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Having seen the rollover market from both an advisor and recordkeeper point of view, I can promise you that the biggest obstacle advisors face when dealing with larger employers are the recordkeepers themselves. Fidelity and Vanguard control over 75% of the 401k Plans for Fortune 1000 employers and are doing their very best to play keep away from every advisor in the industry.
After all, Fidelity and Vanguard have a lot to lose. They have several hundred BILLION dollars at stake of leaving their firms and want to retain the revenue stream from the assets. Therefore, they are cross selling every product in their arsenal and as well as giving advice to customers when they retire. Fidelity and Vanguard have 2 of the most trusted brands in the financial industry so advisors cannot make any mistakes to compete against them successfully. Here are the top 5 mistakes I have seen advisors make: 1. Underestimate the no-load recrodkeepers – They sometimes keep up to 80% of the money when clients finally roll their retirement dollars out. This means that EVERY other firm in the industry is sharing what’s left over. Most advisors do not realize this and don’t plan accordingly. 2. Many advisors don’t understand how different rollovers are processed - . For example, I have seen some advisors send in internal documents to initiate a rollover. This never works and results in the advisor looking unprofessional. The no-load firms also use this opportunity to cross sell their services as well. Advisors need to know exactly what to do and say when they call the no-loaders because those firms are not going to help them. Having a game plan is crucial. 3. Using a product vs. a consultative sale – Instead of going through the “4 options” with a prospect and suggesting a product, 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.” 4. Not properly understanding special tax treatments. – There are several special tax treatments which you must absolutely know cold if you are to succeed in the rollover market. I personally believe advisors rely WAY too much on rule 72T without researching other ways clients can access money without confining themselves to the rules of 72T. For example, after-tax money can often be used instead of 72T. This is another reason why properly researching the prospects account and the plan itself are so important. 5. Not acting soon enough. – In war, which is what the rollover space is, I would much rather face an enemy that did not know I was coming than one who was on full alert. This means that you need to start planting rollover seeds and helping clients well before they retire. If you wait until your clients retire, the no-load firms will be on full alert and be a much bigger obstacle. Scott Brooks, MBA, CFP® helps advisors attract and convert rollover business. He is the creator of the Rollover Coach IRA Training program which is a 3 hour Audio CD based training program which gives advisors everything they need to know to take their rollover business to the next level. His material is unique because he has spent 5 years as a retail financial advisor but also spent 4.5 years working at Fidelity Investments where he specialized in the rollover market for Fortune 1000 employers. Having seen both sides of the rollover game, he has the knowledge and experience to take advisors business to the next level. A sample of his Rollover Coach training is available at http://www.rollovercoach.com |
