No matter what happens to the Labor Department’s fiduciary rule, RIAs have the opportunity to expand into 401(k) market, primarily for small businesses.
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RIAs currently manage about 10% of the $4.7 trillion 401(k) market, when they could manage a lot more, said Skip Schweiss, who oversees TD Ameritrade Institutional’s Retirement Plan Services platform, citing data from the Investment Company Institute.
He expects that opportunity will continue to exist for advisors even if the Labor Department’s rule, which requires that managers of 401(k) plans under $50 million be fiduciaries, is delayed or repealed.
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“Advisors are already fiduciaries. They will benefit from the public attention given to fiduciary advice,” said Schweiss.
“Clients and plan sponsors are becoming more educated about fiduciary advice and the importance of it, and there’s a lot more upside when only 10% of advisors are actively pursuing the space,” said Schweiss. “It’s a wide open competitive landscape that there’s for the taking.”
The target market for advisors, says Schwiess, are 401(k) plans with assets between $1 million and $10 million and 10 to 100 employees, which account for about 90% of such plans, in terms of their numbers.
“That’s a natural market for RIAs,” said Schweiss. “Between $20 million and $1 billion [plan size], the “competition gets really fierce.”