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October 03, 2016 at 09:24 AM
When it comes to deciding where to invest former defined-contribution plan assets, participants look to a provider’s trustworthiness above all other criteria.
Trustworthiness trumps both fees and investment performance in rollover IRA selection, according to a new Cogent Reports study released Monday by Market Strategies International. Thirty-five percent of plan participants who said they were likely to open a rollover IRA in the next 12 months cited brand trust as the primary reason they would choose a particular provider.
A quarter of participants said they would stick with their current plan provider.
Brand reputation, financial stability, low fees, easy rollover process, service and support, and investment performance were secondary influencers in rollover IRA provider selection.
“For years we have seen fees and investment performance serve as a leading factor in the rollover decision for investors,” Linda York, senior vice president at Market Strategies, said in a statement. “We are finding that trust is increasingly a larger factor in the decision-making process—which is likely fostered by some of the missteps that have not put the investor first for a number of asset managers over the past few years.”
The study found that brand trust becomes more important as participants age, which highlights the need for providers to foster relationships over time, according to Sonia Sharigian, senior product manager and report author at Market Strategies.
“When rollover triggers like a job change or a desire to consolidate assets arise, firms that have successfully built long-term brand loyalty will be well positioned for future asset retention, while providers that have not cultivated a sense of trust and loyalty among their current or former plan participants will be at a sizable disadvantage to keep those assets in-house,” Sharigian said in a statement.
According to the study, Fidelity continued to be the most popular rollover IRA provider, and American Funds the most lucrative option among prospective retirees and recent job changers.
Ten rollover providers in the study were highly associated with the brand attribute, “is trustworthy”:
1. Fidelity Investments
2. USAA
3. Vanguard
4. Wells Fargo
