Capturing Rollovers Presents Opportunities for Advisers

Speaking at the 401(k) SUMMIT in San Diego, California on Tuesday, John Blossom, of Alliance Benefit Group of Illinois, said those three areas all have opportunities for advisers looking to build their businesses, especially as Baby Boomers retire and move into new jobs in their retirement.

Roll-In

The roll-in offers the most accessible assets, available through a “captive” audience at enrollment meetings, Blossom suggested. Further, there is little competition for that money, other than the possibility of an adviser at the old plan trying to capture, or hang on to the assets. By consolidating accounts, a participant will find it easier to manage their retirement plan assets, which also can be a selling point for them.

This can also be a good thing for plan sponsors, Blossom said, because by increasing the plan’s size, and the average participant balance, it can help to reduce plan sponsor costs – since many plan costs are based on average participant balance.

Rollover

An adviser wants to avoid a distribution rolling out of the plan to someone else, Blossom said. Consequently, the rollover, upon termination or retirement, is a key point to capture assets. The rollover opportunity should be as simple as possible, he explained, saying that the more paperwork a person has to do, the less likely he is to complete the process.

Another reason that it is good to discuss the roll-in option at the enrollment meetings is that you can also talk about the need to consolidate assets once they leave the company. Blossom suggested that advisers must begin talking about the rollover opportunity at enrollment, rather than waiting until the point of distribution. This lets participants know that they have an option to turn to the adviser when they have questions or issues about dealing with their money. Advisers should make sure they can tell participants they offer a lifetime service, not just a retirement plan at the employer. Early communication about planning for after the job or retirement also streamlines a participant’s thinking, getting them focused on their retirement planning and thinking, he said.

Roll On

The roll-on, which is when a participant’s assets in the plan are retained beyond termination or retirement, is a possibility for those who have balances in excess of $5,000, but might only be useful to those with more significant balances, Blossom said.

This can be easy to sell to those whose assets are captured in a managed account program or who have been receiving individualized attention, because they then understand that their asset allocation has been specifically tailored for them, and they would lose that allocation if they moved their assets. When you are able to capture large balances early, it makes it less likely you will lose them, he commented. This is especially true when participants are generally happy – that makes it a harder sell for a competing adviser to steal their assets out of the plan.

Advisers can sell this to plan sponsors because, while it requires additional communication, when the plan retains the large balances, it can help to reduce plan sponsor cost, as with the roll ins, since the large balances raise the average participant balance, on which many plan costs are based.

In order to maximize their business growth from rollovers, advisers should create a marketing plan that describes the type of communication that will frame the adviser as an expert source of information. This should begin at the enrollment meeting, so the adviser isn’t waiting until the time of termination or retirement, when the participant will be less likely to look for advice.