The DOL Fiduciary Rule Doug Baxley, CFP® Vice President, Retirement and Fiduciary Services Ladenburg Thalmann Financial Services

What Are The Key Points? Impacts all service models Prohibited Transaction Best Interest Contract Exemption Private Right of Action Discretionary Level Fee

Who is a Fiduciary? Recommendation: Buy, sell, hold, or exchange Distribution Investment manager Investment strategy Commission vs. fee-based account

What Does it Mean to be a Fiduciary? Avoid conflicts of interest Client’s Best Interest Prohibited compensation Sales loads, commissions, 12b-1 fees, revenue sharing Proprietary products Rollover recommendations High fee vs. identical, low fee products Brokerage to fee-based

What’s the Best Interest Standard? At the time of the recommendation Act with the care, skill, prudence, and diligence Without regard to financial interests Not a hindsight standard

How Do You Determine Best Interest? Account Establishment Commission or advisory Alternatives to a rollover Fees and expenses Services and investments Product type Post Establishment

Can Commissions & Trails Continue? Best Interest Contract Exemption (BICE or BIC Exemption) Allow receipt of prohibited compensation Commission and non-discretionary advisory accounts

What’s Required Under BICE? Contract between the Firm and client Acknowledge fiduciary status Client’s best interest Reasonable comp Material conflicts of interest Cannot prohibit class action Disclosures

What Disclosures Are Required? BIC Disclosure: Services, fees and compensation Right to request “on-demand” disclosure Monitoring and alerts Transaction Disclosure: Prior to, or at the same time as, execution Web Disclosure: Fees, charges, expenses, advisor compensation

What About Existing Accounts? Grandfathering: Systematic investment programs Exchanges among funds or VA sub accounts Hold recommendations No new investments Negative consent BICE delivery

What Products Can Be Used? “Tier 1” Investments “Tier 2” Investments – additional standards Non-Traded REITs and BDCs Options BICE for FIA/EAI sales Sponsor commissions

What About Legal Liability? Private right of action Cannot prohibit class action New claims available to clients Breach of fiduciary duty Breach of contract Violation of contractual warranties Allege recommendations not in best interest

What About Discretionary Accounts? Level Fee Fiduciary “BIC lite” Fiduciary acknowledgment

What Are the Key Points? Impacts all service models Fiduciary, Best Interest Standard Prohibited Transaction BICE Private right of action Level Fee Fiduciary

Questions?