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Cerulli: Fiduciary Rule Won’t Slow Rollovers

The final fiduciary rule is likely to have a number of impacts, known and unanticipated, but a research firm doesn’t see any resulting slowdown in rollover activity.

The latest issue of The Cerulli Edge — Retirement Edition from Cerulli Associates identifies three factors behind the muted impact of the final rule. First, even before the DOL announcement, broker-dealers with large advisor forces were adapting their businesses away from commission and proprietary products to fee-based, fiduciary business models. Cerulli notes that while the industry may continue to see low-end consolidation of advisors and BDs not equipped to deal with sweeping regulatory changes, “firms of scale will continue their business with relatively little disruption."

Secondly, Cerulli notes that some DC plans are not designed to accommodate partial withdrawals from separated or retired participants. As a result, Cerulli notes, it may be in an investor's best interest to roll over their accumulated retirement balances to maintain maximum flexibility in retirement income planning.

Finally, the report notes that until retirement income options become more readily available inside DC plans, IRAs will continue to be the primary consolidation vehicle for retirees, “regardless of an evolving regulatory environment.”

Cerulli research shows that just 21% of large 401(k) plan sponsors report having adopted an in-plan retirement income product, and notes that while interest and willingness to discuss in-plan retirement income products are growing, obstacles remain to more widespread adoption.

One thing that could come from that new fiduciary standard: increased engagement of ERISA 3(21), 3(38), and 3(16) fiduciary providers. While formalizing the fiduciary duty of an advisor will not eliminate litigation exposure for plan sponsors or advisers, Cerulli says those services can reduce potential liability associated with a retirement plan.