Relationship and Timing Are Key to Capturing Rollover Assets, LIMRA Study Finds

WINDSOR, Conn., Dec. 10, 2009—According to a LIMRA study, three out of five retirees had an existing relationship with a representative from the firm where they rolled over their money and more than 80 percent of retirees started talking about this decision before they retired.

“Competition in the rollover market is high, with the top 15 companies capturing the majority of the rollovers from retirement plans,” said Matt Drinkwater, associate managing director, Retirement Research. “It’s important that a company develop an effective rollover program that achieves high visibility and develops a relationship with the retiree before retirement.”

According to LIMRA’s Opportunities in the Rollover Market: Employee Perspective study, of the retirees who take action, two-thirds will do so within two months. Within12 months, 80 percent of all retiree assets are distributed from the plans.

According to LIMRA research, brokerage/planning firms are the leaders in capturing rollover dollars, with a rollover average of $163,000. Mutual funds and insurance companies average $128,000 and $102,000 in rollover amounts, respectively. Banks capture the lowest average rollover amounts at $87,000.

Retirees cite consolidation, convenience and the desire for more control as the top reasons for switching to a firm other than the plan provider. Personalized advice was important to about a third of retirees surveyed and only 19 percent moved their money to seek a better return on their investments.

LIMRA studies have found that plan providers retain only 18 percent of retirees’ assets that are rolled into IRAs. Plan providers can improve the probability of retaining retirees’ assets by nurturing the existing relationship they have with the retiree through strong customer service and communication materials.

LIMRA researchers found that retirees are significantly more likely to keep their money with the plan provider firm if they talk with a customer service rep of the plan provider to help them decide what do with their plan assets. Developing a pro-active retention strategy using call center reps, robust Internet tools, seminars and personalized guidance could help companies with asset retention.

Approximately $250 billion becomes available for rollover each year as people retire or terminate employment, and total IRA rollovers — including assets that become available in prior years — are expected to grow to more than $306 billion annually by 2013.

“Bottom line, companies who wish to take advantage of this growing market need to start building the relationships now,” said Drinkwater.

About LIMRA

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.