Retirement plan advisers are gearing up for the U.S. Department of Labor's proposed new fiduciary rule, according to a recent report from Cerulli Associates.
The controversial "retirement security" rule could potentially expand the definition of an investment advice fiduciary, making retirement plan advisers subject to ERISA fiduciary standards when making one-time IRA rollover recommendations from workplace retirement savings plans.
The proposed new rule attempts to address the conflicts of interest inherent in making rollover recommendations. More than half (57%) of retirement plan advisers say IRA rollovers from their retirement plan business help grow their wealth management business, Cerulli said.
The proposed rule comes less than two years after the DOL began enforcing new prohibited transaction exemption requirements calling on advisers to document why a rollover is in the best interest of a participant. To claim the exemption, advisers making the rollover recommendation must provide the participant with detailed disclosures covering the investment options, fees and services offered in a participant's plan vs. an IRA.
Because of the added burden of the required documentation, some advisers are now less likely to recommend an IRA rollover from a retirement plan with a relatively small balance, saying it's not worthwhile to take on the added regulatory scrutiny, according to the report.
Nearly one-third (30%) of retirement plan advisers are now less likely to recommend an IRA rollover from a retirement plan with less than $50,000, Cerulli said.
Cerulli estimates that 63% of the $845 billion in assets rolled over from defined contribution plans in 2022 were rolled over into IRAs with the assistance of a retirement plan adviser.