Rollovers into individual retirement accounts will take a bigger share of the retirement market in coming years, with large record keepers such as Fidelity Investments, TIAA-CREF and The Vanguard Group Inc. reaping the benefits.
Assets in the U.S. retirement market are projected to grow to $22 trillion by 2016, a sharp increase from the estimated $16 trillion in the accounts in 2011, according to data from Cerulli Associates Inc. IRA assets currently make up 29.7% of all retirement market assets, but they are forecasted to grow to 33% of the total retirement market by 2016.
Rollover activity is the key behind the growth in IRA accounts, noted Alessandra Hobler, an analyst at Cerulli.
Because many retirement plan participants stick with the record keepers employed by their employers, the biggest record keepers stand to gather the most rollover assets in the upcoming years. Fidelity is the largest defined-contribution record keeper, both by assets and by total participants, according to data from sister publication Pensions & Investments.
“These record keepers already have a strong book of DC business, and they can translate that into a conversation of IRA rollovers,” said Ms. Hobler. “If they have income options embedded, they can entice the participant to roll over.”
Advisers, particularly at small to midsize plan, traditionally have been able to capture some of the rollover money as participants leave plans. It's unclear whether advisers will continue to siphon off IRA rollover money, however, once the Labor Department posts a broader definition of fiduciary duty, said Kevin Chisholm, an analyst with Cerulli.
Still, at that plan size, record keepers whose products are adviser-sold have the opportunity to gather assets from rollovers.
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It also remains to be seen if in-plan income distributions, which give retirees the option to receive income without exiting the plan and rolling over into an annuity, will help firms hold on to assets. Providers in the space include Financial Engines and Dimensional Fund Advisors LP.
Large and megasized plans have been able to participate in this market, but widespread adoption remains limited, said Ms. Hobler. “I don't think we've seen a strong adoption with in-plan retirement income options,” she said. “And in the small to midsize plans, it's been difficult to get a proper solution that's tailored to the plan side.”
Mutual funds have the largest market share among IRA products, with 47% of account assets as of the first quarter of 2011, according to Cerulli. Brokerage accounts, meanwhile, account for a bit more than a third of IRA assets.
