1. The New Fiduciary Rules
What Do You Need to Know and Do Now?
September 2016

2. Introduction
Timeline to Comply with Best Interest Contract Exemption (PTE )
Rollovers
“Streamlined” BIC for Level Fee Fiduciary
Samples
Anticipated Trends in the Industry

3. BICE Timeline Divided into 13 parts:
4 alternative BICE conditions (“Full Blown”, “Disclosure”, “Streamlined”, “Transition”)
Grandfathered Transaction
Negative Consent
3 types of disclosures (web, transaction, proprietary products and third party payments)
When and what to train your advisors
DOL filing requirement
408(b)(2) plan level disclosure

4. Capturing Rollovers Issues Arising From Cross-Selling
Potential conflicts of interest
Advisor develops relationship with plan sponsor and participants
Exploiting trust to sell at unfavorable terms
Potential Impact on Participants
Advisor’s fees on rollover assets may be higher than fees on plan assets

5. Effect of New DOL Rule on Rollovers
Impact on Advisory Opinion A
Would replace DOL’s current rollover guidance
Under new fiduciary rule, any rollover advice would be fiduciary advice
Rollover advice would automatically trigger plan or IRA fiduciary status
Relief under BIC Exemption
Commission-based advisors need “Full Blown” BIC to earn compensation from rollover IRAs
Fee-based advisors may also need relief under BIC Exemption when offering rollover advice

6. Potential Impact on RIAs - Rollovers
Capturing Rollovers
RIAs advising plan clients generally earn higher (and variable) fees when capturing rollovers
May use “Streamlined” BIC as Level fee Fiduciaries for rollover IRAs
Streamlined BIC may also be used when offering rollover advice to “off the street” participants

7. “Streamlined” BIC: Level Fee Fiduciary
When Does a Level Fee Fiduciary Need BIC?
Offering rollover advice to participants when plan sponsor is existing client, resulting in higher fees
Offering rollover advice to “off the street” participants
Moving from commission- to fee-based services
Streamlined BIC Requirements
Advisor gives written statement of fiduciary status
Advisor documents (internally) reason for rollover recommendation being in client’s best interest
No need for compliance policies or other disclosures

8. Sample Streamlined BICE Notice
Reasons Streamlined BIC needed Intention to comply with BICE (PTE ) Fiduciary Statement Impartial Conduct Standards

9. Streamlined BIC Checklists
Checklist A: Rollover from ERISA Plan to IRA Checklist B: Rollover from IRA or Similar Account Checklist C: Switching from Commissioned to Fee-Based Arrangement

10. Potential Impact on RIAs – Retail Managed Account Programs
Advisors earning variable compensation from IRA/plan clients must comply with BICE
Solicitors would be fiduciary advisors and must also comply with BICE

11. Focusing on Managed Accounts.
Impact of DOL Rule
Recommending investment manager may be deemed advice relating to “management”
e.g., 100 bps for managed account services
-30 bps for Investment Manager #1
-20 bps for other costs
50 bps net compensation
Other Potential Variable Compensation
Revenue sharing
Commission and ticket charges

12. Implications for Managed Accounts
BIC Exemption
May provide relief for managed account programs with variable compensation
BICE does not provide relief for variable compensation arising from discretionary advice
Fee Levelization
Combination of BICE and Fee Levelization may be necessary
Restructure revenue sharing payments

13. Anticipated Trends in Industry
Strategic Course of Action
Levelizing commissions and structuring revenue sharing as flat dollar payments
More RRs migrating to advisory model
Promoting advisory programs featuring institutional mutual funds and variable annuities
Modifying managed account programs to rely on BICE and/or fee levelization
Support for Smaller Retirement Accounts
Reducing minimums for advisory programs
Relying on Computer Model Exemption (robo-advice) to earn commissions

14. ERISA Compliance Planning
What You Should Be Doing Right Now
Identify all products/services sold to Plans/IRAs
Confirm firm has adequate supervisory control
Identify all instances of variable compensation
Develop compliance strategies (BICE, PTE and Fee Levelization with ERISA counsel)
Timing
“Transition” BIC will require disclosure and BICE Officer designation as of April 10, 2017
“Full Blown” BIC will require contracts for IRA and Non-ERISA Plan clients as of January 1, 2018 (negative consent is permitted)

15. Implementation BIC Exemption Toolkit
Create model contracts for “Full Blown” BIC and model disclosure for “Disclosure” BIC
Adopt model Transaction and Webpage Disclosures
Consider changes to payout grid for individual advisors to limit differential compensation
Develop system to ensure specific compensation figures will be available upon demand
Provide training for advisors with regard to new fiduciary standard, BIC Exemption and firm’s compliance policies

16. Strategic Use of Financial Plans
Benefits Under New Fiduciary Standard
Advice from commission-based advisors will need to meet new fiduciary standard
Consider using financial plans to ensure recommendation are in “Best Interest” of client
Qualify financial plans by their nature can help demonstrate prudent advice
Benefits Under BIC Exemption
BIC compliance policies must address conflicts and variable compensation issues
Requiring financial plans (before investments are recommended) can help mitigate conflicts

17. IMPORTANT INFORMATION
This presentation is intended for general informational purposes only, and it does not constitute legal, tax or investment advice from The Wagner Law Group. Financial advisors and other plan service providers should consult with their own legal counsel to understand the nature and scope of their responsibilities under ERISA and other applicable rules.

18. Marcia S. Wagner, Esq. 99 Summer Street, 13th Floor Boston, MA 02110
(617)
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