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If you were to survey most financial advisors and ask them who they believe is their toughest competitor in the rollover market you might get some interesting answers.
Most advisors believe a local top producer team, wirehouse, or local registered investment advisor is cleaning up. Unfortunately, I am here to tell you the biggest obstacle advisors face in the rollover market is the recordkeepers themselves.
Fidelity Investments and Vanguard control 80 % of the 401k plans for Fortune 500 companies. Each firm literally controls hundreds of billions of dollars in pension and rollovers. Executives at Fidelity and Vanguard desperately do not want to lose the income stream they have been getting from their 401k participants. They are cross selling managed money, brokerage accounts, annuities, etc to every one of these participants.
The belief system and culture of the founders and employees at these firms could not be more polar opposite than those at full-service advisors. Outside advisors are likely to be branded as super expensive and an unnecessary expense. After all, why pay for something you can get for free right?
We can provide a financial plan, retirement income plan, portfolio review, etc.
And charge you nothing
Loaded fundswhat a complete waste
You are actually paying a fee for a plan, let us do it for free.
We can do the exact same thing as your advisor and not charge you
This is what Fidelity and Vanguard will be telling your customers and prospects. How will you respond? The Wall Street Journal did a survey in 2006 and named Fidelity and Vanguard the most familiar and trusted brands in the industry. A copy in this chart can be found in a booklet produced by Vanguard Financial Advisor Services
Fidelity and Vanguard I believe are retaining at least half of the assets when clients retire. This means every other firm is splitting leftovers. They do even better the higher the balance.
Fidelity and Vanguard have a number of advantages in the rollover space
They know exactly when clients retire and change jobs. This allows them to market to these people aggressively at the perfect time.
They have set up special departments which specialize is the rollover experience. If you do one thing all day long you are going to know the market much better than most outside advisors
They are perceived as the low cost trusted provider
The training many advisors get from vendors and back office personnel is not sufficient in my opinion. To help advisors win the rollover war, I have created some coaching material which gives them the information they need to compete successfully in this important market.
I have a few suggestions for advisors wanting to increase their rollover business.
1. Using a product vs. a consultative sale Instead of going through the 4 options with a prospect and suggesting a solution, I recommend advisors use a 2 step approach when dealing with potential rollovers.
Step #1 Learn everything you can about the customers existing 401k AND the plan itself. By knowing what questions to ask and what to look for you can uncover several drawbacks to the prospect keeping the money in their 401k. Many clients are perfectly happy leaving their money where it is. Therefore, you must give them good reasons why they should change course.
Step #2 After you have learned everything you can, present your recommendations. This 2 step consultative process will help you come across like a true professional and will result in a greater rollover batting average.
2. Never ever let your customers contact the recordkeeper without you on the phone. This saves your customers the rollover sales pitch
3. Be more proactive in learning about your clients 401k and benefit plans. I have found the firms that do the most comprehensive planning are often the best at obtaining rollovers as well.
4. Have an organized approach that you use with clients who are retiring.
I also suggest advisors track the pros/cons of the 401ks of local employers in their area. This will help your staff be more knowledgeable and come across as more of a professional. Many of our clients are perfect happy leaving their money in where it is.
Therefore, you need to have a solid value proposition for them to change direction.
For advisors to succeed in this competitive market, they need to be on the top of their game. The rollover war has begun. Financial Advisors, you have been warned.