T he De pa rtme nt o f L a b o r Co nflic t o f I nte re st Rule - PowerPoint PPT Presentation

T he De pa rtme nt o f L a b o r Co nflic t o f I nte re st Rule s A Co mpre he nsive Ove rvie w o f the ne w DOL Ruling

I mpo rta nt Disc lo sure s T his ma te ria l is g e ne ra l in na ture . It is no t inte nd e d a s inve stme nt o r e c o no mic a d vic e , o r a re c o mme nd a tio n to b uy o r se ll a ny se c urity o r a d o pt a ny inve stme nt stra te g y. Ad d itio na lly, it d o e s no t ta ke into a c c o unt the spe c ific inve stme nt o b je c tive s, ta x a nd fina nc ia l c o nd itio n o r pa rtic ula r ne e d s o f a ny spe c ific pe rso n. We e nc o ura g e yo u to se e k the a d vic e o f a n inve stme nt pro fe ssio na l who c a n ta ilo r a fina nc ia l pla n to me e t yo ur spe c ific ne e d s. F e d e ra l ta x la ws a re c o mple x a nd sub je c t to c ha ng e . Aimc o R Gro up, L L C; Aimc o R me mb e r firms no r its re pre se nta tive s g ive le g a l o r ta x a d vic e . Clie nts sho uld c o nsult with the ir a tto rne y o r le g a l a d viso r fo r a nswe rs to the ir spe c ific q ue stio ns. T his pre se nta tio n d o e s no t c o nstitute le g a l o r inve stme nt a d vic e . Ple a se c o nsult with yo ur ta x o r le g a l a d viso r. T he info rma tio n pro vid e d he re in is g e ne ra l in na ture a nd sho uld no t b e c o nstrue d a s le g a l o r ta x a d vic e , a s suc h o pinio ns c a n b e re nd e re d o nly whe n re la te d to spe c ific situa tio ns. T he info rma tio n pre se nte d he re is pro vid e d a t a hig h a nd no n-ind ivid ua lize d le ve l. E a c h a spe c t o f the DOL rule ma y b e sub je c t to a d d itio na l c o nd itio ns a nd re q uire me nts. T he info rma tio n pro vid e d is no t le g a l a d vic e . Ple a se c o nsult yo ur le g a l a d viso r if yo u ha ve q ue stio ns. F OR F INANCIAL PROF E SSIONAL USE ONL Y

T he De pt. o f L a b o r Co nflic t o f I nte re st Rule • 1,023 pa g e s o f ne w, c o mplic a te d re g ula tio ns • I mpo se ne w lia b ilitie s & re q uire me nts o n e ve r o f o ur y me mbe r industry • Co nta in no “Safe - Har ” la ng ua g e o r c he c klist fo r a dviso rs o r bor b ro ke r/ de a le rs • T he Offic e o f Ma na g e me nt & Budg e t e stima te s it will c o st o ur industry $19 Billio n to c o mply with the ne w re q uire me nts • I ndustry fo c us ha s b e e n o n c o mpe nsa tio n. BI CE he lps a ddre ss tha t. Mor e impor tant foc us should be on me e ting fiduc iar y obligations, r e gar dle ss of how we ge t paid • Ne w de finitio n o f F iduc ia ry unde r the rule s is e ffe c tive Apr il 10, 2017 . • T he full se t of r ule s and r e quir e me nts apply as of Januar y 1, 2018

T he De pt. o f L a b o r Co nflic t o f I nte re st Rule Re q uire s a ll who pro vide re tire me nt inve stme nt a dvic e to : E RI SA-g o ve rne d re tire me nt pla ns (i.e . 401k pla ns), • Spo nso rs & fiduc ia rie s o f suc h pla ns, • Pa rtic ipa nts & b e ne fic ia rie s o f suc h pla ns, • I RA o wne rs & I RA b e ne fic ia rie s • to a b ide b y a “fiduc ia ry” sta nda rd – putting the ir c lie nts’ be st e sts b e fo re the ir o wn pro fits. inte r F irms a nd a dvise rs will b e re q uire d to ma ke prude nt inve stme nt re c o mme nd a tio ns witho ut re g a rd to the ir o wn inte re sts, o r the inte re sts o f tho se o the r tha n the c usto me r; c ha rg e o nly re a so na b le c o mpe nsa tio n; a nd ma ke no misre pre se nta tio ns to the ir c usto me rs re g a rding re c o mme nde d inve stme nts. Source: U.S. Dept. of Labor - www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource- center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

De finitio n o f Advic e De finitio n o f Advic e T hink “Inve stme nt Advic e ” Co ve re d inve stme nt a dvic e is de fine d a s a re c o mme nda tio n to a pla n, pla n fiduc ia ry, pla n pa rtic ipa nt a nd b e ne fic ia ry o r I RA o wne r fo r a fe e o r o the r c o mpe nsa tio n, dire c t o r indire c t, a s to the a dvisa b ility o f b uying , ho lding , se lling o r e xc ha ng ing se c uritie s o r o the r inve stme nt pro pe rty, inc luding re c o mme nda tio ns a s to the inve stme nt o f se c uritie s o r o the r pro pe rty a fte r the se c uritie s o r o the r pro pe rty a re ro lle d o ve r, tra nsfe rre d o r distrib ute d fro m a pla n o r I RA. Source: U.S. Dept. of Labor - www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource- center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

De finitio n o f Advic e De finitio n o f Advic e T hink “Ac c ount/ Por tfolio Str uc tur e & Manage me nt” Co ve re d inve stme nt a dvic e a lso inc lude s re c o mme nda tio ns a s to the ma na g e me nt o f se c uritie s o r o the r inve stme nt pro pe rty, inc luding , a mo ng o the r thing s, re c o mme nda tio ns o n inve stme nt po lic ie s o r stra te g ie s, po rtfo lio c o mpo sitio n, se le c tio n o f o the r pe rso ns to pro vide inve stme nt a dvic e o r inve stme nt ma na g e me nt se rvic e s, se le c tio n o f inve stme nt a c c o unt a rra ng e me nts (e .g ., b ro ke ra g e ve rsus a dviso ry); o r re c o mme nda tio ns with re spe c t to ro llo ve rs, tra nsfe rs, o r distrib utio ns fro m a pla n o r I RA, inc luding whe the r, in wha t a mo unt, in wha t fo rm, a nd to wha t de stina tio n suc h a ro llo ve r, tra nsfe r, o r distrib utio n sho uld b e ma de . Source: U.S. Dept. of Labor - www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource- center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

De finitio n o f Re c o mme nda tio n A "re c omme nda tion" is a c o mmunic a tio n tha t, b a se d o n its c o nte nt, c o nte xt, a nd pre se nta tio n, wo uld re a so na b ly b e vie we d a s a sug g e stio n tha t the a dvic e re c ipie nt e ng a g e in o r re fra in fro m ta king a pa rtic ula r c o urse o f a c tio n. T he mo re individua lly ta ilo re d the c o mmunic a tio n is to a spe c ific a dvic e re c ipie nt o r re c ipie nts, the mo re like ly the c o mmunic a tio n will b e vie we d a s a re c o mme nda tio n. Source: U.S. Dept. of Labor - www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource- center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

De finitio n o f Re c o mme nda tio n De finitio n o f Re c o mme nda tio n Whe n doe s a r e c omme ndation make one a fiduc iar y? I n o rde r fo r a re c o mme nda tio n to c o nstitute fiduc ia ry inve stme nt a dvic e , it must b e re nde re d fo r a "fe e o r o the r c o mpe nsa tio n." "F e e o r o the r c o mpe nsa tio n, dire c t o r indire c t" me a ns a ny e xplic it fe e o r c o mpe nsa tio n fo r the a dvic e re c e ive d b y the pe rso n (o r b y a n a ffilia te ) fro m a ny so urc e , a nd a ny o the r fe e o r c o mpe nsa tio n re c e ive d fro m a ny so urc e in c o nne c tio n with o r a s a re sult o f the re c o mme nde d purc ha se o r sa le o f a se c urity o r the pro visio n o f inve stme nt a dvic e se rvic e s inc luding , tho ug h no t limite d to , suc h thing s a s c o mmissio ns, lo a ds, finde r's fe e s, a nd re ve nue sha ring pa yme nts. Source: U.S. Dept. of Labor - www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource- center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

De finitio n o f Re c o mme nda tio n De finitio n o f Re c o mme nda tio n Re c omme ndations that give r ise to fiduc iar y inve stme nt advic e r e sponsibilitie s inc lude r e c omme ndations made e ithe r dir e c tly or indir e c tly (e .g. thr ough or toge the r with any affiliate ) by a pe r son who: • Re pre se nts o r a c kno wle dg e s tha t the y a re a c ting a s a fiduc ia ry within the me a ning o f E RI SA o r the I nte rna l Re ve nue Co de (Co de ); • Re nde rs a dvic e pursua nt to a writte n o r ve rb a l a g re e me nt, a rra ng e me nt o r unde rsta nding tha t the a dvic e is b a se d o n the pa rtic ula r inve stme nt ne e ds o f the a dvic e re c ipie nt; o r • Dire c ts the a dvic e to a spe c ific re c ipie nt o r re c ipie nts re g a rding the a dvisa b ility o f a pa rtic ula r inve stme nt o r ma na g e me nt de c isio n with re spe c t to se c uritie s o r o the r inve stme nt pro pe rty o f the pla n o r I RA.

DOL Co nflic t o f I nte re st Rule s It se e ms that almost anything an advisor says to a c lie nt with r e gar d to an E RISA- gove r ne d r e tir e me nt plan or IRA will be c onstr ue d as advic e that make s the advisor (and the advisor ’s fir m) a fiduc iar y, inc luding: • Wha t funds o r inve stme nts sho uld b e o ffe re d in a 401k pla n o r I RA • Wha t a 401k pa rtic ipa nt o r I RA o wne r sho uld inve st in • Re c o mme nda tio ns a b o ut ro lling (o r no t ro lling ) 401k a sse ts to a n I RA • Whe the r o r no t to ta ke a distrib utio n fro m a 401k pla n o r I RA • Ho w muc h to ta ke a s a distrib utio n fro m a 401k pla n o r I RA • Wha t to do with 401k/ I RA distrib utio n pro c e e ds