Everywhere you turn, the IRA market presents opportunities. The Wall Street Journal captured the current situation, quite succinctly:
New IRA Law Bewilders Investors.
Break From Mandatory Withdrawals, Meant to Protect Savings, Leads to Mixups, Ad Hoc Responses; 'It's All So Confusing.' A new law that was intended to give retirees and their battered nest eggs some relief is causing aggravation instead.
Owners of individual retirement accounts and 401(k)s who are over age 70 ½, and those who have inherited such accounts, must withdraw a minimum amount from those accounts each year, based on their life expectancy.In December, lawmakers suspended that requirement for 2009, hoping to give investors a chance for their accounts to rebound after a brutal year in the markets.
Yet that seemingly simple idea—a one-year reprieve from mandatory withdrawals—is giving headaches to investors, financial planners and retirement-plan custodians.
But there have always been opportunities for advisors to provide valuable service. Investment News revealed this potential train wreck:
Your clients' retirement accounts are often their single largest non-real-estate asset. Yet these assets can be at risk because about 80% of beneficiary forms on individual retirement accounts, defined benefit pension plans and insurance policies are either blank, outdated or not properly filled in.
Mistakes made when designating beneficiaries can be costly and even tragic because they impair the ability of your clients to protect, preserve and pass on assets to their heirs.
The market data is really compelling:
IRA Rollover Market a Big Opportunity for Advisors
The estimated $2.75 trillion IRA roll-over market is poised for significant growth in assets and is expected to take on more prominence in advisers' practices.The individual retirement account market as a whole is expected to have a five-year compounded annual growth rate of 12%, according to Brightwork Partners LLC, a research-based consulting firm in Stamford, Conn. The IRA rollover segment makes up two-thirds of that total and is expected to grow at a rate of at least 13%.
While less than 10% of financial advisors focus solely on the retirement-planning market, all advisors dedicate at least some of their practice to retirementservices, according to Cerulli Associates Inc., a Boston-based research firm.
There is opportunity for advisors.
Market Differentiation
"Education is important to distinguish the advisory firm," said Peter Lynch, President of Peter Lynch Inc. of Red Bank, N.J. "You need to establish yourself as a specialist in that area," said Mr. Lynch.