How would you like to increase your AUM without finding new clients or adding new plans? You can dramatically increase your AUM just by helping your current participants find their accounts from previous employers and roll them into the plan. This strategy is great because it piggy-backs on the participant education you are already providing, allowing you to deepen relationships with current participants and grow the plan assets all without having to win new clients or new plans.
Are your existing participants a realistic source of new assets?
You may be thinking “Yeah, right, my participants are not going to have enough outside assets to make it worth my while.” While it’s true you may not find many closet millionaires in your next participant meeting, but if you did find several dozen people with $50,000 or more in old accounts you might think twice about dismissing the idea. So how many people have old accounts and how much might be out there for you to roll over into the retirement plan? Let’s look at some data.
In 2010, ING Direct USA (now Capital One 360) conducted a survey that revealed some exciting possibilities. The average American will work for seven different employers over a lifetime and 50% have retirement accounts that they have left with former employers. Of these, 24% have between $10,000 and $50,000 in old accounts and 18% have over $50,000 left in old retirement accounts. An additional 11% don’t know how much they have. This means, in an average participant group, half may have assets in old accounts that could be rolled over and over 40% with probable account balances of more than $10,000. You know the participant groups you work with, how many assets are you leaving out there that could be rolled over?
Why should your participants roll their money over to their current retirement plan?
Some participants may not know that they can roll their old retirement account balances into their current retirement plan. Others may know they can but choose not to. There are several reasons they may want to pursue a rollover.
- Old accounts may not be allocated correctly anymore. An old retirement account that a participant had in their 20s may not have an ideal asset allocation if they are now in their 40s or 50s. Unless they are invested in Target Date Funds, their old asset allocations may be way out of whack. A participant could go back and rebalance and reallocate each account but this could be cumbersome, it would be easier to consolidate the accounts by rolling them into the current retirement plan and manage their asset allocation in one place.
- Ease of management and visibility. If 11% really have no idea how much is in old accounts, this is not good. Having all the accounts rolled over gives participants one place to keep track of their retirement. Many people are not good money managers and having multiple accounts to check, monitor fees and investments, and figure out an asset allocation across multiple accounts can be difficult. It is simpler to manage everything if it is consolidated into one plan.
- Fees may be lower than an IRA. Participants may want to know why they should roll over their accounts into the retirement plan instead of an IRA. Obviously, the answer to this will depend on each individual situation, but the retirement plan may have lower fees, offer institutional class investments, and include retirement advice. Helping a participant compare the two options may reveal that the retirement plan is the best choice for the rollover at which point you can help facilitate that.
How can you help participants roll over their old accounts?
Once a participant decides that rolling over their old accounts would be a good idea, there is still the significant hurdle of them actually following through! Obviously, there is only so much hand-holding you can do as an advisor but here are a couple of ways you can help make the process as smooth as possible.
- If your retirement plan accepts rollovers, explain the process to the participant to help them understand what will happen. When a participant understands the process and how easy it is, they will be more willing to follow through.
- Tell them where to get the rollover forms. Provide details about where to get the rollover forms and how to complete them. You may even be able to provide them yourself. Doing as much as you can to actually get the participant to the forms they need to fill out will help overcome the inertia to do nothing.
What if a participant doesn’t remember or can’t get their old plan information?
Some participants will forget how to access their old accounts. A call to a Human Resource representative at a former employer can easily resolve this issue by informing the participant where their old account is located.
If the participant can’t find the former employer due to a name change, merger, etc. then finding an old plan document such as an old account statement might reveal contact information that the participant could use to track down their account.
The participant could also check the National Registry of Unclaimed Retirement Benefits to see if their old employer has listed them as an unclaimed account.
If a former employer is no longer in business or has terminated the retirement plan the participant can find their old accounts through the Employee Benefits Security Administration’s Abandoned Plan Search tool.
Grow your AUM through participant rollovers
It can be hard finding new clients and winning new plans. An easy route to supplement your current business growth strategy might be to engage your current participants and help them roll over their old accounts into the retirement plan. It’s true that a lot of this depends on the participant taking action themselves, but good education about plan rollovers and gentle nudges in the right direction can help participants better manage their retirement assets and can help you bring new assets into the plan.
Advisors looking for plan participant education solutions should consider The Retirement Analysis Kit (TRAK) which includes unique solutions to engage participants and grow your business.
Want more tips on working with your participants? Check out our free whitepaper How Advisor-Driven Education Motivates Participants!
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