Can't 401(k) reps and record keepers get along?

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 this morning at the 2010 SPARK Forum conference in Palm Beach, Fla. Mr. Geli 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 yesterday 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 — with the hope those advisers will park some of those assets with the firm — while also 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?” Other ways record keepers can help strengthen their relationships with financial advisers is to help them obtain consolidated participant data, Mr. Geli said. Companies can also promote adviser referrals by placing advisers' contact information on their websites as participants search for help with their distributions. In any case, the best way to bring in rollover dollars is to build the relationship with the participant as soon as possible — preferably while the employee is still in the plan. Mr. Geli estimated that 35% of rollover opportunities are gone within a month of a participant's termination date. Within six months, that figure balloons to 81%. “Get to your participants early and often, and build strategies that include advisers,” Mr. Geli said. “More rollover opportunities exist now than ever before, and this trend is expected to continue into the future.”