© PRIMERICA

Hispanic American Leadership Council

April 12, 2011

The Honorable Hilda Solis
Secretary of Labor

U.S, Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210

Re: U.S. Department of Labor Proposed Change in Definition of Fiduciary
Dear Secretary Solis:

We are writing to you on behalf of the Primerica Hispanic American Leadership Council, which
is a group of Primerica representatives that is composed of, and which serves, Hispanic
American workers throughout the United States. We want the Department to be aware of the
impact that the proposed fiduciary rule may have on the communities in which we live and work.

For Hispanic American workers, the problems of retirement savings awareness and access to
methods for retirement savings are extremely acute. In addition to the barriers that exist for
other middle- and lower-middle income workers, Hispanic families frequently face a language
barrier that limits their ability to obtain retirement savings advice and products, and the close-
knit nature of many Hispanic American communities causes those communities to be ignored, or
at least underserved, by many financial services firms. Many workers in these communities are
in work situations that do not provide a 401(k) or similar retirement savings plan,' and even
those who do have access to such a plan tend to participate at low levels.? As a result of all of
these factors, Hispanic Americans have very low rates of retirement savings, and it is very
common for members of our organization to make presentations to families who have never even
considered the need for retirement savings.

As registered broker representatives, we have the ability to reach families in the communities
where we live, There are no cultural or language barriers that prevent us from educating families
in our communities about the importance of retirements savings and their options for saving.

x According to the National Compensation Survey performed by the Bureau of Labor Statistics, only 65% of
American workers have access to an employer-sponsored retirement plan, and only 50% actually participate. For
workers in smaller companies, the numbers are even lower, with only 50% of workers having access to a retirement
plans, and only 35% participating. http://www.bls.gov/news.release/pdf/ebs2.pdf, at 2, 6.

“ A 2009 study found that Hispanic workers are less likely to participate in 401(k) plans, and for those who do
participate, to contribute less than their white cohorts. Of workers with access to 401(k) plans, 77% of white
workers participated, while only 65% of Hispanic Americans did. Further, for middle-income workers earning
between $30,000 and $59,999, the average 401(k) balance was $35,551 for white workers, and only $22,017 for
Hispanic American workers. Groundbreaking Study Reveals African-Americans and Hispanics Significantly Less
Prepared for Retirement Than Their White Counterparts, http://www.hewittassociates.com/IntI/NA/en-
US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=6979.



Primerica offers customers the ability to open IRAs with very small initial balances ($250) and
allows for very small monthly pre-authorized contributions to IRAs of as little as $25 per month.
For the families we serve, opening one of these small IRAs is often the crucial first step they
have taken to save money for retirement.

We are very concerned that the Department’s proposed fiduciary standard would leave the
Hispanic American communities we serve without any viable access to retirement planning
education and retirement savings opportunities. By prohibiting third-party compensation under
the “prohibited transactions” rule, we believe that the Department’s proposed standard would
eliminate representatives of broker-dealers, our members, as a source for IRAs in the Hispanic
American community, and instead would force customers to open IRAs exclusively through
investment advisers.

The investment adviser model does not work in the communities we serve. Investment advisers
either charge customers a flat dollar amount to create an investment plan (typically $500), or
charge an amount based on a percentage of the customer’s assets, In the communities where we
live and work, an up-front charge would be so large in comparison to a customer’s initial account
balance that it would outweigh any investment returns, and would dissuade customers from
opening accounts at all. Similarly, a percentage-of-assets model is not viable for a customer with
asmall IRA. The typical fees charged by investment advisers are in the 1-2% range, and for an
account that is opened with a $1,000 initial balance and a $25 per month contribution (a very
common account size for our customers), the adviser’s compensation would be $10-20 initially
and only marginally more than that in later years. The work involved in educating a family
about the need to save, assisting them with a savings calculation, and helping them in choosing
suitable investments is sufficiently time-consuming that it would simply not be worth an
adviser’s time to work with customers with limited assets.

The Hispanic American communities that we live and work in have an urgent need for retirement
savings knowledge, advice and products. We believe that in applying the fiduciary standard to
IRA products, the Department’s proposed rule would cut off one of the only avenues available to
our communities to help reverse the problem of low retirement savings rates. For this reason, on
behalf of our members, we urge the Department not to impose the proposed standard on IRAs
without substantial additional study of the potentially severe consequences the proposed rule
could have for middle-income working families.

Yours very truly,

a ‘
Thareceaiy bf, AN
a

Francisco Dillon, Chairman Jose F. Rivera Vega, Co-Chairman

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