The landscape is shifting and the rules of engagement have changed for advisor commissions and compensation. The ability to demonstrate both prudency and transparency are rapidly becoming a minimum requirement for clients as well as regulators. Firms now face a wide array of options for addressing these changes. Regardless of strategy however, increased reliance will be placed on automated tools and workflows to build compliance and transparency into every client transaction, simplify management of third-party payments, and provide a full audit trail. Process approach and automation will be key, and this webinar will explore both the options as well as provide real-world insight to help you move forward with confidence. Join John Ludes from Broadridge and Chris Zabik of PNC Bank, as they discuss the various challenges and industry approaches to commission and compensation management.

1. Confidential
Countdown to Fiduciary
Compliance
Looking Beyond Regulatory Requirements to Streamline
Advisor Compensation and Add Value to Clients
February 23, 2017
This webinar and the slides contained herein do not constitute
legal advice or recommendations for specific actions for your
firm.

2. Confidential
Countdown to Fiduciary
Compliance
Looking Beyond Regulatory Requirements to Streamline
Advisor Compensation and Add Value to Clients
February 23, 2017
This webinar and the slides contained herein do not constitute legal advice
or recommendations for specific actions for your firm.

3. 2|© 2017Confidential
Featured Speakers
John Ludes
Revenue & Expense Management
Vice President Business Development
Chris Zabik
Vice President
Investment Operations

4. 3|© 2017Confidential
A Unique Vantage Point
Broadridge provides the insights
and solutions that help all types of
financial services providers create
stronger customer experiences.

5. 4|© 2017Confidential
Webinar Agenda
• Update on the Presidential Memorandum
• Puzder out – Alexander Acosta is the new DOL Nominee
• Is DOL “DOA”?
• Business/Technology Impacts – Data, Process & Audit Control
• An Industry in Transition – How are Firms Preparing?
• Fee/Compensation Strategies for Compliance
• Real World Industry Perspective with PNC Investments
• Weighing Considerations for a Comprehensive Strategy
• Questions and Answers

6. 5|© 2017Confidential
Fiduciary Rule Update
Description of Presidential Memorandum - February 3, 2017
• On February 3, 2017, President Trump signed
a Presidential Memorandum directing the
Department of Labor to review the Fiduciary
Duty Rule to see if it may limit Americans’
retirement advice options
• Includes request for a formal economic and
legal analysis on whether or not retirement
investors are harmed by the Rule due to:
1. Reduced advice options
2. “Disruption” to the retirement
services industry
3. Increases in financial institutions’
litigation costs passed on to investors
through increased prices
• If the Department of Labor finds harm is
done to retirement investors by the Rule,
it is to publish and solicit for comments
on a new proposed rule to rescind or revise
the Rule
The Memorandum does not have a
defined timeline for this process.
No part of the Memorandum makes
direct changes to the Fiduciary Rule.

7. 6|© 2017Confidential
Fiduciary Rule Update (continued)
Most Recent Events Regarding Presidential Memorandum - February 9, 2017
• On February 9, the Department of Labor
filed two documents with the Office of
Management and Budget (OMB) relating
to their review of the Fiduciary Rule:
1. Proposed rulemaking to delay the Rule
by 180 days past the current April 10
implementation date
2. Initiation of another round of public
comment on the Rule
• Ultimate delay of the Rule will depend
on review by the OMB – may take up to
two weeks
As things stand today, the April 10
deadline remains in place

8. 7|© 2017Confidential
Is DOL “DOA”?

9. 8|© 2017Confidential
An Industry in Transition?
November Survey Says:
• The market generally agrees that regardless of the Fiduciary Rule’s regulatory
standing, the industry has already begun to change
• A number of large firms (e.g. LPL, UBS, Merrill Lynch) have made public
announcements stating they will continue forward with compliance preparations that
will influence others in the market
• Additionally, publicity around the Rule has increased consumer attention to and
skepticism of potential conflicts in the advice they receive from financial advisors
The new DOL regulations will result in major long term shifts within the industry.
Strongly agree; 93%
Neutral; 7%
Strongly disagree; 0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10. 9|© 2017Confidential
Interactive Poll
How do you regard the DOL Conflict of Interest Rule?
A. Not a concern - the new administration will reverse the ruling
B. Minimal compliance - This is a regulatory imposition that
requires us to avoid risk by minimally conforming to
requirements
C. We need to react to remain competitive – the fiduciary
standard is eventually coming regardless of the fate of the
DOL rule
D. An opportunity to gain a competitive advantage - We see this
as a trend that can be leveraged to provide more attractive
options to clients

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Marketplace Trends

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Countdown to Fiduciary Compliance: Key Trends

13. 12|© 2017Confidential
Countdown to Fiduciary Compliance : Key Trends

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Business and Technology Impacts

15. 14|© 2017Confidential
•Dependent on strategy employed
•Increased account volume due to transitioning
– E.g. – Transitioning of clients to Advisory
•Increased Market Value & Transaction volume due to greater
granularity
– More frequent requirement of Asset Class & Cusip-Level
•Potential increase in Asset/Cusip volume due to Product Introduction
– E.g. – T-Shares
•Broader attribute tagging requirements
– E.g. - Retirement vs. Non-Retirement assets
– “White-Listing” Combinations of Qualified Accounts with Selected
Products
Inbound Data Impact

16. 15|© 2017Confidential
•Highly dependent on strategy employed
•Will require greater throughput capacity and streamlining of processing
•Distribution Incentive Validation
•Compensation Reconciliation
•Workflow Processing Automation
•Related Expense Calculation
Fee Billing & Expense/Commissions Calculations Impact

17. 16|© 2017Confidential
• Demonstrate Accuracy of Distribution and Commission Amounts
– Inclusive of splits and allocations
• Capture and Store Calculation (not only the result)
– Inbound data/transaction, Calculation Method, Fee Schedule, Tolerance Check.
• Capture and Store Workflow Approval Process
– Combination of automated workflow and exception-based approval processing
• Report on data at different levels
– E.g. – commissions by Advisor, by Fund/Family, by Strategy, by Client, etc.)
• Profitability Metrics
– Netting Distribution Payments against Commissions and related Expenses
Reporting and Compliance Auditing Control Impact

18. 17|© 2017Confidential
Interactive Poll #2
What is your level of readiness for the
April 10 deadline?
a. Not subject to Fiduciary status, so no preparation is required
b. Already completed required fee/compensation compliance
c. In-process of establishing fee/compensation compliance
d. Have not begun establishing fee/compensation compliance
e. On-hold pending the outcome of the request for delay

19. 18|© 2017Confidential
What are we hearing from Broadridge clients?
• Broadridge DOL Fiduciary Rule Steering
Committee
– Executive team formed in 2015
– Multiple meetings with 100 financial
services firms since April 2016
– Met with Retail brokerage firms, Insurance
companies, DC Plan Recordkeepers, Asset
Managers
• Broad-based support for the Rule’s basic
concepts
• Vast majority moving forward with
strategies in varying degrees
• Acknowledgment that a new fiduciary
paradigm has been introduced and must be
addressed to compete
• Failure to move to a more transparent and
customer-focused approach will result in
competitive disadvantage
• Challenge is balancing cost of compliance
with efficient, end-to-end solutions that
enhance the participant experience
• Looking to firms such as Broadridge for
assistance with compliance on various
components of the rule including
fee/compensation automation

20. 19|© 2017Confidential
Strategic Options on Advisor Compensation

21. 20|© 2017Confidential
What options are being considered?
Keeping Advisor Compensation structure the same and relying on
the Best Interest Contract Exemption
– The BICE acts as an supplemental contract to the Investment Management Agreement.
It states that the Advisor will act in the best interest of the client.
PRO’s
 Does not require a shift in Advisor
Compensation model
 Reasonably easy to implement
CON’s
 Requires additional contract
agreement to be put in place with
each Client
 Creates a significant liability in that the
contract provides a more binding
means for the client to take action in
the event they feel it has not been
honored
 Does not act as a suitability check or
prevent the Advisor from generating
questionable transactions

22. 21|© 2017Confidential
What options are being considered? (continued)
Migrating to a Level-Commission Compensation strategy
PRO’s
 Arguably the most objective method
of ensuring Advisors have no incentive
to recommend a given investment
option vs. another
 Providing the data is available, the
set-up and configuration can be
reasonably straightforward
 Reporting/Auditing can also be the
least complex of all the active
strategies
CON’s
 Depending on how implemented, may
require re-papering investment
agreements
 Likely requires some level of data
realignment and/or enrichment
 Least popular with Advisors as
levelizing commissions results in the
“LCD” – ultimately reducing
compensation across the board
 Requires monitoring and periodic
adjustments to compensation
structures to prevent “gaming”
 How to handle the comp “delta”?

23. 22|© 2017Confidential
What options are being considered? (continued)
Migrating from commission-based to an asset-based recurring fee
for the Advisor
PRO’s
 Most closely aligns with the objective
of the ruling – active management and
asset-based incentive vs. transactional
 Ultimately where many firms see the
industry is headed
 Inherently addresses conflict of
interest
 Leverages existing data and can be less
complex to set-up/configure
CON’s
 Requires new contract agreement to
be put in place with each Client
 While not necessarily complex,
implementation requires transition
plan from transactional commission to
asset based fee structure

24. 23|© 2017Confidential
What options are being considered? (continued)
Examining the possibility of using Transaction Shares (“T-Shares”)
PRO’s
 Simplifies the process and provides
uniformity across the product offerings
 Effectively addresses the conflict of
interest
 Retains flexibility regarding
compensation structures
CON’s
 Heavy data requirements – thousands
of new cusips that need to be
registered and incorporated and
coordinated across multiple systems
 Likely not a near-term solution
 Presents some unknowns – technical,
business & investor adoption

25. 24|© 2017Confidential
What options are being considered? (continued)
Limiting investment options for retirement plan products
PRO’s
 Partially/Mostly addresses conflict of
interest
 Allows culling of “outliers” to narrow
the range of compensation
 Does not require a shift in Advisor
Compensation model
 Less complex implementation
CON’s
 Partially/Mostly addresses conflict of
interest
 Reduces available options to investors
– some “outliers” may be preferred
 Limits Advisor options for investment
alternatives

26. 25|© 2017Confidential
What options are being considered? (continued)
Reducing Advisor support to education and other
non-fiduciary services
PRO’s
 Removes Fiduciary status, so no longer
subject to enforcement of DOL ruling
 Significantly limits risk exposure
CON’s
 May require revised/new contract
agreement to be put in place with
each Client
 If DOL is revised/replaced, removal of
Fiduciary status as currently defined
may no longer be the “bar”
 Represents a reduction in offered
services
 Immediate revenue impact
 Collateral damage (potential loss of
client)

27. 26|© 2017Confidential
What options are being considered? (continued)
Exiting the retirement plan business altogether
PRO’s
 Removes Fiduciary status, so no longer
subject to enforcement of DOL ruling
 Removes risk exposure
CON’s
 Represents a reduction in offered
services
 Immediate and long-term revenue
impact
 Collateral damage (potential loss of
client)

28. 27|© 2017Confidential
What options are being considered? (continued)
Waiting on further guidance to make a determination on
next steps
PRO’s
 Allows for further review of regulatory
compliance atmosphere
 Allows for further review of industry
trends and competitive direction
 Reserves capital and resource
expenditure for potential future use
CON’s
 Limits reaction time to implement
strategy to ensure compliance
 Increased risk of compliance conflict
 May result in short-term competitive
disadvantage
 Potential revenue impact based on
investor preference trends

29. 28|© 2017Confidential
Interactive Poll #3
How are you addressing regulatory compliance
initiatives surrounding Advisor Compensation?
A. Advisor Compensation structure will remain the same and rely on the
Best Interest Contract Exemption
B. Migrating to a Level-Commission Compensation strategy
C. Migrating from commission-based to an asset-based recurring fee for the Advisor
D. Examining the possibility of using new “T-Shares” (Transaction Shares)
E. Limiting investment options for retirement plan products
F. Reducing Advisor support to education and other non-fiduciary services
G. Exiting the retirement plan business altogether
H. Waiting on further guidance to make a determination on next steps

30. 29|© 2017Confidential
Supporting Your Strategic Future with Revport
However you decide to address Fee Transparency and Advisor Compensation Challenges,
Revport can help you manage with Flexibility. Granularity. Transparency.
Business Intelligence-
transparency into most/least
profitable distribution partners
Constructs custom fee structures and calculation
records based upon your firms agreements
Reviews and Approves on multiple
levels and automatically issues
approved statements/invoices
Calculates custom fee structures
using rules for unlimited number
of distribution and service
agreements
Revport
Core Calcualation &
Invoicing
Engine
Generates GL entries, extracts
and customized audit reports
Automated email distribution

31. 30|© 2017Confidential
The Revport Solution

32. 31|© 2017Confidential
Real World Industry Perspective
with PNC Investments
Weighing Considerations for a Comprehensive Strategy

33. 32|© 2017Confidential
DOL Commissions and Compensation Impacts
Considerations
– Customer advocacy / best interest
– Competition
– Cost / impact to firm financials
– Timeline
– Vendor capabilities
– Interpretation of the DOL fiduciary standard
– Legal compliance
– Reporting and Audit Control
Key Decision Point – whether to support commissions on
transactional business inline with DOL fiduciary standards
(Best Interest Contract)

34. 33|© 2017Confidential
DOL Commissions and Compensation Impacts
Approach
– Maintain transaction based commission structure
– Reset commission schedules and improve transparency for clients
• Mutual fund select list (stripped out share classes)
• Rules engine and commission schedule system development
• Transitional mailing to impacted clients
• Website disclosure
– Levelize compensation across products to eliminate conflict of interest
and eliminate incentive for advisor to direct business for their benefit
– Move to conviction research from suitability to narrow product focus
and support Best Interest standard
– Adjust systems to make managed offerings available to clients previously
not eligible (prorated exclusion of previously paid loads/commissions)
– Rebate 12b-1 payments in all qualified accounts
• Revisit IRA annual administration fee to offset increased costs
– Review capacity to support increased managed business

35. 34|© 2017Confidential
Questions and Answers

36. 35|© 2017Confidential
Additional Information
Visit the Broadridge Fiduciary Resource Center
www.broadridge.com/DOL-Solutions
Fiduciary Webinar Series
Listen to replays of this and our other Fiduciary Webinars:
https://event.webcasts.com/starthere.jsp?ei=1130013
•Tackling Transparency, Suitability and IRA Rollovers
•Making DOL Fiduciary Rule Communications a Marketing Touch Point
•Solving Commission and Compensation Challenges post-DOL
Thank you
Contact your Broadridge Representative or visit us online at www.Broadridge.com

37. No part of this document may be distributed, reproduced or posted without the express written permission of Broadridge Financial Solutions, Inc.
©2017 Broadridge Financial Solutions, Inc. All rights reserved. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial
Solutions, Inc.
Confidential