Anatomy of a Risk Assessment Preparing for the DOL Fiduciary Rule - PowerPoint PPT Presentation

Anatomy of a Risk Assessment Preparing for the DOL Fiduciary Rule Change

Gena Spitzer Evan Rosser Relationship Manager, Director Ami Shah Robert Tuch Director Senior Consultant

Statements made by the DOL in the preamble: In the preamble to its Fiduciary Rule, the DOL indicated that advisers to plans and IRAs may be providing conflicted advice that furthers their own interests rather than the interests of retirement plan participants and IRA owners. The DOL also indicated that a broader definition of “fiduciary” would be appropriate to better protect the interests of plans, plan participants, plan beneficiaries and IRA owners from possible conflicts of interest, imprudence or disloyalty.

Fiduciary - any individual receiving compensation for providing individualized advice or advice specifically directed to a particular plan sponsor (e.g., an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment

The new definition includes:  A recommendation to take a distribution  A recommendation regarding the investment of assets to be rolled over to an IRA  A recommendation regarding individuals who will render investment advice The new definition does not require that advice be made on a regular basis.

Investment Education Platform Providers General Communications

Advice providers need to provide advice based on the retirement investor’s:  Investment objectives  Risk tolerance  Financial circumstances  Needs of the retirement investor An advice provider needs to provide advice without his/her regard to their own financial or other interests and without regard to those of the financial institution or any affiliated entity.

Includes transactions resulting in the receipt of variable compensation such as:  Sales loads  Rule 12b-1 fees  Trailing commissions  Revenue sharing payments

 Acknowledge that the advice provider and his/her firm are fiduciaries  Commit the firm and adviser to providing advice in the client's best interest (Impartial Conduct Standards)  Adopt policies and procedures designed to mitigate conflicts of interest  Clearly and prominently disclose any conflicts of interest that might prevent the adviser from providing advice in the client's best interest.

 Prior to or at the same time as the execution of the recommended transaction, the adviser’s firm shall provide the retirement investor with a written statement of the firm’s and the adviser’s fiduciary status.  The firm and the adviser must adhere to the Impartial Conduct Standards.

 When recommending rolling assets from an ERISA plan to an IRA, the firm shall document the specific reasons why the recommendation is in the best interest of the retirement investor. The documentation must: 1. Include consideration of the retirement investor’s alternatives to the rollover. 2. Take into account the fees and expenses associated with both the ERISA plan and the IRA, whether the employer pays for some or all of the plan’s administrative expenses and the different levels of services and investments available under each option.

 When recommending that assets be moved from another IRA or that the investor switch from a commission-based account to an account that charges a level fee, a Level Fee Fiduciary must document the reasons why the arrangement is in the best interest of the retirement investor, including the services that will be provided for the fee.  If applicable, the BIC Exemption conditions relating to proprietary products must be satisfied.

June 7, 2016 April 10, 2017 Jan 1, 2018 • DOL Rule • DOL Rule will • All becomes become requirements effective applicable for BIC Exemption to be met

• Now What – Next Steps in Preparing for the DOL Fiduciary Rule Changes October 26 • Are you ready for April – Training and Education Around the DOL Fiduciary Rule Changes January 2017 • Testing Your Implementation Model – Does it Stand Up to the DOL Fiduciary Rule Changes April 2017 • Preparing for Next Year’s Requirements of the DOL Fiduciary Rule Changes – How to Utilize the BIC May 2017

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