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IRA Rollovers Go High Tech

By making it easier for investors to roll over assets from qualified employee benefit plans to IRAs, two service providers are giving financial service providers a better shot at capturing those often elusive assets.

Wealth Management Systems of Holgate, N.J., and Rollover Systems of Charlotte, N.C., have been busily inking deals with investment companies anxious to retain those assets or find a new way to showcase their funds to a whole new audience of job-hopping employees.

Wealth Management, a consulting firm which began in 2000 by building Web sites for third-party retirement plan administrators, saw the opportunity to include fully automated rollover tools, said Jude Metcalf, CEO of the firm. So, the firm built Rollover Solutions Network for plan recordkeepers and investment advisors' own Web sites. The online forms take investors only 20 minutes to fill out, with the rollover itself taking about four days, as opposed to the 43-day, paper-intensive process before.

Wealth Management runs the Web technology for clients, although it can link seamlessly to firms' proprietary, back-office systems, including call centers and recordkeeping. Wealth Management can track conversion rates and participant behavior and report those back to clients.

Another novel feature clients can include is the IRA Marketplace. Because many investors inevitably decline to roll over their 401(k) assets to an IRA at one of the investment firms in the plan, this functionality will allow them to shop among other designated firms' rollover product offerings. Should the employee choose another firm's IRA, the receiving firm would pay a finder's fee to the introducing firm. Wealth Management touts that this creates a revenue stream for those inevitable "lost cause" rollovers.

As for the cost, IRA providers pay Wealth Management $125 for each rollover, significantly less than what it costs them to attract new money, Metcalf added. Recordkeepers also pay the firm through revenue sharing.

Within the past 12 months, Wealth Management has attracted some heavy- hitting clients, including Ameritrade, BISYS, ExpertPlan, Merrill Lynch and E*Trade. T. Rowe Price, which has been a pioneer of easing the rollover process, will be implementing the Rollover Solutions Network this spring. According to Metcalf, six other new clients are also on tap.

Under a September 2004 amendment to the Economic Growth and Tax Relief Reconciliation Act of 2001, if an employee with between $1,000 and $5,000 in their 401(k) misses their rollover deadlines, beginning March 28, 2005, the employer must automatically roll over their money for them. E*Trade decided last month to sign on with Wealth Management to take advantage of the new demand that this law will create.

Rollover Systems' RolloverMarket technology is similar in its intent, although it works a bit differently, and paper-based forms are still a must. The firm is marketing its rollover technology to IRA providers, recordkeepers, employers, human resource consulting firms and financial advisers, said CEO Reginald Bowser. Rollover Systems is about to sign its first two plan administrator clients, who will private label the technology.

Rollover Systems can cull account information from data feeds from third-party recordkeepers and plan sponsors so that it can contact employees when they have either left or retired from a company, giving them a password to log onto Based upon a short profile the investor is asked to fill out, the Web site will offer them a choice of five possible IRA rollover product offerings. Once they have chosen their product provider, Rollover Systems will mail them the required documents.

For employers, there is a one-time set-up fee ranging from $1,000 to $7,000 depending on the number of employees in the firm. The company also charges each financial service firm $2 for each offer it presents and $50 for each successful rollover.

For their part, financial services firms can determine what types of investors they will make offers to by using filters, such as for those with $100,000 or more. They also have the ability to log onto a secured site to add or change product offerings in real time.

Rollover Systems has also attracted some major players, including American Century, Charles Schwab, Fidelity, JPMorgan Chase, TD Waterhouse, First Horizon, Neuberger Berman and New York Life. RolloverMarket is also now included in ResumeMaker software.

Those ready-to-rock job changers are precisely who American Century wants to reach, said Steve McClain, vice president of direct marketing at the firm. Although American Century only went live on the RolloverMarket Web site two weeks ago, the firm is hopeful it will reach the right people at exactly the right time.

Certainly, efforts to tap the pool of potential IRA rollover assets are heating up. Financial Research Corp. of Boston projects that between last year and the end of this decade, $2.1 trillion will flow out of overall employee-benefit plans. And with more plan sponsors using automatic contribution rate increases, the IRA rollover stakes are getting even higher.