One of the industry s Fastest Growing RIAs

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1 One of the industry s Fastest Growing RIAs The growth of POM Planning is truly amazing. Its unique low drawdown risk platform has made it one of the fasted growing RIAs in the entire financial services industry. Why is this story so amazing? -Of the advisors who have checked out over 500+ advisors have gone to training. -Of the 500+ who went to training, over 250 got contracted to start working with POM Planning. -Of the over 250+, over 150 have picked up Assets Under Management (AUM) (keep in mind, many are true newbies to the assets-under-management game; and they are having immediate success). -The 150+ advisors have collectively picked up over $640 million in AUM in just over four years. That s truly crazy. Crazy good. Why are advisors working with POM Planning doing so well and having so much success in picking up AUM? 1) POM Planning offers a very unique low risk/high yield money-management platform. For example, the top three "conservative" strategies have an average Beta of.37* (the S&P has a Beta of 1.00). The average annual return for their top three "low-risk" managers going back seven years is 9.19%* net of fees (truly incredible for "low-risk" strategies). The top three "moderate-risk" strategies have a Beta of.523.* The average annual return for their top three "moderate-risk" managers going back seven years is 19.28%* net of fees (again truly incredible for "moderate-risk" strategies). *2015 year-end numbers. *Click on the following to learn about this unique AUM platform: 2) POM Planning offers a no-load VA where its unique platform can grow without annual capital gains taxes for only $25-a-month fee. Click on the following to learn about their no load VA: 3) POM Planning has the best training in the industry when it comes to teaching advisors how to pick up new clients and, in turn, millions of dollars under management. Click on the following to learn about their training: So what are you waiting for? If you want to take money away from your local Edward Jones, Merrill Lynch, Wells Fargo, etc., brokers and build for yourself a substantial reoccurring revenue stream with a low risk/high return platform (one that dovetails well with fixed products like FIAs and IULs), you should act now to sign up for more information. To sign up for a due-diligence packet on POM Planning, click on the following link:

2 Understanding the Best Interest Contract Exemption (BICE) Who will sign the BICE? By: Drew Horter Peace of Mind Planning 1

3 Copyright 2016 Peace of Mind Planning All rights reserved. The following material is the property of POM Planning. This material is provided as a courtesy to our Investment Advisor Representatives for their reference only. Unauthorized use, duplication or distributions of this material without express and written consent of POM Planning is strictly prohibited. 2

4 POM Planning FIAs Integrated into Our Money Manager Platform Unique Selling Proposition to the Public Tactical Asset Management go risk off to cash Excellent Training Follow Our Systems and Procedures How to Build a Successful and Very Valuable Practice 3

5 DOL Fiduciary & the BICE POM Planning Will be a Level Fee Advisor for its Tactical Investment Management platform Risk Tolerance Software Managing Risk 3 Buckets (see next slide) Key Questions Portfolio Design to Meet: Risk Tolerance Income needs Objectives Concerns Financial Plan 4

6 Three Bucket Approach We are an RIA that gets it. We not only understand FIA, we embrace their use in our three bucket system. WHAT IS THE MAXIMUM LOSS YOU WOULD ACCEPT BEFORE YOU WOULD BEGIN TO FEEL VERY UNCOMFORTABLE? % 5

7 Who Needs A Series 65 License? - Those who want to provide more comprehensive advice. - Those who want to be a fiduciary to all of a client s assets - Source of funds issue is very important - SEC What Fiduciary law will be passed? - Get all of a client s assets - Build a huge recurring revenue story - AUM of $20M = $200,000 per year (revenue) 6

8 Upcoming 2-day training Whether you have or are thinking of passing the Series 65 exam, you need to attend our industry best two-day sale s training. They are held in Cincinnati, OH. November December 8-9 January February March (Southern California) 7

9 New DOL fiduciary definition Fiduciary advice occurs when Investment Advice is given, in an advice relationship, to a Retirement Investor (for compensation). New DOL fiduciary definition Investment Advice Applies when a recommendation is given on: Whether to buy/hold/sell/exchange Whether to roll over an IRA How to invest after a rollover Which managers or strategies to use Switch from brokerage to advisory Advisor must receive (direct or indirect) fee or other compensation for the recommendation. 8

10 New DOL fiduciary definition New DOL fiduciary definition Advice Relationship Applies to a person who: Holds out as a fiduciary Provides advice to a specific person Provides advice that the recipient believes is based on their particular needs New DOL fiduciary definition Retirement Investor Defined to include participants of an ERISA plan, IRA owners, and those who are acting as fiduciaries for an IRA or ERISA plan Also includes Education IRA (Coverdell) accounts, and HSAs & MSAs as well 9

11 New DOL fiduciary definition New DOL fiduciary definition Key Changes If the client believes you re giving fiduciary advice you are! No longer just ongoing/regular advice. Nor even limited to investments; the act of rolling over counts, too! Retirement Investor includes IRAs, too! 10

12 DOL Fiduciary Any Recommendation To: Roll 401(K) Funds Existing IRA Funds Not Roll Change Allocation 11

13 How Will You Be Impacted BICE BICE Light Impartial Conduct Standards Suitability 12

14 DOL Fiduciary & the Rule 1. Required Fiduciary Duty- BEST INTEREST 2. Material Conflicts of Interest Compensation 3. Prohibited Compensation 4. Disclosure 5. Record Keeping 13

15 Why being a DOL fiduciary matters Prohibited Transactions A potential conflict of interest deemed material enough that it is prohibited (unless otherwise exempted) Have a long history in (ERISA and trust) fiduciary law, particularly regarding self-dealing transactions 14

16 Prohibited Transactions DOL Fiduciary Prohibited Transactions A prohibited transaction would normally prevent the advisor from engaging in that action at all DOL has the ability to grant a Prohibited Transaction Exemption (PTE) permitting specific advice situations Advisors will be able to engage in typical compensation for fiduciary advice with the Best Interests Contract Exemption (BICE) 15

17 Understanding the BIC Understanding the Best Interests Contract Advisors can avoid the prohibited transaction on their advice recommendations by signing a Best Interests Contract (BIC) with their clients, stipulating that their advice is in the best interests of the client Functionally allows fiduciary advisors to provide investment advice for compensation 16

18 Requirements of the BIC 1) Acknowledge fiduciary status 2) Adhere to Impartial Conduct Standards Give Best interests advice Charge Reasonable Compensation Make no misleading statements about transactions, compensation, & conflicts 3) Implement Policies & Procedures to mitigate potential violations of Conduct Standards 4) Refrain from advisor incentivies that may lead to acting contrary to clients best interests 5) Fairly disclose fees, compensation, & material conflicts of interest 17

19 Best interest advice BIC Requirements: Best Interests Advice Part of Impartial Conduct standards Will draw on what constitutes Best Interests advice from the ERISA fiduciary rules: Prudent advice that is based on the investment objectives, risk tolerance, financial circumstances, and needs of the Retirement Investor, without regard to the financial or other interests of the Adviser, Financial Institution, or their Affiliates, Related Entities, or other parties. 18

20 Reasonable Compensation BIC Requirements: Reasonable Compensation Compensation must not be excessive based on the going market value for services rendered. Similar to the prudent advice standard, it s based on expertpeer comparisons Will depend on scope of services provided, and the experience and expertise/credentials of the advisor Permits varying models for different services Primarily targets above average compensation Benchmarking will be more important than ever! 19

21 Level-Fee Fiduciaries and a streamlined PTE Requires that compensation from the clients be level, regardless of what investments/accounts they re directed towards Level fees include: Percentage of AUM Set flat/retainer fee Doesn t require all clients to be charged the same, just the compensation within the client accounts 20

22 Effective Date Effective Date for New DOL Fiduciary Rules General BICE Rules take effect April 10, 2017 Full policies and procedures do not need to be implemented until January 1st, 2018 Full disclosure details also part of delayed implementation timeline 21

23 DOL Fiduciary Implications Will be more disruptive for broker-dealer entities Forces them to reconfigure their business models Some may stay taxable-account-only to avoid DOL? Some will go Level Fee Fiduciary only, others not If you re RIA-like, why not just be an RIA? If there are more fee-based products for RIAs, what is the purpose of a broker-dealer at all? Expect an explosion of new product design! 22

24 Signing the BICE The sale of fixed annuities and Fixed Indexed Annuities (FIAs) specifically has become a real issue in the insurance industry. Who can sign the BICE? Insurance Company Broker Dealer Registered Investment Advisor IMO? 23

25 Who will sign the BICE? Word is that most insurance companies have no interest in signing the BICE. Some may in a restricted environment We all know that B/Ds do not like FIAs and so it will be interesting to see what they do. RIAs can sign, but will they? Some IMOs have put in to be deemed financial institutions for they can sign the BICE. 24

26 IMO It s not a bad thing IMOs are applying to be deemed Financial Institutions (FIs). If they all do it, that would be good. However, the economic realities are that most will not become FIs. If only a handful are able to sign the BICE, what does that mean for advisors? It means your choices will be very limited. It means that IMOs will be able to dictate terms on compensation and what products are sold (both very bad outcomes for independent advisors) 25

27 POM Planning gets it We understand the fiduciary obligation advisors have to their clients. We believe anything that limits the ability of an advisor to offer the best products to clients is bad for consumers. We have decided that we will sign the BICE for the advisors we work with. 26

28 Options By working with an RIA that will sign the BICE, what benefits does that provide advisors? Choice you can then work with any IMO you want. Several IMOs offer different benefits. When you don t have to rely on the IMO to sign the BICE, you can work with multiple IMOs if you so choose. You will also be in a better place to bargain about your compensation with the IMO. 27

29 What is Signing the Bice Process For FIA s? 28

30 Best Interest Contract Exemption Engaging in a prohibited transaction under ERISA can lead to enforcement actions and penalties. The DOL Fiduciary Rule expands the opportunities for triggering a prohibited transaction. The BICE is an exemption that allows for variable compensation without triggering penalties, as long as advisors and financial institutions follow certain requirements. The BICE permits the receipt of variable compensation for the sale of all insurance and annuity contracts except for fixed rate annuities. (Fixed rate annuity contracts are permitted under the revised prohibited transaction exemption ) 29

31 Best Interest Contract Exemption The BICE comes at a steep price, imposing extensive compliance costs in the form of new disclosure requirements, as well as new policies and procedures requirements. The exemption substantially increases litigation risks by providing IRA and other retirement plan investors a new private enforcement right against financial institutions. 30

32 Best Interest Contract Exemption The BIC contract must be signed by the client and countersigned by the Financial Institution The DOL defines Financial Institution as: Bank Broker Dealer Insurance Company Registered Investment Advisor An entity that applies for and receives an exemption from the DOL to become a Financial Institution (e.g. certain FMO s) 31

33 Best Interest Contract Exemption The Financial Institution requirement makes the BICE particularly problematic for insurance-only agents, as well as for advisors whose firms do not wish to act as a Financial Institution Without a countersigning Financial Institution, the advisor will no longer be able to sell Fixed Indexed Annuities to retirement investors. This will be an excellent opportunity for advisors to obtain their Series 65 and become registered under Horter and expand their business on the AUM side. 32

34 Best Interest Contract Exemption Horter will be the Financial Institution for its network of advisors, as well as certain other insurance-only agents. For Horter to assume the risk of becoming the Financial Institution for FIA sales to retirement clients, certain requirements must be met: The advisor must enter into a contractual agreement with Horter. The advisor must license Horter s FIA analysis and recommendation software. The advisor must purchase E&O insurance in an amount greater than $1 million in fiduciary liability coverage with Horter as a named insured. Horter will conduct a fiduciary review of every application. Horter will determine what constitutes reasonable compensation. Horter will receive a per transaction fee for every FIA application processed. The advisor must consent to supervision by Horter. 33

35 Best Interest Contract Exemption The process Advisors will continue to submit their FIA applications through their FMO. Advisors will also submit the report from the analysis and recommendation software through their FMO. All paperwork will be processed electronically. The FMO will continue to submit applications to the carriers for suitability reviews. The FMO will also submit to Horter for the fiduciary review. Once approved by Horter, the BIC contract will be released to the advisor. The advisor will obtain the client s signature on the BIC contract as well as the delivery documents for the annuity contract. 34

36 Working with POM Planning We believe there are several reasons you should consider working with our RIA. Tactically managed platform In person training Online training Terrific support when needed to pick up new clients Mentoring from elite advisors Several different marketing systems Discounts on Roccy s marketing software Signing the BICE 35

37 Summary Don t stick your head in the sand. Prepare yourself for the DOL rules. Position yourself as a unique advisor able to offer comprehensive advice to clients. Be in a position to always offer your clients the best fixed products by working with an RIA that will sign the BICE and allow you the flexibility. 36

38 Questions? To learn more, go to: 37