Skip to main content

You are here


How Will the Fiduciary Regulation Affect Rollovers?

A new report concludes that changes in response to the Labor Department’s fiduciary regulation will result in less movement of assets from workplace retirement plans.

Lifehealthpro notes that among the key findings of global analytics firm Cerulli Associates’ report, “U.S. Evolution of the Retirement Investor 2016: Regulation and investor addressability”:

  • As recommendations respecting 401(k)-to-IRA rollovers will now be subject to the fiduciary rule, larger DC plan providers that historically used aggressive marketing campaigns to gather rollover assets will need to reassess these strategies. For example, Cerulli notes, offering an individual a cash incentive to roll over to an IRA may be deemed inappropriate and not worth the potential risk under this new regime.

  • Cerulli believes that the elimination of those incentives would affect the 8% of participants who indicate they rely on their 401(k) provider for advice, as well as the 1% who are influenced by advertisements or communications from their IRA provider.

  • Advice from a financial professional (29%) and consolidation into an existing IRA (29%) are the two most common reasons why participants choose to roll over their retirement savings from an employer-sponsored savings plan to an IRA.

  • Financial advisors who rely on IRA business as a significant component of their book of business will not likely abandon IRA revenue opportunities post-implementation of the DOL rule. Rather, Cerulli anticipates a bifurcation in the services offered to IRA clients based on their account balances.

Cerulli notes that the influence of existing advisor relationships, currently the greatest driver of IRA rollover assets, in addition to DC-plan-specific considerations (such as the current lack of in-plan retirement income solutions), may, however, continue to support the migration of DC plan assets to the retail IRA market.

While Cerulli expects that DC plan providers with significant IRA businesses will continue to gather IRA rollover assets, they expect that the manner in which they achieve this will, however, “look somewhat different.”