1. Our View on the DOL and Independent Agents
What does it mean to you?
a division of FFFC

2. What does the DOL mean to you?
Department of Labor, Fiduciary Responsibility
What sets the ASA Group/M3 Financial partnership apart from our competitors is our comprehensive distribution. While most firms concentrate on a single distribution platform, we diversify our distribution in order to maximize critical mass, control and growth.
Read slide…
Note to self: Expound upon the dedication to the insurance professional.

3. What does the DOL mean to you?
Department of Labor, Fiduciary Responsibility
Post April 2017
Understanding the DOL ruling
M3 Financial Model
Risk and Change
Key dates
We will be discussing how the world will look Post Our primary conversation will cover Understanding the DOL ruling…M3 Financial model dedicated to independent insurance agencies…Risk and Change and finally Key dates to be aware of.

4. What does the DOL mean to the industry?
Department of Labor, Fiduciary Responsibility
Legal Information Institute, is a non-profit, public service of Carnell Law School
A fiduciary duty is a legal duty to act solely in another party’s interest. Parties owing this duty are called fiduciaries. The individual to whom they owe a duty are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals’ express informed consent.
What does it mean to the industry?
Essentially, you will need express informed consent to profit from your relationship with your clients while declaring your legal duty to act solely in their best interest.

5. What does the DOL mean to you?
Department of Labor, Fiduciary Responsibility
Understanding the DOL Fiduciary Rule
Sellers need to become fiduciaries
Prudent Man Rule
Must follow a process for risk analysis and product recommendations
Must disclose conflicts of interest, which means commission conflicts and limitations
Must service the customer
Must record keep all conversations and documents
Must be supervised by a financial institution
Let’s break it down.
We know in the near future the fiduciary rule will change the face of product recommendations.
Prudent Man rule = remove commission bias
Risk analysis & Product recommendations. More Robust suitability up front
Disclose conflicts of Interest. Included commissions. Carriers will tr to even this out. ABC product vs XYZ product have similar benefits which fit a need but different comp. Must disclose compensation.
Record keep for 7 years.
Supervised by F.I. (Broker dealer, RIA, Carrier or approved IMO.

6. What does the DOL mean to the industry?
Department of Labor, Best Interest Contract Exemption
Best Interest Contract Exemption, BICE
According to the DOL…”assessing the prudence of a particular indexed annuity requires the understanding of:”
Surrender terms & charges
Interest rate caps
Particular market indexes to which the annuity is linked
Scope of any downside risk (MVA’s)
Administrative charges
Specific methodology
Insurer’s authority to revise terms and charges of the life of the investment
And any optional benefits that may be offered, such as living benefits and death benefits
This assessment is something we already do today. Length of contract, caps, market indexes, etc.
Disclosure of downside risk is the majority of FIA’s is letting the client know they cannot lose money. BUT…there are FIA’s which have an MVA (or Market Value Adjustment) which is viewed as downside risk due to the nature of how they impact the clients accumulation value, above and beyond the surrender schedule.
Plus…some carriers have the ability to change the terms and charges after a certain period. Example: one living benefit in the industry comes at no cost for the first 10 years and the carrier reserves the right to add in the charge after the 10th year.

7. What does the DOL mean to the industry?
Department of Labor, Best Interest Contract Exemption
Best Interest Contract Exemption, BICE
The DOL continued to say: Based on precedence of the Employee Retirement Income Security Act of 1974, ”an adviser would also need to evaluate the financial stability of the insurance company and its ability to make the annuity payments (e.g. 20 or 30 years from now),”
Financial strength matters!
Read slide…
Reference 40 carriers, etc.

8. Our View on DOL and Independent Agents
M3 Financial Model for Supporting Insurance agents
Financial institution solution for independent agents: IMO, Broker/Dealer, RIA
M3 Financial and our parent company, FFFC is one of the only seven IMOs in the U.S. to apply for FI status.
We will support insurance agent only model and insurance agents/IAR model
Someone will provide FI solution whether it’s an RIA/BD/IMO or even a Carrier
BD = looking into insurance only agents. Means FINRA oversight too.
Imo”s = 7 applied ytd
We will support the insurance agent only model.

9. Our View on DOL and Independent Agents
M3 Financial Model for Supporting Insurance agents
We prefer the IMO model as it will be tailored for the independent agents and are working on a platform that will:
Ensure you act consistent with prudent man standard
Manage all BICE contract and website requirements
Provide simple sales tools
Provide technology and suitability oversight
Help you manage your service requirements
Build commission and compensation rules to maintain fair compensation for your work and meet the new standards for ‘reasonable’ and ‘service based’. Protect you from commission conflict claims.
The question becomes…what will it look like?
BICE = Disclose general comp rate (percentages). Financial Institution will have a consumer Website requirement for clients to review. Comp disclosed by dollar amount for all involved.
Simple Sales tools. ReThink Retirment strategic workbook
Tech/Suitability oversight “sign off on sales’
Push notifications to help manage service requirements
DOL stated to our President…no need to get a series 65. It would be a disclosure on BICE as a limitation.
Reg rep support…if BD allows the sale of FIA’s…nothing will likely change in this type of business relationship.

10. What does the DOL mean to the legal field?
Dying of Laughter, A litigation opportunity
Labor Department faces Five Lawsuits over Fiduciary Rule
The DOL, as of June 9th, will be defending it finalized fiduciary rule which attempts to cut down on conflicted investment advice regarding their IRA’s.
Separate lawsuits raising a variety of claims against the rule itself, the rule making process restricting the speech of the investment professional.
First Amendment claims. Three lawsuits.
Fifth Amendment Due Process Clause. One lawsuit.
Three filed strategically in the same federal court in Dallas.
Dying of Laughter – A litigation opportunity.
Summarize slide…

11. What does the DOL mean to the legal field?
Dying of Laughter, A litigation opportunity
Labor Department faces Five Lawsuits over Fiduciary Rule
Who is leading the legal challenges?
The US Chamber of Commerce
National Association of Fixed Annuities
American Council of Life Insurers
Indexed Annuity Leadership Council
Market Synergy Group.
28 Legal claims against the DOL, the rule and the rule-making process.
Summarize slide.
The first indication from a few industry experts (Jack Marion, NAFA) is it will be an extremely hard uphill battle to stop this from happening. Maybe a delay in the implementation…or a slight variation of some finer points…but it will likely happen is some way shape or form.

12. What does the DOL mean to you?
Decision Of a Lifetime, the next generation of advisers
Risks and Change
Fiduciary versus Sales
Commissions and Perks
Technology and documentation
Risk Management
Supervision and Oversight
Note: SEC & FINRA. Submitting a ruling to include NQ assets.
Extra comp plans will likely be eliminated. Agent and IMO levels will be ALL be affected.
Risk management = Customers can sue…not for punitive damages though…Prone to class action lawsuits.
BD = means FINRA oversight

13. What does the DOL mean to you?
Decision Of a Lifetime, the next generation of advisers
Government Accountability Office, IRA totals as of 2011
The GAO, most recent report of IRA’s and their Fair Market Value. (2011)
5.2 Trillion dollars reported in 2011.
43 million tax payers contributed to IRA’s in 2015
$377 billion dollars in rollovers contributed to overall IRA assets in 2014
The bank channel saw a 30% increase in indexed annuity sales from 2014 to 2015

14. What does the DOL mean to you?
Decision Of a Lifetime, the next generation of advisers
Recommendations
Prepare for the future as a fiduciary-based insurance advisor
Attain your series 65 if you are inclined to move to the more holistic model
Don’t make hasty decisions
Have confidence that there will be huge winners post DOL
Summarize slide.

15. What does the DOL mean to you?
Decision Of a Lifetime, Fiduciary Responsibility
Key Dates
M3 Financial DOL Filing : July
Begin M3 Financial’s DOL platform build : August
DOL responses and outcome of lawsuits : TBD
Agent advisory committee : October
M3 Financial’s DOL platform announcement and training : December – March 2017
DOL ‘practice period’ : April 2017
M3 Financial’s platform refinements : 2017
Full implementation : January 2018

16. Q&A a division of FFFC 10 W 18TH ST, 8TH FLOOR NEW YORK, NY 10011
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