5 Misconceptions on IRA Rollovers Lead Advisors to Bungle ‘Unique Opportunity’

What clients are looking for, according to McKinsey, is convenience. “Rollovers are seen as a tedious chore, and consumers tend to follow the path of least resistance.”

2)  Consumers who have advisors automatically roll assets over with them. McKinsey acknowledges that “pre-existing relationships are critical for IRAs,” and that 70% of IRA assets remain at financial institutions that already have a relationship with the consumer. Because of this, many advisors fail to offer support for IRA rollovers, leading to fewer than 50% of clients who received support from their advisor when they changed jobs or retired.

3)  IRAs do not bring in substantial assets from the affluent or high-net-worth segments. IRAs are not a middle class product, McKinsey asserts; rather, they represent almost 20% of household assets for households with $500,000 to $5 million in investable assets. In fact, the average IRA rollover captured by wealth managers is about $100,000. Additionally, 50% of affluent investors expect their advisors to create and update a holistic retirement plan.

4)  IRA rollover events are rare and hard to predict. On the contrary, one out of five brokerage clients experiences a rollover event each year, but advisors make “little effort to anticipate these events.” Even when advisors fail to recognize an opportunity for rollovers, they typically have between one and three months to identify events because that’s usually how long it takes consumers to transfer their assets, McKinsey found.

5)  The “sale” is closed when the client agrees to roll over assets. Finally, McKinsey notes that advisors who give up once clients agree to roll assets over risk having clients drop out of the process. McKinsey recommends advisors lead their clients through the process within one to two weeks, and to focus on online or phone conversations, rather than using paper forms, to complete the process.