Lifestyle/Lifecycle Funds Best Strategy for Capturing Rollovers

September 26, 2008 ( - A new Cerulli report suggests that between 2008 and 2013, rollovers from 401(k), 403(b), and 457 plans will account for nearly $1.9 trillion of asset flows into traditional IRAs, which will increase to $6.1 trillion by 2013.

According to the report, “IRA Rollover and Retention: Strategies and Positioning,” real success in capturing these assets will hinge on the right mix of advice.

In a press release, Cerulli explains that there are three main ways in which rollovers are being serviced and supported: direct to the investor; limited advice with a combination of embedded-advice solutions and limited advisory services; and full advice served with a full complement of investor-review programs.

“We asked asset managers and IRA providers to identify the best opportunities for building IRA rollover business. Firms see embedded-advice solutions as a key component to rollover success. And, some firms identified advisory services delivered through call-center representatives as necessary component,” said Tom Modestino, Senior Analyst and author of the report, in the press release. Focus on embedded advice (i.e. lifecycle funds) was identified as a top strategy by one-third of those surveyed.

Cerulli points out that embedded-advice programs are showing impressive growth. Lifestyle and lifecycle funds (at $51 billion and $38 billion respectively) showed a combined five-year CAGR of 58.1% and are in the early stages of adoptions. However, these funds comprise only about 1.9% of the market share of total IRA assets, so there is plenty of room for growth, Cerulli says.

Managed accounts represent 22% of traditional IRA assets as of the fourth quarter of 2007, and mutual fund advisory programs accounted for the largest share of traditional IRA assets at $883.8 billion.

The report examines the IRA rollover marketplace and provides insight for asset managers, providers, and distributors on how to best position themselves for success. In addition to case studies, the report includes market sizing, market share rankings, projections for future growth, and insight into legislative trends affecting rollovers.

To purchase a copy of the report, contact Marketing & Business Development at 617-437-0084 or .