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IRAs Make Up Nearly Half of Advisors’ Business

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Advisors get nearly half of their business from IRAs, including simplified employee pension plans (SEPs), a report released in February by Cerulli Associates found.

Bing Waldert, director at Cerulli, said this is important for asset managers who want to acquire rollover assets, as advisors capture larger rollovers than direct providers on average, and large balances typically stay with existing advisor relationships.

Rollovers are the main driver of the IRA market, the Cerulli report found, with $321 billion transferred into IRAs in 2012 and an expected increase to $400 billion by 2015.

The 50- to 59-year-old cohort presents the largest opportunity to capture assets, Cerulli found. The report put rollover assets for that group at more than $144 billion and 37% of accounts in 2012.

“Financial advisors play a key role in asset managers’ abilities to win flows from rollovers,” Waldert said in a statement. “Rollover assets are a key component of an asset manager’s retirement strategy. However, advisors view rollovers as just another source of funds for their practice, instead of a key market to be cultivated.”

Cerulli found a “degree of ambivalence” among advisors, many of whom see retirement planning as only one part of what they provide their clients. The report recommended asset managers that want to work with advisors to capture rollover assets approach them from an “oblique angle,” providing services and programs that focus on education rather than products and can lead to a deeper relationship.

Advisors who provide “a holistic outlook” for their clients will likely capture the biggest rollovers, Cerulli suggested, which will ultimately benefit assets managers that have built those deep relationships. “Positioning a firm as a retirement expert may not directly lead to retirement assets in the short term,” the report says, “but asset managers hope that this soft sell ultimately will generate the flows that they seek.”