If the April 2017 applicability date for the DOL fiduciary rule is unchanged by the incoming Trump administration, advisors will have to make a choice: whether to pursue employer-sponsored retirement plan business or engage in traditional wealth management.

That’s according to the fourth-quarter issue of The Cerulli Edge—Retirement Edition, in which the consulting firm says that all advisors serving the retirement market, whether they provide investment advice to small retirement plans (less than $50 million in assets), plan participants and/or health savings accounts, will become ERISA fiduciaries.

The rule, says Cerulli, brings IRAs under its jurisdiction, as well as increasing scrutiny on the recommendation to move assets from employer-sponsored retirement plans to IRAs.

According to the report, rollovers are a substantial source of growth in the $7.3 trillion IRA market; with rollover transactions being scrutinized more closely, providers, asset managers, and, especially, advisors who participate in the retirement market “will be impacted in myriad ways.”

“Advisors accustomed to parlaying defined contribution plan assets into traditional wealth management relationships via IRA rollovers face new obstacles,” Dan Cook, associate analyst at Cerulli, said in the report.

Cook added, “To justify that an IRA rollover is in the best interest of a DC plan participant, advisors will face additional compliance and operational work.”

Under the new rule, advisors and their broker-dealers will have to evaluate whether it’s worth the additional time, effort and fiduciary liability to pursue rollover assets.

In addition, some advisors will be told by their wirehouse or broker-dealer to pick one or the other, rather than operate in both DC retirement plan and wealth management channels.

Cook continued, “Cerulli expects that advisors will increasingly turn to fiduciary outsourcing providers either because their BDs prohibit them from acting in a fiduciary capacity, or because they lack the appetite or ability to take on the greater fiduciary responsibility currently set forth under the new regulation.”

Instant Insights /

The decision advisors will have to make post-DOL fiduciary rule

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