Cerulli Identifies Niche Retirement Market Opportunities

July 28, 2011 (PLANSPONSOR.com) - Cerulli's most recent issue of The Cerulli Edge: Retirement Edition says the primary retirement markets (401(k), 403(b), public and private DC and DB, and traditional and Roth IRAs) represent nearly $14 trillion in 2010, while the niche markets, of which Cerulli identifies six, currently represent only $1 trillion.

However, Cerulli says, they are burgeoning areas of growth and asset-gathering potential for firms willing to look beyond the crowded mainstream retirement markets.  

These six niche opportunities examined in Cerulli’s research include: 

  • Taft-Hartley Plans: In an effort to improve their funded ratios, these plans are primed to increase their allocation to international investments as they seek to improve performance. 
  • Nonqualified Deferred Compensation Plans (NQDCP): As economic conditions improve, hiring activity will lead employers to consider enhancements to benefit plans, such as adding a NQDCP, in order to gain an edge in the competition for talent.  
  • 457 Plans: While-asset gathering opportunity is limited and specific, firms that are able to offer a 403(b) plan together with a 457 plan are poised to win assets as this combination allows for the creation of higher balance accounts. 
  • 412i Plans: The asset manager opportunity is limited due to requirements related to the funding vehicles used in these plans. There are opportunities, however, for B/Ds and insurance companies because plans are attractive to small, but very profitable businesses, typically characterized by highly compensated, late-career professionals with significant assets. 
  • Small Business IRAs: With 70% of small business owners not saving for retirement in any vehicle, these plans provide the solution, and thus can’t be ignored by firms seeking asset-gathering opportunities.  
  • Solo 401(k) plans: Current growth is positive for these plans and may be augmented by Baby Boomers who, working past retirement age, may see the flexibility of a sole-proprietorship arrangement, and desire to continue to save for retirement through this familiar vehicle.