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Retirement Planning > Retirement Investing

Online brokerages likely to nudge out full-service firms for rollover assets

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Four-in-10 high-net worth investors with money currently sitting in an employer retirement plan are ready to roll over those assets to an IRA within the next 12 months. An average account balance of nearly $200,000 means around $450 billion of retirement assets are going to be in motion.

But market insight firm Cogent Research reports it’s not the full-service advisory practices that are going to be the beneficiaries of these rollover assets. Four of the top five rollover IRA destinations are firms that are traditionally known as online or discount brokers, many of which also have substantial 401(k) plan franchises.

“Online brokers have spent a lot of time and money encouraging investors to use their rollover services, and it’s working. Not only are they the most likely to be successful at migrating client assets from the institutional-side to the retail-side of the house, online brokerages are also the most likely to bring in new dollars at the expense of full-service providers,” said Christy White, principal of Cogent Research in a statement.

“Assets In Motion: The Rollover IRA & Retirement Income Market Opportunity,” Cogent Research’s latest report, has identified that one in three (32 percent) affluent and HNW investors have assets currently sitting in former employer retirement plans like 401(k), 403(b), and 457 plans.

The “top tier” destinations for rollover IRA assets, according to Cogent Research, include Fidelity Investments, Vanguard, Charles Schwab, Merrill Lynch and USAA.

“With the exception of Merrill Lynch, many full-service firms find themselves in the bottom tier in terms of being a destination for rollovers assets, including some well-known firms such as T. Rowe Price, Bank of America, JPMorgan Chase, Wells Fargo, Edward Jones, and Smith Barney,” Cogent Research stated in a press release. “While most investors know which firms they will turn to for their rollover IRA, nearly 20 percent have yet to decide where they will put their dollars, reflecting a significant opportunity for full-service providers to increase their share of rollover assets.”

Research also indicated HNW investors are far from being prepared to retirement. Close to half (46 percent) have yet to create a detailed financial plan.

“Overall, investors appear to need more, not less hand-holding when it comes to retirement planning accumulation and distribution strategies. This is an opportunity for the full-service providers to add value for their clients, while also opening the door to a conversation about legacy ESRP assets,” added White.


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