The DOL’s fiduciary rule will lead to fewer rollovers from 401(k)s. However, the influence of existing advisor relationships, which Cerulli Associates finds is “the greatest driver of IRA rollover assets,” will act as a counterbalance.
New research from the Boston-based global analytics firm looks at the future of the IRA rollover market post-implementation of the Conflict of Interest Rule. While the $7.3 trillion IRA market is the largest and fastest-growing segment of the U.S. retirement market, Cerulli notes the regulation will “impose greater scrutiny and complexity on the rollover market and potentially disrupt future flows.”
“There is general consensus in the retirement industry that more assets will remain in employer-sponsored DC plans because of the rule,” Jessica Sclafani, associate director at Cerulli, said in a statement.
While Cerulli generally agrees with this statement, she said there are additional considerations, “such as the influence of existing advisor relationships, which is the greatest driver of IRA rollover assets, in addition to DC-plan-specific considerations, such as current DC plan design and lack of in-plan retirement income solutions, that may continue to support the migration of DC plan assets to the retail IRA market.”
Cerulli also quantifies the degree to which assets pegged as headed toward the IRA market may now be “at risk” and more likely to remain in employer-sponsored DC plans, finding that almost half now qualify for the designation.
Cerulli’s research examines how IRA providers that are also retirement plan providers will negotiate this new landscape—one that will make it more difficult to recommend 401(k) plan participants move assets from a low-cost account with institutional pricing to a higher-cost retail account.
“Marketing messages related to promoting an IRA rollover will need to be thoroughly assessed and potentially softened,” Sclafani added. “Ultimately, however, Cerulli expects that DC plan providers with significant IRA businesses will continue to gather IRA rollover assets—the manner in which they achieve this, however, will look somewhat different.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
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