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The Rollover Opportunity Remains: IA Retirement Plan Advisor for September 2010

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The rollover of high balance retirement plan balances into IRAs represents one of the greatest business opportunities for advisors and plan providers over the next few years.

George Walper, president of Chicago-based Spectrem Group, which has just released a survey on the topic, believes that clients with high balances in their retirement plans (many of whom also have significant funds in other retirement accounts) are like “low-hanging fruit”: They are very easy to identify, both for advisors and plan providers, yet Walper believes that neither has really made a concerted effort to tap into this pool of opportunity.

“The opportunity is so significant and can impact profitability in a huge way,” Walper says.

It is all the more telling because, according to the Spectrem survey, “High Balance Rollover 2010,” only 25% of plan participants who performed a rollover of $200,000 or more since mid-2008 rolled all or some of the funds into an account held by their existing plan provider. Instead, 53% rolled over at least part of their balance to firms where they held other investments and 39% transferred funds to firms where they had an existing IRA. An already established relationship, especially with existing IRAs or other household assets, is the most predictive factor of what provider an individual will select to manage his or her high balance IRA.

“Some [plan providers] with better brand names have been more successful at retaining clients, but for this size of account, 25% is still a pretty low number,” Walper says.

While there’s no question that plan providers have caught on to the opportunity and are making strides to retain clients that can roll over into an IRA, they would really do well by going all out to hold onto these people, he says.

As for advisors, they also stand to gain significantly by looking at this market segment, since the survey showed that less than two-thirds (59%) of high-balance participants used an advisor in the rollover process, with the remainder either requesting a hard-copy rollover application directly from their providers (22%) or handling the process online (19%).

While many high-balance clients do have existing relationships with advisors and choose to migrate away from their plans because of these, advisors still need to approach this client base, Walper says, with a long-term view.

“A lot of advisors say their minimum for a new client is $1 million in investable assets, so they don’t take on people who have, let’s say, $300,000 in investable assets, not counting 401(k) plans,” he says. “But what advisors need to do is look further down the line and think of people in terms of what they will be worth down the road as opposed to what they are worth today.”

Advisors also stand to gain by zeroing in on “consolidators,” those who are looking to put together more than one IRA, Walper says. Most individuals initiating high-balance IRAs have at least two or more IRA accounts, and those individuals who made a high balance rollover decision or consolidated high-balance IRAs generally have significant additional household savings, too.

It’s also important to note that the individuals who are consolidating high balance IRAs are generally more sophisticated than those merely rolling a high balance from a plan, since they tend to be both older and wealthier. According to Walper, they are easy game for advisors.

The survey, entitled “High Balance Rollover 2010,” is available at It was conducted in July and participating individuals were screened first on the basis of whether they had the opportunity to roll over a balance from an employer-sponsored retirement plan within the past two years and then on the size of the balance transferred.

The study also included a sample of individuals who consolidated multiple IRAs. Qualified respondents had the opportunity to either roll over or consolidate at least $200,000.


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