Adviser Relationships Can Mean Rollover Opportunities

Nearly one in three Americans works with a paid financial professional, according to a new consumer study by the LIMRA Secure Retirement Institute. Fifty percent of consumers reported working with their financial adviser for five or more years, and nearly one-third have maintained the relationship for 10 or more years.

Consumers’ high levels of confidence in the relationship is one finding of “Spotlight on Advisors: Consumer Perception, Assessment and Experience.”

Fewer than half (43%) of the survey respondents who are defined contribution (DC) plan participants discussed the advantages and disadvantages of potential rollover actions with someone. However, the institute discovered that plan participants who regularly work with financial advisers are more likely to have discussed the advantages and disadvantages of potential rollover actions than those who do not work with a financial adviser (60% vs. 30%). 

Three in four participants who worked with an adviser to make the decision to roll the money into an individual retirement account (IRA) said they continue to work with this adviser. This implies that the rollover transaction is usually not a one-time interaction but instead takes place inside the context of a long-term relationship, the report contended.

Consumers assessed their financial adviser by responding to five statements surrounding regulatory standards of care, such as the fiduciary versus the suitability standard. They were asked whether the adviser:

1. Always puts their interests first;
2. Recommends products that are suitable for them;
3. Gathered sufficient detailed information about their finances before offering advice or recommending products;
4. Understands their entire financial situation; and
5. Provides excellent value for the costs associated with his/her services.

For all five criteria, 9 in 10 consumers agreed with the statements, no matter the compensation model of the adviser (fee-based or commission).

“The high prevalence of longer-term relationships suggests that clients are satisfied with the services they are receiving,” said Matthew Drinkwater, assistant vice president of the LIMRA Secure Retirement Institute. “In turn, the financial professionals who have longstanding clients are more likely to have a deeper understanding of their clients’ needs and preferences.”

LIMRA surveyed 3,900 U.S. citizens who worked with a financial adviser. A chart showing some of the report’s findings is here.