Most Plan DC Participants Who Rollover Assets Into IRA Seek Advice

WINDSOR, Conn., May 15, 2017 - A new LIMRA Secure Retirement Institute Study finds 8 in 10 of defined contribution (DC) plan participants who roll their assets into an individual retirement account (IRA) speak to someone before performing the transaction.

According to Institute research, DC plan participants roll over more than $400 billion annually.  The study, Money in Motion: Understanding the Dynamics of Rollovers, Roll-ins, and IRA Transfers, explores the attitudes and behaviors of those who have moved their qualified assets from one account to another.

“It is clear that the decision to move their assets is an important decision and as such, most people look to another person for guidance or validation of their decision,” noted Matthew Drinkwater, PhD., assistant vice president, LIMRA Secure Retirement Institute. “The majority (58 percent) of these people rely on a financial professional when making this decision. Since so many of these transactions involve financial professionals, any changes to advisors’ business practices based on the Department of Labor’s fiduciary rule could have a significant impact on the direction of the rollover market.”

Why they move their assets

The top reasons plan participants gave for rolling over their DC assets into an IRA are:

1. To gain more control over their assets;
2. Access better investment options to achieve better returns; and
3. To consolidate their portfolio.

“This is consistent with prior studies,” noted Drinkwater.  “Among all workers age 40-75, about 11 percent rolled money from their DC plan into a traditional IRA within the past two years.  People age 60-64 with income of $100,000 - $249,999, were most likely to move their DC plan assets into an IRA.”

Why they don’t choose to roll to their employer’s plan provider

Consolidation and convenience are the most common reasons given for moving their assets to another retail IRA provider. One third of participants said they had other accounts with the retail provider they had chosen to rollover their DC assets and another third say it is more convenient to do business with their chosen IRA provider. This motivation is more pronounced with those who have more than $1 million in household assets as nearly half (46 percent) cite consolidation as their reason to move their assets.

Relationships matter

Whether or not the plan participant keeps their assets with the plan provider or moves it to another retail IRA provider often depends on the strength of the relationship with the plan provider. Only 11 percent of participants said they had a strong relationship with their plan provider before leaving their employer.

The study finds that 54 percent of those rolling over assets start thinking about the decisions 90 days or more before the leave their employer. In general, plan providers do not know in advance that a participant is leaving his or her employer; therefore, it is important that plan providers work on ways to develop and strengthen their relationship with participants. Institute research finds retention rates are highest among younger participants, wealthier participants, and participants who had formed a strong relationship with their plan providers before leaving their employers.

The factors influence participants’ choice of provider

The top three factors participants considered when considering a company were reputation (47 percent), recommendation by friends, family or co-workers (33 percent) and relationship—when a participant already has an account or products with the company (28 percent).

To view a list of companies that captured the most rollovers, please see Companies that captured the highest market share of participants rolling over assets from DC plan to IRA