IRA rollovers are a “unique asset-gathering opportunity,” a report released Monday by McKinsey claims. The consulting firm found that over the next five years, rollovers are expected to drive between 40% and 50% of net new money for wealth managers and will total $7 trillion in assets or between 12% and 14% of all household assets by 2015.
The problem for wealth managers, McKinsey notes, is that they have largely “failed to mobilize their advisory forces,” adding that less than half of brokerage clients receive help from their advisors on rollovers.
That’s not to say wealth managers are not without opportunities to capture those assets. Among the strategies successful managers need to implement, according to McKinsey, are institutionalizing advisor practices, enhancing home office support, leveraging the brokerage call center and implementing a “quick and seamless” rollover process.
The report noted that the events that trigger a rollover often lead investors to take stock of their financial situation, allowing advisors to open the conversation about consolidating assets. McKinsey found that about 30% of affluent investors have more than one IRA; furthermore, 40% of consumers said the ability to consolidate assets was a key reason for choosing an IRA provider.
McKinsey identified five misconceptions wealth managers hold regarding clients’ attitudes.
1) Investment options and fees drive consumer decisions. Advisors who use complex calculations and figures to impress their clients often run the risk of scaring the client off. McKinsey refers to a 2009 LIMRA study which found that 36% of job changers and 26% of retirees did not fully understand how a rollover works.