401(k) reps, record keepers should team up

Instead of fighting with advisers over the estimated $1.5 trillion in 401(k) rollover assets, record keepers may want to work with them.

“Many advisers are now seeking ways to generate revenue, and [record keepers] have to communicate with them early and deliver excellent services,” John Geli, chief executive of Wealth Management Systems Inc., said at the 2010 SPARK Forum.

He estimated that more than $1.5 trillion in assets will roll out of 401(k) plans and other defined-contribution plans in the next five years, much of that into the individual retirement account market, which is projected to reach $7 trillion by 2015.

Advisers and record keepers often compete for control of those rollover assets when clients exit plans. Record keepers want to hold on to the assets, while advisers want direct control and the opportunity to place those assets elsewhere.

But the relationship between the two camps doesn’t need to be so combative, Mr. Geli said. For example, record keepers can reach out to advisers to determine the types of retirement accounts they target for rollover opportunities.

A panel of three plan advisers at the forum agreed that they aim for 401(k) plan participant accounts with at least $250,000.

Record keepers can pass along to advisers those bigger participant accounts in the form of referrals while retaining control of smaller accounts.

“Are we [record keepers] working with those advisers to say that when they set their asset threshold, we’ll pass them the referrals?” asked Mr. Geli. “Half of the advisers aren’t looking at providers to provide them with leads or referrals: So is that a value-add to your adviser products?”

E-mail Darla Mercado at [email protected].