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The $5 Trillion Opportunity for RIAs

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The private defined contribution market is largely a market that is untapped by financial advisors, yet it represents $5 trillion of the retirement plan market and is projected to grow 5.85 percent by 2020, said Skip Schweiss, head of TD Ameritrade Institutional’s Retirement Plan Services platform.

Only 5 percent of fiduciary advisors are actively involved in the 401(k) space, and only 6 percent of 401(k) specialists are RIAs. In other words, there is competitive room for advisors to get into this area, and they should, Schweiss said during a session at FPA’s annual Experience conference in Orlando, Fla. today.

Most financial advisors are already in the IRA space—which makes up one-fourth of the retirement plan market. But you could double the size of the retirement market you play in by getting into the DC space, Schweiss said.

What makes this market so attractive? During the 2008-2009 period, 98 percent of DC participants continued to defer money into their retirement plans. For the last decade, DC plans outpaced the S&P 500, up 57 percent. Why? Participants continue to contribute.

“New money just keeps coming into these accounts.”

Regulatory changes are also driving the opportunity, such as the increased rules around fee disclosure.

But there’s also an opportunity for RIAs to pick up market share in the IRA market, Schweiss said. As the Department of Labor looks to propose new rules expanding the definition of a fiduciary to retirement plans, the broker/dealer community says they will back away from advising IRA accounts, he said. RIAs, however, are already acting as fiduciaries.

“Greater transparency plays right into your hands.”

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