitioners have urged the Department to read the exemption 
 4

more broadly, it would be difficult to advise a broker that the exemption provides any relief for 

the sale of affiliated mutual funds unless the broker is the principal underwriter of the fund. 

Practitioners have also raised questions regarding the use of PTE 86-128 where the 

fiduciary does not have investment discretion and control.3

 While we believe the history of the 

exemption should lead to the conclusion that the exemption provides relief to both discretionary 

and advisory fiduciaries, this issue seems to be unresolved and as recently as last week, 

Department representatives were unable to provide certainty on this point. Assuming that the 

Department was able to provide clarification on this point, the exemption provides relief for the 

purchase and sale of securities and commissions in connection therewith. It does not provide 

relief for investments other than securities, such as currency, futures, and deposits, for which 

there is a significant need in today’s markets. 

In addition to the sale of mutual funds and insurance contracts where a fiduciary is 

charging an advisory fee, and for the sale of products and property other than securities on an 

agency basis, exemptions providing section 406(b) relief would be needed for: 

• principal transactions in securities and other assets (such as futures, currency, structured 

products, repurchase agreements, treasury bills, bankers acceptances, brokered deposits 

and other deposits) with both domestic and foreign dealers 

• extensions of credit in all the settings contemplated by PTE 75-1, Part V as well as 

others, such as in the context of overdrafts, float, and other custody extensions of credit 

• sale of underwritings 

• receipt of 12b-1 fees, revenue sharing and other payments from third parties 

• clarification that PTE 77-4 applies to advisory fiduciaries 

• relief for commodity funds and commodity ETFs, and other pooled funds that are 

publicly traded but not registered with the SEC such as Irish funds and other foreign 

vehicles 

• Clarification that investment in closed end funds in the secondary market requires no 

exemptive relief 

• use of ECNs and other trading and clearing platforms both domestic and foreign 

• common brokerage arrangements such as payment for order flow, and 

 

3

PTE 86-128 provides relief for: “a plan fiduciary’s using its authority to cause a plan to pay a fee”. Some have 

questioned whether that language covers a plan fiduciary using its influence to cause a plan to pay a fee. While the preamble to 

the final exemption PTE 78-10 clearly makes the predecessor exemption to PTE 86-128 applicable to fiduciaries without 

discretion, clarification would be helpful. 
 5

• securities loans to brokers whose employees may provide fiduciary advice to plans. 

For your reference, we have attached a chart to this comment as Appendix I which lists the type 

of transactions for which relief would be required and the shortcomings of current relief in each 

area. It is important to note that the list is not exhaustive but illustrative of the significant 

limitations of plan choices that the current exemptions will not address. 

We emphasize that any exemptive relief will need to be in final form before the 

regulation becomes final to avoid a significant disruption to and a very material cost impact on 

retirement accounts and retirement savings plans. That exemptive relief would also be necessary 

before the regulations become final so that conditions and consents can be reflected in the 

broker-dealers systems and documents. Without such advance publication, trading for plans and 

IRAs would be seriously disrupted on the effective date of the regulation and participants will be 

unable to purchase the products they currently purchase or will be able to so at significantly 

increased expense to them. We do not believe that it is reasonable or efficient to take up each 

existing transaction-specific prohibited transaction exemption separately, reproposing each of 

them with new conditions. We urge the Department to issue an exemption that provides 

workable conditions to permit plans to continue to invest in the products and investments that 

they have historically used and to enable plans to make the choices that they believe are 

appropriate and in their interest and in participants’ interest. We think it is critical that current

plan investments not be disrupted by the regulation. We urge you to consider the negative effect 

on the economy, and plan participants, if plans suddenly are required to sell a significant part of 

their holdings because fees are paid to their brokers. 

Mr. Hauser suggested that certain of the increased execution costs of securities 

transactions might be minimized by a principal transaction exemption for fiduciaries. We agree 

with that suggestion, and would like to take this opportunity to comment on the kinds of 

conditions which might, and might not work in the context of an exemption for investment 

transactions executed on a principal basis4

. 

 

4

The Department also sought comment on changes to the seller’s exception. We hope the Department will consider 

the following: 

(i) For purposes of this paragraph (c), a person shall not be considered to be a person described in paragraph (c)(1) of 

this section with respect to the provision of advice or recommendations if, with respect to a person other than a person 

described in paragraph (c)(1)(ii)(A), such person can demonstrate that the recipient of the advice or recommendation knows or, 

under the circumstances, reasonably should know, that the person is providing the advice or making the recommendation in its 

capacity as a purchaser, seller or lender of a security or other property or a seller of services, a counterparty in a swap, 

repurchase agreement or other bilateral agreement, as a broker or agent of the advice recipient, or as an agent of, or appraiser 

for, such a purchaser, seller, lender or counterparty. A person will be deemed to have demonstrated that the recipient of the 

advice or recommendation knows or reasonably should know that the advice or recommendation is made in its capacity as a 

purchaser, seller, lender, counterparty, agent, broker or appraiser if the person has disclosed in writing that it is not acting as a 

fiduciary, that its financial interests may be affected by the transaction, that it may earn a fee, spread or other compensation if 

the transaction is consummated or the service is provided and that the recipient of the advice or recommendation will not have 

the remedies that it would have if the person were agreeing to act as a fiduciary under ERISA and the Internal Revenue Code. 
 6

First, we would note that various proposals for principal trading relief in ERISA accounts 

have been raised with the Department well before the current rulemaking process. For example, 

in May 1998, the Investment Adviser, Investment Company, Federal Regulation and Retirement 

Products and Estate Services Committees of our predecessor organization, the Securities Industry 

Association (“SIA”), together wrote urging the Department “to clarify that it interprets Section 

406(b)(2) of ERISA in a manner consistent” with the views of the SEC staff in the Morgan, 

Lewis no-action letter,5

 where the SEC had concluded that “trade by trade” consent for principal 

trading activity in advisory accounts under Section 206(3) of the Investment Advisers Act was 

not required in a “wrap” fee advisory contract where third party managers, and not the broker 

sponsoring the advisory program, had discretion in directing trades. Under those circumstances, 

it was and continues to be SIFMA’s view that “whether the trades by such a Dual Registrant are 

executed on a principal or agency cross basis, the concerns that underlie Section 406(b)(2) 

clearly are not present.” However, the Department has never formally answered this request, 

and has generally required advance “transaction by transaction” consent. As we have advised 

the SEC in the context of the Dodd-Frank fiduciary standard for retail brokers, such advance 

consent on a transaction basis is impractical and expensive; it will be rare that a fiduciary broker 

will engage in a principal transaction rather than trade away, if consent is required on a 

transaction by transaction basis or if other conditions imposed by the Department are 

unworkable. In addition, relief that the Department has provided in the past to foreign brokerdealers has required substantial involvement by the U.S. affiliate which has proved cumbersome, 

expensive and in the long run, unworkable. Finally, while every principal transaction is reported 

to clients pursuant to the requirements of the securities laws, we urge the Department to closely 

coordinate the information required in connection with these transactions with the SEC, which 

we understand will be issuing similar relief in connection with regulations under section 913 of 

Dodd-Frank. 

The Oliver Wyman Study 

The Department requested back up data from the Oliver Wyman study that was attached 

to SIFMA’s comment. The backup material is attached hereto as Appendix II. 

A Reproposal of the Rule Together With Proposed Prohibited Transaction Relief is Necessary

 

We hope that we can collaboratively find a method to make sure, either through a 

reproposal or a very open airing of regulatory language, that plans and participants are not 

inadvertently harmed by the Department’s final rule, and that exemptive relief is in place on the 

effective date so that plans will not have to sell investments they currently hold, change 

strategies or give up investment choices currently available to them. 

 

5

In an April 16, 1997 letter to Morgan Lewis & Bockius, the SEC staff determined that, when a transaction is directed 

to a broker-dealer sponsor of a non-discretionary advisory program by an unrelated portfolio manager that has investment 

discretion to manage the account, and the broker-dealer does not recommend, select or play any role, direct or indirect, in the 

portfolio manager’s selection of particular securities to be purchased for, or sold on behalf of program clients, then the brokerdealer would not be acting as an investment adviser in relation to the transaction for purposes of Section 206(3) of the 

Investment Advisers Act (the restrictions on principal trading). 
 7

SIFMA and its members appreciate the Department’s openness to additional comments. 

We look forward to working with you on this very important regulatory initiative. 

 Sincerely, 

 Kenneth E. Bentsen, Jr. 

 EVP, Public Policy & Advocacy 

 
 8

Appendix I 

Type of Transaction Where Broker 

May Be a Fiduciary under DOL 

Proposal 

Current Law Restriction or 

Shortcoming 

Principal Transactions in securities 

and other assets with domestic or 

foreign broker dealer 

• PTE 75-1 Part II does not permit 

such transactions with fiduciaries; 

• only permits such transactions 

with U.S. broker-dealers; 

• only covers securities and not 

currency or futures 

Principal Transactions in currency 

with domestic or foreign broker 

dealer or bank 

Section 408(b)(18) does not permit 

such transactions with fiduciaries 

Extensions of credit for settlement, 

short sales, margin, debt (publicly 

traded, privately placed, notes, 

commercial paper, structured 

products); need relief to provide 

advice where affiliate provides credit 

to fund being recommended 

• PTE 75-1, Part V only covers 

U.S. broker –dealers; 

• no fee or interest if party in 

interest is a fiduciary; 

• doesn’t cover debt. 

• While debt is covered under 

section 408(b)(17), that statutory 

exemption doesn’t cover 

fiduciaries 

IPOs underwritten by domestic or 

foreign broker dealers who may be 

members or managers of the 

syndicate, or trustees of the 

underlying assets 

• PTE 75-1 only covers U.S. 

broker-dealers 

• only covers members, not 

managers of a syndicate, and 

• does not cover indenture trustees 

or other trustees 

Repurchase agreements and other 

short term investments such as 

commercial paper, bankers 

acceptances and deposits 

PTE 81-8 only covers U.S. brokerdealers and banks and does not cover 

fiduciaries. 
 9

Receipt of trailers and other payments 

from mutual funds, collective trusts, 

their managers or distributors or 

principal underwriters 

• Unclear the breath of payments 

covered by PTE 75-1, Part II for 

unaffiliated open end funds; 

• no relief for trailers from closed 

end funds, collective trusts, 

commodity funds or affiliated 

funds; 

• PTE 86-128 does not cover 

payments from third parties other 

than in an agency cross 

Insurance company commissions and 

other payments 

PTE 84-24 should be clarified to 

cover relief for 

• any nondiscretionary fiduciaries, 

• for affiliated and unaffiliated 

insurance companies, in 

connection with different types of 

annuities, including fixed and 

variable annuities where affiliated 

managers manage subaccounts 

and differing compensation 

among subaccounts, and 

• revenue sharing 

Mutual fund commissions PTE 84-24 should be clarified to 

cover 

• sellers other than principal 

underwriters, 

• receipt of fees by affiliated 

managers, 

• closed end funds and commodity 

funds 

Agency transactions, regardless of 

whether the fiduciary has 

discretionary control, in investments 

including securities and other assets 

PTE 86-128 does not now cover 

transactions in assets other than 

securities and may be unclear 

regarding its applicability to advisory 
 10

such as brokered deposits, currency, 

commodities, futures, private funds, 

such as hedge funds, real estate funds, 

private equity funds, including 

riskless principal transactions, 

including indirect compensation such 

as order flow, revenue sharing, ECN 

payments, concessions and discounts 

fiduciaries. 

Advice We note that interpretation of the 

statutory relief in section 406(g) is 

not yet published, and the Department 

has not provided the exemption called 

for the Pension Protection Act for 

IRAs. 

However, the proposed exemption 

includes an onerous third party audit 

provision that if retained, will 

discourage the use of the exemption. 

Securities Lending PTE 2006-16 should be clarified to 

permit loans to borrower even if 

borrower’s affiliate provides advice 

for a fee to the plan 

Appendix II 

Oliver Wyman Materials 
November 17, 2010 

Via email to: rule-comments@sec.gov and IA-BDStudy@sec.gov

Elizabeth M. Murphy 

Secretary 

Securities and Exchange Commission 

100 F Street, N.E. 

Washington, D.C. 20549-1090 

 Re: Study Regarding Obligations of Brokers, Dealers, and Investment

Advisers; Exchange Act Release No. 62577; Investment Advisers

Act Release No. 3058; File No. 4-606 

Dear Ms. Murphy: 

The Securities Industry and Financial Markets Association (SIFMA)1 would like to 

thank you for the opportunity to meet with representatives of the Securities and 

Exchange Commission (SEC) on November 10th to review our analysis of potential 

changes to the standard of care for investors served by our member firms.2

 As noted in 

our previous public statements, SIFMA supports harmonization of broker-dealer and 

investment adviser regulations for those who provide personalized investment advice 

to retail investors. We believe this can be accomplished in a way that does not restrict 

customer choice or product access. We commend the SEC for the depth of review it is 

undertaking in its current study. 

 The key findings from our study show that broker-dealers play an important role in 

retail brokerage, which cannot be easily replicated with alternative service models. 

Among the findings are: 

 95% of the househ

commission-based brok

                                                       

olds served by the firms participating in our survey use 

erage accounts to meet their investment objectives today; 

1

 SIFMA brings together the shared interests of hundreds of securities firms, banks and asset managers. 

SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job 

creation and economic growth, while building trust and confidence in the financial markets. SIFMA, 

with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial 

Markets Association. For more information, visit www.sifma.org. 

2

 Our study, filed with the SEC on October 27, 2010, is available at http://www.sec.gov/comments/4-

606/4606-2824.pdf. 

Washington | New York 

1101 New York Avenue, 8th Floor | Washington, DC 20005-4269 | P: 202.962.7300 | F: 202.962.7305 

www.sifma.org | www.investedinamerica.org 
2 

the standard of care for investo

                                                       

 Access to investment products traditionally offered on a principal basis (corporate 

and municipal securities) is more common and more affordable through 

commission-based accounts, particularly for small investors; and 

 The realized cost of investment for investors under fee-based advisory accounts is 

consistently higher (23-27 bps on average) than the commission-based brokerage 

accounts used by the 38MM+ households covered by our study. 

We recognize that the legislation does not prohibit commission-based compensation or 

other common elements of the broker-dealer service model. Our survey results bear 

out the relative value of commission-based accounts, particularly for smaller investors. 

If these same brokerage services had to be provided under the existing provisions of 

the Investment Advisers Act of 1940, however, it would negatively affect client choice 

and access to products, such as those now available on a principal basis. Thus, we 

continue to support a uniform federal fiduciary standard for broker-dealers and 

investment advisers who provide personalized investment advice to retail clients, yet 

that new standard must be “operationalized” to reflect the many different business 

models currently in effect serving investors. 

We have drafted this letter to respond to SEC staff requests for additional detail on the 

methodology used to complete the study, the robustness of the data gathered, and 

several exhibits contained in the original submission. Accordingly, our response is 

organized as follows: 

 Methodology for impact assessment 

 Robustness of data gathered 

 Additional data 

We are grateful for the opportunity to respond to SEC staff questions and your 

consideration of the findings from our study. 

I. Methodology for impact assessment 

SIFMA commissioned Oliver Wyman3 to analyze the impact of potential changes to 

rs served by our member firms. Oliver Wyman 

3

 With more than 2,900 professionals in over 40 cities around the globe, Oliver Wyman is an 

international management consulting firm that combines deep industry knowledge with specialized 

expertise in strategy, operations, risk management, organizational transformation, and leadership 
3 

                                                                                                                                                                

designed a standard template (see appendix 2) that was distributed to ~30 member 

firms to collect aggregated data on investment activity, asset allocation, and ‘realized 

investment costs’ across different client wealth segments and account types. Due to 

restrictions on disclosure of personal financial data and operational constraints, clientlevel data was not requested as part of the survey. Oliver Wyman supplemented the 

aggregated member data with publicly available information in preparing the study. 

In total, 17 firms provided SIFMA with sufficient data for analysis. These firms 

represent a broad cross-section of SIFMA’s membership serving retail investors, 

including global, national and regional full service broker-dealers, bank brokerages, 

and discount brokers. 

II. Robustness of data gathered 

The data gathered to support the analysis covered 38.2MM households with $6.8TN 

invested with member firms. To put these figures in context: 

 The 38.2MM households included in the data represent 33% of households in the 

United States today, according to the most recent survey of consumer finances by 

the Federal Reserve.4

 However, not all U.S. households hold investment accounts, 

implying that the true percentage of investors covered by the data is higher than 

33%. 

 The $6.8TN in client assets captured in the data represents 27% of financial assets 

held by investors in the United States. A significant share of the financial assets 

identified by the Federal Reserve includes ‘investments’ that are not generally held 

in brokerage or advisory accounts (e.g. pension assets), implying that the true 

percentage of investor assets covered by the data is higher than 27%. 

The objective of this study is to analyze the impact of potential changes to the standard 

of care for investors served by our member firms – not necessarily to draw conclusions 

on the broader investor population. This population of 38MM+ households represents 

development. The firm helps clients optimize their businesses, improve their operations and risk profile, 

and accelerate their organizational performance to seize the most attractive opportunities. Oliver 

Wyman is part of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit 

www.oliverwyman.com. 

4

 Federal Reserve Board Survey of Consumer Finances 2007 
a meaningful share of the US investor population, which should be considered 

carefully in the SEC study. 

To our knowledge, this information set is unique in that it provides a window into the 

underlying economics of different models for serving retail investors and is exceptional 

both in its breadth of coverage and its usefulness in comparing realized investment 

costs across different firms. 

III. Additional data 

The SEC staff attending the meeting on November 10th also requested additional detail 

on asset allocation (provided in summary form on page 17 of the original submission). 

A breakdown of asset allocation across different client wealth segments and account 

types is provided in appendix 1 below. 

Please let us know if we have adequately addressed your questions and requests for 

additional information, or if there is anything more we may provide that would be 

helpful to you. 

Sincerely yours, 

__________________________________ 

Ira D. Hammerman 

Senior Managing Director 

and General Counsel 

cc: Mary L. Schapiro, Chairman 

Luis A. Aguilar, Commissioner 

Kathleen L. Casey, Commissioner 

Troy A. Paredes, Commissioner 

Elisse B. Walter, Commissioner 

Robert W. Cook, Director, Division of Trading and Markets 

Andrew J. Donohue, Director, Division of Investment Management 

4 
Appendix 1: asset allocation across wealth segments and account types 

5 

0

200

400

600

800

1000

1200

1400

1600

1800

<250K 250K-1MM 1MM-5MM >5MM

All account types

Asset allocation ($BN) by wealth segment, 20091,2

$1,300BN

$1,900BN

$1,800BN $1,800BN

1. Numbers may not sum to total due to rounding

2. 5 firms representing less than $400BN in assets did not provide asset allocation details by account type and are excluded from analyses on the following charts

3. Includes cash, currencies, money market funds, etc

Source: SIFMA member data, Oliver Wyman analysis

Mutual Funds / ETFs 614 705 484 313

Cash / other 306 429 373 346 3

Equities 311 478 528 604

Corporate Bonds 37 76 66 58

Municipal Bonds 31 120 238 296

Structured Products 18 28 12 7

Alternatives 7 14 21 57

Government / Agency 9 23 35 80

Bonds

<250K 250K-1MM 1MM-5MM >5MM 

Mutual Funds / ETFs 614 705 484 313

Cash / other 306 429 373 346 3

Equities 311 478 528 604

Corporate Bonds 37 76 66 58

Municipal Bonds 31 120 238 296

Structured Products 18 28 12 7

Alternatives 7 14 21 57

Government / Agency 9 23 35 80

Bonds

<250K 250K-1MM 1MM-5MM >5MM 

0

200

400

600

800

1000

1200

1400

<250K 250K-1MM 1MM-5MM >5MM

1. Numbers may not sum to total due to rounding

2. Includes cash, currencies, money market funds, etc

Source: SIFMA member data, Oliver Wyman analysis

Commission-based, non-discretionary accounts

Asset allocation ($BN) by wealth segment, 20091

$1,100BN

$1,400BN $1,300BN $1,400BN

Mutual Funds / ETFs 457 468 336 230 

Cash / other 273 359 323 307 2

Equities 230 332 386 477 

Corporate Bonds 32 59 51 41 

Municipal Bonds 28 99 192 195 

Structured Products 17 25 11 5 

Alternatives 6 10 17 45 

Government / Agency 7 15 23 51 

Bonds

<250K 250K-1MM 1MM-5MM >5MM 

Mutual Funds / ETFs 457 468 336 230 

Cash / other 273 359 323 307 2

Equities 230 332 386 477 

Corporate Bonds 32 59 51 41 

Municipal Bonds 28 99 192 195 

Structured Products 17 25 11 5 

Alternatives 6 10 17 45 

Government / Agency 7 15 23 51 

Bonds

<250K 250K-1MM 1MM-5MM >5MM 
6 

0

50

100

150

200

250

<250K 250K-1MM 1MM-5MM >5MM

Fee-based, discretionary accounts

Asset allocation ($BN) by wealth segment, 20091

5BN

$195BN $195BN

$260BN

Mutual Funds / ETFs 51 83 59 40

Cash / other 7 14 14 18 2

Equities 52 75 77 84

Corporate Bonds 2 5 7 11

Municipal Bonds 1 8 23 78

Structured Products <1 <1 <1 2

Alternatives <1 1 2 6

Government / Agency 2 6 9 21

Bonds

<250K 250K-1MM 1MM-5MM >5MM 

$11

Mutual Funds / ETFs 51 83 59 40

Cash / other 7 14 14 18 2

Equities 52 75 77 84

Corporate Bonds 2 5 7 11

Municipal Bonds 1 8 23 78

Structured Products <1 <1 <1 2

Alternatives <1 1 2 6

Government / Agency 2 6 9 21

Bonds

<250K 250K-1MM 1MM-5MM >5MM 

1. Numbers may not sum to total due to rounding

2. Includes cash, currencies, money market funds, etc

Source: SIFMA member data, Oliver Wyman analysis

0

20

40

60

80

100

120

140

<250K 250K-1MM 1MM-5MM >5MM

$90BN

$150BN

$135BN

$85BN

Fee-based, non-discretionary accounts

Asset allocation ($BN) by wealth segment, 20091

Mutual Funds / ETFs 69 94 63 29 

Cash / other 8 19 18 10 2

Equities 11 28 35 27 

Corporate Bonds 1 4 4 3 

Municipal Bonds <1 3 9 13 

Structured Products <1 <1 <1 <1 

Alternatives 1 1 2 1 

Government / <1 1 2 3 

Agency Bonds

<250K 250K-1MM 1MM-5MM >5MM 

Mutual Funds / ETFs 69 94 63 29 

Cash / other 8 19 18 10 2

Equities 11 28 35 27 

Corporate Bonds 1 4 4 3 

Municipal Bonds <1 3 9 13 

Structured Products <1 <1 <1 <1 

Alternatives 1 1 2 1 

Government / <1 1 2 3 

Agency Bonds

<250K 250K-1MM 1MM-5MM >5MM 

1. Numbers may not sum to total due to rounding

2. Includes cash, currencies, money market funds, etc

Source: SIFMA member data, Oliver Wyman analysis
Appendix 2: data collection template 

Variable inputs for member firms to complete

I. Assets, Revenues, and Costs for all accounts

Wealth Segment (client assets)

2009 data < 250,000 250,000-1MM 1MM-5MM >5MM

Number of households holding accounts (year-end)

Total fees, commissions, other client-related revenues ($MM)

Total client assets ($MM) (year-end)

Asset composition ($MM)

Equities

Fixed Income | Corporate Bonds

Fixed Income | Government and Agency Bonds

Fixed Income | Municipal Bonds

Mutual Funds and ETFs

Structured Products

Alternatives (Hedge funds, private equity, managed futures)

Other Products (MM MF's, FCASH, CD's)

II. Assets, Revenues, and Costs by account type

Wealth Segment (client assets)

2009 data < 250,000 250,000-1MM 1MM-5MM >5MM

Fee-based discretionary accounts

Number of households holding accounts (year-end)

Total fees, commissions, other client-related revenues ($MM)

Total client assets ($MM) (year-end)

Asset composition

Equities

Fixed Income | Corporate Bonds

Fixed Income | Government and Agency Bonds

Fixed Income | Municipal Bonds

Mutual Funds and ETFs

Structured Products

Alternatives (Hedge funds, private equity, managed futures)

Other Products (MM MF's, FCASH, CD's)

Fee-based non-discretionary accounts

Commission-based discretionary accounts

Commission-based non-discretionary accounts

III. Additional 'client profile' data 

2009 data < 250,000 250,000-1MM 1MM-5MM

Number of clients holding IRA accounts (year-end)

Fee-based

Commission-based

Number of clients holding both fee- and commission-based accounts (year-end)

Number of clients with concentrated positions >25% of assets in one position (year-end)

Number of clients executing less than 10 trades in 2009

Number of clients purchasing shares in IPOs on principal basis in 2009

Number of clients purchasing Municipal Bonds on principal basis in 2009

Wealth Segment (client assets)

7