BOSTON (6/9/14)--Credit unions and other financial advisers will have an opportunity to assist more members and consumers in financial planning and management, as defined contribution plans will experience seismic outflows as baby boomers retire, creating both opportunities, and real challenges.
That's the upshot of new analysis from Cerulli Associates that projects distributions from 401(k) plans will outpace new contributions by 2016.
"This has significant implications for asset managers and other financial services providers," said Bing Waldert, a director at Boston-based Cerulli. "Distributions create opportunities as money moves from employer-sponsored plans to IRAs. On the other hand, the allure of the defined contribution market fades as the stickiness of assets comes into question, and net flows decline or may turn negative for some asset managers."
In its report, "Evolution of the Retirement Investor 2013," Cerulli aggregates data on enrollees' contribution habits throughout their investing life cycle, examining IRA rollovers and enrollees' relationship with advisers as they cash out their 401(k)s and begin to allocate resources for retirement.
Cerulli's report suggests advisers redouble their efforts on increasing contribution rates with younger workers in order to counter the massive outflows following boomers into retirement.
Over 60% of workers under the age of 30 use their company match as a gauge of how much they contribute to their plans, suggesting that an increase in match would lead to increased contributions. Short of that, Cerulli says advisers will have to intensify their efforts to safeguard their sponsor relationships.