How U.S. regulators resolve key issues bearing on retirement plan assets could have significant consequences for financial service professionals and their clients, according to a new report.
Cerulli Associates explores potential regulatory changes in the retirement planning space in the April 2015 edition of “The Cerulli Edge: U.S. Edition.” The report examines how regulations will reshape asset and wealth management, challenges in developing a harmonized fiduciary standard that properly balances industry and investor interests, and uncovers regulatory developments governing banks.
“Legislative guidance and policy changes are focusing on evolving the employer-sponsored [defined contribution] plan, which creates significant implication for providers across the asset management and wealth management industries,” the report states. “While policymakers are attempting to solve for wide-ranging issues, the proposed solutions, in many cases, encourage plan participants to leave assets in an employer sponsored plan, rather than rolling over into an individual retirement account (IRA) when they leave their employer.
“Given the dependence of the wealth and asset management industries on rollovers as a source of assets and revenue, these legislative changes present a secular risk,” the report adds.
The risk is particularly great for advisors. As the report notes, IRAs account for the largest component of advisors’ book of business — 44 percent. Also a substantial part: non-qualified plans and personal trust assets for high net worth individuals (44 percent); employer-sponsored retirement plans (10 percent); and institutional assets (10 percent).