According to research recently completed by Spectrem Group, 86 percent of investors have an IRA account and more than a quarter of investors own 3 or more IRA accounts. Only 36 percent of investors indicate, however, that all of their IRAs are held at one financial institution. In fact, 39 percent indicate their IRAs are held at two financial organizations while almost a quarter of individuals have IRA accounts at 3 or more financial institutions.
Financial advisors should identify IRA accounts as a potential opportunity to gather assets and to gain greater loyalty with their investors. In Spectrem’s report Capturing IRA Consolidations and Rollovers, the primary reason that investors had not consolidated their IRAs is because they “don’t like to put all of my eggs in one basket”(38%). The second most common reason is “too much of a hassle”(19%).
Financial advisors should address these challenges as follows:
1. Explain to your clients that to ensure that their portfolio is properly allocated across multiple asset classes, it’s important to understand how their IRA assets are invested. While these may not cause the investor to rollover his or her assets immediately, it will become part of a larger discussion about their overall financial picture.
2. Make the rollover or consolidation process easy. Many advisory firms do all of the legwork for the investor. For investors who believe the administrative tasks are a hassle, having their assets with one provider will make it easier for them in the future.
3. Identify the IRA assets as critical to the financial planning process. Investors today believe that financial planning is part of their overall financial picture. They are more loyal to advisors that provide them with a plan and ultimately they allocate more assets to the advisor who has created their financial plan.
For many households, IRA assets represent the largest part of their retirement savings. Identifying all potential assets and working with investors to ensure their IRAs are consolidated, if appropriate, is important for the long-term relationship.