IRA Rollovers Increase; Survey Predicts Continued Growth

By Cyril Tuohy InsuranceNewsNet

By Cyril Tuohy

A new report by Cerulli Associates finds that individual retirement account (IRA) rollover contributions in the U.S. reached $321.3 billion last year, an increase of 7.3 percent over 2012.

“We anticipate IRA rollover contributions will continue to grow,” Cerulli director Bing Waldert said in a news release.

That’s good news for advisors since they already play a primary role in helping asset managers win asset in-flows. These occur as employees roll over their employer-sponsored defined contribution plan holdings assets into IRAs after workers lose or change jobs.

Every time an employee rolls over assets from a 401(k) plan to an existing or new IRA, advisors can step in and suggest how those assets are managed to best meet the needs of the employee.

The data are contained in Cerulli Associates’ “Retirement Markets 2013: Data & Dynamics of Employer-Sponsored Plans,” which examined public and private U.S. retirement markets contained in defined benefit, defined contribution and IRA plans.

Over the next four years, assets held in IRA accounts will make up 35.4 percent of all retirement market assets, an increase from the estimated 32.1 percent in retirement market assets in 2014, the report also found.

IRA accounts will grow at the expense of public and private defined benefit plans, whose market share will shrink over the four-year period ending in 2018, Cerulli also said.

At the end of last year, IRAs contained an estimated $6.5 trillion, according to the Investment Company Institute (ICI), which represents the mutual fund industry. Defined contribution plans were next with $5.9 trillion in assets, according to ICI data.

Cerulli also found that only 7.9 percent of all financial advisors — about 24,440 advisors — fall under the category of retirement specialist.

Of those 24,440 advisors, 12,882 work in the insurance channel, 4,711 in the independent broker/dealer channel, 2,392 in the registered investment advisor (RIA) channel, 2,065 in the dually-registered advisor channel, 1,525 in the wirehouse channel, 468 in the regional broker/dealer channel, and 396 in the bank channel, the report said.

Specialist retirement advisors most often work through the insurance company channel because carriers act as record keepers for the retirement plans. The retirement plan business “represents a natural extension” of other insurance products to business owners, Cerulli said.

Insurance companies as record keepers tend to be more prevalent among the retirement plan segment with less than $500 million in assets.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].