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Spectrem Sees Opportunity For Plans in Rollovers

At Deadline

High-balance retirement plan participants aren't showing much loyalty to plan providers when rolling assets into an individual retirement account-yet this could signal room for improvement for 401(k) plans and their advisers.

Just 25% of plan participants who have performed a rollover of $200,000 or more since mid-2008 rolled all or some of the funds into an account held by their existing plan provider, according to a survey by Spectrem Group. Fifty-three percent rolled over at least part of their balance to firms where they held other investments and 39% transferred funds to firms where they had an existing IRA.

Spectrem estimated the high-balance IRA rollover market, which includes both high-balance rollovers and the consolidation of IRA accounts totaling $200,000 or more, consists of more than 935,000 individuals with $365 billion of assets.

"With just one in four high-balance retirement plan participants selecting their existing plan providers at rollover time, it's clear that plan providers have an opportunity to make significant gains," said Spectrem President George H. Walper. "Further, less than two-thirds of these participants used an adviser in the process, suggesting that both providers and advisers should work to improve communications with this important group."


Wirehouses Easing Out of Cash, Fixed Income

National wirehouses are slowly moving out of cash and fixed income, which currently comprise nearly a third of their portfolios-3.9% and 25.8%, respectively-according to "Distribution Dynamics: Investment Selection," a report from RepThinkTank. This consulting alliance for the financial services industry is comprised of FUSE Research Network, Momentum Partners, The Oechsli Institute and Registered Rep magazine.

Equity funds, particularly emerging markets and international, will absorb the bulk of that money, RepThinkTank found through its survey of more than 1,000 advisers. "International equity specialists that get ahead of this transition will be positioned to gain assets," the report said.

Over the past year, wirehouse advisers' No. 1 reason for altering asset allocations was changing risk/return expectations, followed by regular rebalancing and tactical adjustments. Few brokers said they adjusted client portfolios as a result of a customer request. When using screening/selection criteria to select funds, wirehouse reps' primary objective is to find the highest-performing funds based on relative returns. They also seek out asset managers with good reputations, followed by strong fixed income characteristics and absolute returns. Interestingly, fees and expenses ranked as their fifth most important criteria, a contrast from the financial services' overall ranking of No. 1.

Asked which fund companies have the best overall positioning at their brokerage, the reps cited American Funds, followed by Franklin Templeton, PIMCO, BlackRock and Lord Abbett. In terms of specific asset classes, the leader in the domestic equity specialty class is Ivy Asset Management. For both international equity-core and fixed income-muni, the standout is Thornburg. OppenheimerFunds was cited as the breakout for international equity-emerging markets and fixed income-global/international.

The other three premier companies are Pioneer (fixed income-high yield), Nuveen Investments (fixed income-municipals) and Royce Funds (domestic equity mid/small cap).



Quote of the Week

"Our [401(k)] asset retention strategy starts when employees become participants and continues throughout their lifecycle here at Vanguard. So far, we have retained in excess of 40% of rollover assets."

- Amy Cribb

Head of Participant Experience, Vanguard