Rollover Market Changing Quickly

ORLANDO -- While the rollover market is facing regulation pressure and other hurdles during a difficult transition period, business will likely remain strong, according to one analyst.

LIMRA has projected the individual retirement account rollover market to expand to $515 billion by the year 2018, and approximately $150 billion will be in annuities.

Those forecasts are unchanged by regulation led by the Department of Labor fiduciary rule, said Matthew Drinkwater, assistant vice president, LIMRA Secure Retirement Institute.

Drinkwater will moderate a panel discussion on rollovers today at the LIMRA Retirement Conference.

While low-fee options like Vanguard are generating a lot of publicity, Drinkwater said LIMRA research found the attractiveness of those options might be overblown.

“Fee sensitivity is not nearly on the level as you might imagine,” he said. “There’s this expectation that everybody is automatically going to roll to the lowest-fee provider. The vast majority of people do not do that.”

People generally stay with their current account provider, Drinkwater said.

While Vanguard is often portrayed as a behemoth changing the industry, the company’s rollover market share is similar to that of several other heavyweights, such as Fidelity and Charles Schwab, he added.

The fiduciary rule, which establishes a best-interest standard of care when working with retirement accounts, is certainly bringing fees into the spotlight, Drinkwater acknowledged. That is likely to cause relentless pressure to drive compensation down, he said.

“We did a survey of advisors and quite a number of them said that, in the future, the DOL rule would prevent them from dealing with smaller rollovers,” he explained. “We may see some of those small balances, especially the really small ones, be automatically transferred to that participant’s new employer.”

Does that mean there’s no role for advisors? Hardly, Drinkwater said.

The significance attached to a $500,000 rollover isn’t likely to ever change. Given the stakes involved, an advisor’s professional service will be required, Drinkwater said.

“Regardless of what this DOL rule does, there’s going to be a demand one way or another for their services,” he said. “To the extent that that market is made up of larger transactions, I think that is going to continue.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

© Entire contents copyright 2017 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.