About 10,000 people a day are turning 65 years old and they are likely to move their assets out of institutional investments, according to Prudential. The future of this business stream will depend on whether these asset transfers are deemed fiduciary acts by the Department of Labor.

“Currently, fee-only and commission advisors are able to transfer assets without fiduciary status, but in the future, under the current definition of fiduciary, only fee-only advisors will be able to transfer assets and maintain fiduciary standard over that money,” said Donald Cummings, a fee-only advisor with Blue Haven Capital in Geneva, Ill.  “This could change because commission brokers have a strong interest in acquiring these assets to manage. The capture of these assets and the definition of fiduciary will continue to be lightning rod issues in 2013.”

In 2005, the Department of Labor issued an advisory opinion concluding that recommendations relating to plan distributions did not constitute investment advice. However, the department will issue a new proposal in 2013 relating to fiduciary-investment advice issues under which transfer of assets will be addressed.

“If the transfer of retirement assets from institutional accounts to retail accounts is determined to be a fiduciary act, advisors will question remaining in the practice area partly because fees could double and not pass potential suitability requirements,” said George Castineiras, senior vice president with Prudential Retirement’s Total Retirement Solutions, at Prudential Financial’s 2013 Global Economic and Retirement Outlook briefing in New York. “It’s a challenge for advisors to create a business system to accommodate both institutional and retail clients.”  

Fees would double because an advisor who manages institutional accounts manages employers with many individual accounts while an advisor who manages retail accounts manages only personal individual accounts, according to Prudential.

“The cost structure is different and the fee structure is two times higher because one is dealing with business to business while the retail advisor is serving business to consumer,” Castineiras said.

For example, Cummings uses PortfolioCenter, a Schwab subsidiary, to serve his retail clients.

“It offers a breakdown of stocks and bonds, which allows me to take a hard look at bonds,” said Cummings, who manages $35 million in assets in his retail retirement practice.

PortfolioCenter is a software application that manages financial data, runs back office operations and serves clients. It also gives a single, consolidated view of all financial assets, regardless of where they are held. Its capabilities include portfolio data management, performance measurement, decision support tools, accounting, reporting and billing.

The rollover IRA market is expected to balloon to $338.8 billion in 2014, according to Cerulli Associates Inc. Over the next five years, more than $1.5 trillion will roll over into IRAs, according to McKinsey & Co. data.

Retirees that roll over their retirement assets to self-invested accounts with Schwab or Ameritrade pose a particular challenge for advisors.

“I have seen an increasing number of people that request my services after getting frustrated with managing their own portfolio holding last year’s best performing mutual funds or CNBC's ideas," said UBS Financial Advisor Chris Ure in Boca Raton, Fla.  “I overcome the obstacle by cultivating a relationship with a potential client before they actually retire.”

Another change affecting retirement plans is a new rule that allows investors to convert assets in a traditional 401(k), including pre-tax salary deferrals, at any age, into a Roth 401(k). 

“In reference to conversions in 2012, we reviewed the risk tolerance of clients in the highest tax brackets last year and plan to pay income taxes on the amount converted from tax deferred accounts into Roths,” said Andrew Aran, a financial advisor with Regency Wealth Management in Midland Park, N.J..

The new rules apply equally to 401 (k)s, 403(b)s, thrift saving plans and 457 (b) plans.

“Rates were lower in 2012 than they were likely to be in 2013. As long as clients planned to keep the converted money in the Roth for more than five years, it made sense to pay the taxes in 2012,” said Aran.

Now that Washington has deemed the transfer of assets from 401k plans to Roth IRAs to be legal, plan design is expected to be an area of growth for financial advisors.

“Many business owners think there is only one 401k like there is only one IRA. It's simply not true,” said Ure. “We believe there is a huge opportunity with plans in the $500,000 to $10 million range to improve plan design, offer and or improve online access, enhance participant education, broaden investment options, lower fees and provide more personal customer service.”

According to the Investment Company Institute, $3.5 trillion was held in 401(k) plans as of September 30.

“The owner of the company is typically my client for whom I put together a good quality 401k plan with benefits and structure it in a way that maximizes the owners’ deferrals,” said Ure.