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Understanding The World of New Standards Anthony “Tony” Boquet, CLU®, ChFC®, CASL®, CLF®, FSCP®, FIC Vice President / Solutionary The American College of Financial Services

Fiduciary vs. Standard of Care Overview The American College of Financial Services / Ethics behind the Client’s Best Interest Conflicts (Advice = Compensation) Unanswered Questions Conclusion and Student Questions

How did we get here? February 2010 Dodd-Frank Act October 2010 DOL Proposes Rule September 2011 DOL Withdrawal Rule April 2015 DOL Re-proposes Rule April 2016 Final Rule – Extended – Extended a second time Currently DOA

DOL Ruling Snapshot Government interest in retiree’s financial stability Have seen laws, regulations, memoranda, research, speeches Protecting seniors Making sure they get good advice Determining the appropriate vehicles used for financial matters – all of this with a focus on compensation for the advice What has been done? Expansion of Medicare for Seniors – ACA Creation of the myRA – a no fee IRA/savings vehicle Emphasis on the Fiduciary standard

Conceived Conflict (Advice = Compensation)

Examples of Compensation Commission and transaction based business models Asset Under Management (AUM) discretionary accounts Flat fee (annual) Hourly fee Combination of revenue

Complying to Satisfy Acknowledge fiduciary status with respect to the advice to the Client Adhere to “Impartial Conduct Standards” which requires the fiduciary advisor to: Give advice that is in the Client’s Best Interest Charge no more than “reasonable compensation” Make no misleading statements about investment transactions, compensation and conflicts of interest Implement policies and procedures reasonably and prudently designed to prevent violations of Best Interest Conduct Standards Refrain from giving or using incentives for advisers to act contrary to the customer’s best interests Fairly disclose the fees, compensation, and Material Conflicts of Interest, associated with their recommendations

Unanswered Questions

Moving Forward Implement, train, educate and mold company practices to meet the new standard of care environment: How do advisors adhere to impartial conduct standards/act in best interest/without being swayed by compensation? How do advisors conform to various Standards of Care? ie. NAIC, CFP Board’s fiduciary responsibility or others To what level will companies be responsible for monitoring advisors actions and conflicts?

Product Specific Business Model Issues Annuity producer Fixed Variable Mutual fund business Fee oriented business AUM Flat/other fee

What Remains Unanswered? Legal challenges? Could it be overturned in whole or in part at some point? What will the impact be on consumers? What is prudent advice and reasonable compensation? How far does retirement income/distribution advice go? Will this cause a boom or bust for the financial planning world? What other products fall into what level of care? What about liability? Will this be a big burden and to whom? Entity rules? - CFP Board, SEC or NAIC Compensation models moving forward? How does the rule place an emphasis on source of funds in a rollover conversation?

Moving Forward Retirement planning will continue to change and draw attention Need to think about changes with planning flexibility More Comprehensive Planning – must Stay current!

Additional Information The American College New York Life Center for Retirement Income http://retirement.theamericancollege.edu The American College Granum Center for Financial Security http://granum.theamericancollege.edu Retirement Income Certified Professional® (RICP®) designation https://ricp.theamericancollege.edu The American College Blog http://knowledge.theamericancollege.edu

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