PANC 2010: Rolling Over

The panelist, Richard Schooley, vice president, Morgan Stanley Smith Barney, was saying that financial advisers gain the most business opportunities when they’re working with people who want to make a change with their savings.   Very often, plan participants nearing retirement would fall into that category.   

And the business opportunities in the rollover market are plentiful, according to Jonathan Murray, senior vice president, investments, The Murray Group.  He said to think of it like a gas station.  The customers might show up to buy gas, but the station owner makes even more money from the convenience store.  The 401(k) plan is like the gas, and rollovers are like the convenience store.  Murray added that millions of Americans have questions about rolling over a 401(k) plan into an IRA, and financial advisers have a great opportunity to help a lot of people.

Of course, a financial adviser with fiduciary standing over a plan needs to be more cautious, said Don Holt, vice president, Payden Retirement Services Group.  He said full disclosure is the key.  “If I’m charging 50 basis points as plan consultant, and then I’m charging 65 basis points for an IRA rollover…as long as you’re willing to put their interests up front,” there are ways to make it work, he said.   

An adviser in the audience chimed in at the point, to say that her firm assigns fiduciary liability to its advisers.  The FAs are not allowed to solicit participants for rollovers; however, if a participant approaches them, then they are allowed to broach the idea of a rollover.

How can an adviser have participants approach them when it’s time to start thinking about rolling over?  Schooley says it’s all about generating “good will.”  His business model is very labor intensive; they’re on-site once a month getting to know the participants. They send participants birthday cards and have customized newsletters for each client.  By the time the participant is nearing retirement, Schooley says they see his firm as their personal financial adviser. “They’ll approach me and say, ‘I guess I’m supposed to roll this over to you now?’ And I say we can help you with that.”  He lets them know his wirehouse charges more for a rollover, but the participant is just grateful that the adviser is there for them.   

Holt pointed out that as more legislation is introduced, “we all need to be more comfortable with the idea of giving advice.”  He said it will add to more opportunities.Schooley added that conducting participant education activities, such as an “Over-50 Seminar,” would be an appropriate platform to introduce the idea of an IRA rollover. Another option is an in-service withdrawal.   

At the mention of in-service withdrawals, all the panelists started to say what a good idea they are. The in-service withdrawal allows participants aged 59 ½ to rollover their 401(k) into an IRA, penalty-free. This allows them to have more flexibility and control over their investment choices. However, not all plans come with this option.   

The panelists agreed that most people want a financial adviser to take a “holistic approach” to their finances; covering things like college planning, retirement planning, rollovers, and estate planning.  It’s up to each adviser to get the conversation going.