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department of labor

IRA Rollover Assets 'At Risk' of Violating Fiduciary Standard

The $7.3 trillion IRA market is the largest and fastest-growing segment of the U.S. retirement market, but it could be threatened by new rules from the Department of Labor.

According to new research from Cerulli Associates on IRA rollovers, nearly half of the assets that are projected to move over to the IRA market may now be “at risk” of violating the Department of Labor’s conflict of interest rules. These assets are more likely to remain in employer-sponsored DC plans, Cerulli says. 

This could be a problem for large IRA providers who rely on aggressive ad campaigns to attract rollover assets, such as offering investors cash incentives to roll over to an IRA.

“Marketing messages related to promoting an IRA rollover will need to be thoroughly assessed and potentially softened,” said Jessica Sclafani, Cerulli’s associate director.

While the firm said it “generally agrees” with the consensus that more assets will remain in employer-sponsored DC plans because of the fiduciary rule, the IRA market and advisors whose books of business rely on it aren’t likely threatened.

“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,” Sclafani added.

At the end of the day, these practices may not be worth the potential risk. Cerulli’s research found that only 8 percent of participants said they rely on a their 401(k) provider for advice, and only 1 percent said they are influenced by advertisements from their IRA provider. 

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