Study looks at top reasons consumers move investment dollars

By Ayo Mseka

Three of the top reasons U.S. consumers move their money between financial services companies are simplifying their finances, getting more involved, and consolidating for better planning, according to a research report by Hearts & Wallets.

Consolidation is the most frequently offered reason for money movement transactions today, said Laura Varas, CEO and founder of Hearts &Wallets. Starting a new relationship with a financial services firm – referred to as "trial" in the study – is up year over year, according to Varas.

More money movement transactions go to retail financial services firms where the customer has an existing relationship, Varas said. In contrast, prior to the pandemic, more transactions went to “trial.” which funding new accounts with new deposits is the most common type of transaction today. When “trial” occurs, she said, it is most likely to be new accounts that are funded with new deposits.

Survey highlights

According to Varas, other survey highlights include:

Transfers now represent as much money movement volume in transaction terms as do rollovers.
When consumers start moving money, they usually do more than one transaction.
“To simplify my finances” is the No. 1 overall factor that motivates money movement. Smaller transactions are more likely to be motivated by reasons like “simplify my finances” and “get more involved myself.” Large transactions (those of $250,000-plus) are motivated by better “planning,” “service,” and “results,” in addition to “simplify.” “Specific purpose” is a major motivator of “trial” transactions,” Varas said.

The survey noted that motivators are important, given the fact that transactions can take time. Thirty-five percent of rollovers of $500,000 or more can take over two years. Transfers tend to take less time, with the vast majority of them taking fewer than six months.

“Motivations can be harnessed to spur action for money movement, just as motivations can encourage consumers to take action on exercise or weight-loss goals,” added Varas. “Simplify can mean different things, depending on the type of account and customer. The competitive landscape within money movement is changing, and firms should understand where the money is going and why.”

Serving your clients

Armed with this knowledge of some of the reasons consumers move their money, financial advisors and planners can take several steps to better serve their clients and grow their practices.

Among the steps suggested by Varas:

Big firms should take a consolidation approach. “Tailor rep scripts and consolidation promotions,” she said.
Use new deposits to attract new customers. New deposits may be easier to acquire than rollovers or transfers. Even though they are often small, these deposits will offer a foothold to grow the relationship.
Use “simplify” as an overarching theme to drive money movement in and prevent money movement out. “But recognize that the meaning of simplify varies for different account types and types of customers,” she said.
Craft calls to action for trial around specific purposes, linking offers to specific goals.
Transfers will likely represent a key opportunity going forward, as more rollover transactions are being retained in IRAs that are affiliated with the record-keeper than at any time since tracking began in 2010.
Put as much emphasis on transfer of assets as (TOAs) as on rollovers. “Make transfer processes engaging and easy,” Varas said.

The research report, Money Movement 2022: Competitive Trends in Rollover, Transfers of Assets & Trial, examines the movement of money by U.S. households, including rollovers, transfers of assets (TOAs) and funding new accounts with new deposits.

The analysis is drawn from the latest fielding of the Investor Quantitative™ (IQ) Database, which was conducted from Aug. 15 to Sept. 15, 2022, with 5,993 participants, along with trends from the full IQ Database, which includes 70,000 U.S. households dating back to 2010.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].