Boutique firms that specialize in employer retirement plans are set to benefit big time from the Department of Labor’s fiduciary rule.
 
That’s because many advisors who now dabble in the plan market are expected to exit the business due to the extra cost, paperwork and expertise required by the DOL rule. And in some cases, smaller brokerage firms will no longer support retirement plan business.
 
Specialist firms are expected to pick up the slack as advisors either seek to affiliate with them or abandon the market.
 
“A lot of people will get out of the ERISA marketplace, or we’ll see them adopt a different business model, like the niche we’re in,” said Amy Glynn, a partner at Global Retirement Partners, whose firm supports about 270 affiliated advisors who concentrate on employer retirement plans with assets of $220 billion.
 
Glynn said her firm is getting a flood of inquiries from advisors looking to affiliate.
 
“You can’t even believe it,” Glynn says about the number of calls. “It’s bananas -- incoming calls all day long.”
 
Just a year ago, Global Retirement Partners had just 70 affiliated advisors with $80 billion under advisement, she said.
 
Pensionmark Financial Group chief executive Troy Hammond reports similar interest.
 
“Our phone is ringing off the hook,” said Hammond, whose firm works with more than 150 advisors who handle approximately 2,000 retirement plan clients.
 
“The DOL [rule] is a catalyst” for advisors who’ve been on the fence about whether to commit to the retirement plan market, Hammond said.
 
 
In a report this month, researcher Cerulli Associates predicts that the rule will “force another round of ‘in or out’ for the population of advisors operating in the employer-sponsored retirement plan market.”
 
Some advisors “will be mandated by their B/D or wirehouse to choose between DC plan business and traditional wealth management rather than operate in both channels,” said Jessica Sclafani, Cerulli associate director, in the report.
 
Cerulli estimates there are roughly 6,500 retirement specialist practices in the U.S., defined as drawing more than half of their revenue from retirement plans. That’s about 7 percent of the advisor universe.
 
The fiduciary rule follows a string of other regulations that have forced advisors and firms to take a hard look at their ability to support plan business, Glynn said. In 2012, for example, the DOL implemented rule 408(b)(2), which required enhanced cost disclosures.
 
That trend of heightened oversight of retirement plan business won’t stop, even if the new Trump administration rolls back all or part of the rule, observers say.
 
In fact, advisors who work with plans already have a fiduciary duty, whether they know it or not, Hammond said, and the DOL rule has clarified that fact.
 
Observers also predict that specialists in retirement plans will have a better shot at landing rollover business because the DOL will require advisors to make a detailed determination that a rollover recommendation is in a client’s best interest.
 
“With the heightened focus on the recommendation to roll over … it will be problematic for advisors to approach defined contribution plans” for rollover business, Cerulli says.
 
The research firm anticipates that advisors with existing relationships with plan participants will continue to get rollovers.
 
But specialists working with employer plans could be better positioned to make a rollover recommendation, said  Jennifer Tanck, executive vice president at Pensionmark. “I would argue that the plan advisor is in the best position to know” whether a rollover is the right thing to do, since plan specialists will have the data needed to make that determination, she said.
 
More plan assets are expected to remain in employer plans rather than be routinely rolled over, which will slow growth in the $7.3 trillion IRA market.
 
In fact, industry observers believe that the DOL wants participants to keep assets in employer plans, which are seen as less conflicted and cheaper than rolling over to a full-service advisor, Cerulli says.
 
Tanck agrees. “I think we’ll see a lot more terminated [employee plan] participants hanging out in employer plans.”