Cerulli Reports on Opportunities in 403(b) Market

As a result of this shift, retirement advisers, third-party administrators (TPAs), and investment only (IO) asset managers are presented with new opportunities, Cerulli says in its latest report.

The legislation being analyzed, enacted in 2007 and finalized in 2009, enables 403(b) plans to take on a more 401(k)-like structure. Certain 403(b) segments, such as health care, are moving toward single provider and will more closely resemble a 401(k) plan than others, such as the K-12 market, which continues to have multiple providers.

Cerulli says firms and players that can accommodate the changing needs of the various market segments are well poised to benefit from the projected growth. These include:

• Advisers: As the retail relationships between advisers and participants in the 403(b) space diminish, opportunities are being created for more 401(k)-like retirement specialist advisers who act as plan fiduciaries.
• Asset Managers: As 403(b) plans become more single-plan provider- and ERISA-based, they will also be more open architecture, enabling IO asset managers to grow their DCIO businesses.
• TPAs: As more 403(b) plans become ERISA-based (during the past five years the percentage of ERISA 403(b) plans has increased from 17% to 40%), plan sponsors will continue to need help with the regulatory responsibilities, creating opportunities for TPAs with capabilities to accommodate the unique needs of this market.