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December 21, 2015 at 09:36 AM
The pending fiduciary rule from the Department of Labor has led many firms to question whether there will be a slowdown in defined contribution distributions to individual retirement accounts.
However, according a Cerulli Associates report, the global analytics firm does not anticipate a slowdown in rollover activity in the foreseeable future.
The latest issue of The Cerulli Edge – Retirement Edition from Cerulli Associates explores the Department of Labor’s proposed fiduciary rule issued in April and possible implications it may have on future IRA rollovers.
Cerulli’s projection that the proposed rule will be implemented with only minor revisions in spring 2016.
“Cerulli does not anticipate a slowdown in rollover activity in the foreseeable future,” Bing Waldert, director at Cerulli, said in a statement. “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. The industry may continue to see low-end consolidation of advisors and BDs not equipped to deal with sweeping regulatory changes, but firms of scale will continue their business with relatively little disruption.”
The reason for the concern is what Cerulli calls “one of the more contentious components of the proposal,” or its explicit coverage of advice regarding IRA assets. If the advice provider receives compensation that the DOL considers potentially influenced by a conflict of interest (such as commissions or revenue sharing), the provider must qualify for a prohibited transaction exemption.
Currently, under the Employee Retirement Income Security Act and the Internal Revenue Code, prohibited transaction exemptions are situation-specific and narrow in terms of what they cover.
