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The Way to a Retiree's Heart is His Adviser: Fund Firms Partner With Broker/Dealers to Train Advisers

CAMBRIDGE, Mass.-Retirees and their broker/dealers have one thing in common: they both want advice.

Fund companies have responded by creating programs to help broker/dealers and their advisers, who are accustomed to helping their clients accumulate assets, learn what products are most helpful as investors begin spending those savings.

"Advisers have too much coming at them, but not enough explanation," said Marcia Mantell, a principal at Mantell Consulting in Needham, Mass., at Financial Research Associates' IRA Rollover Retirement Summit here last month.

Yet advisers are critical to companies looking for their share of the rollover market.

In a survey of 3,700 investors who had the opportunity to roll over defined contribution savings, 30% turn to an adviser. And the bigger the balance, the more likely investors were to seek professional help. Among those with balances between $50,000 and $99,999, 35% sought advisers' help, while 46% of those with between $100,000 and $249,999 did so. More than half, or 56%, of those with one-quarter-million or more, consulted an adviser.

More importantly, while the average affluent pre-retiree relies on four advisers, by the time they hit retirement, most consolidate their assets under the aegis of one.

"With so much money out there up for grabs, it's a very, very competitive market," said Bill Collins, national sales manager for small plans and IRAs at Merrill Lynch in New York.

Little more than a decade ago, annual net flows to IRAs were $40 billion. Today, they attract $150 billion, far outpacing flows to employer-sponsored defined contribution plans.

For years, wirehouses and independent broker/dealers attracted the majority of rollover assets, but the increased attention to the retirement market has caused other sectors to ramp up their efforts.

Broker/dealers are trying to differentiate themselves and their products by arming advisers that use them with tools that often go beyond product orientation.

Dreyfus' "New Beginnings" program focuses on building trust, both between the company and advisers, and, in turn, those advisers and their clients. "You can't stick a fund fact sheet under someone's nose and think it's really going to work," said Christine Russell, who directs the New York company's retirement rollover efforts.

Dreyfus chose three large firms representing 40,000 advisers with which to work to launch the program. To generate trust, Dreyfus hired outside consultant Convergent Retirement Plan Solutions of Brainerd Minn., to help develop a program that could teach advisers about the psychology of retirement, estate planning, insurance and withdrawal strategies. Dreyfus, like Columbia Management, also offers a toll-free hotline staffed by retirement specialists. Brokers are invited to call with technical questions about products, or to hash out client strategies.

Dreyfus also shares sales statistics with broker/dealer advisers and asks for feedback on the program. Responding to the feedback and adapting the program accordingly is crucial, Russell said. Likewise, fund companies cannot create a one-size-fits-all approach. Each broker/dealer has its own culture, its own clients and its own style. Dreyfus tweaks for each of the three participating wirehouses.

Like Dreyfus and Merrill Lynch, Federated Investors of Boston offers broker/dealer advisers tools, including model retirement portfolios, conference calls with product managers and onsite presentations. Federated also produces a newsletter, which includes tax management tips, prospecting ideas and profiles of successful advisers.

"I was not a big fan of the newsletter idea, to be honest," said Federated Senior Marketing Manager Lynn Kotys. She believed producing the document would be a costly waste of time, since she was unsure busy advisers would find time to read it. But she was wrong. "Advisers loved it," she said. It soon became a valuable type of best-practices manual, she said.

Each of these programs requires commitment, on behalf of the fund companies that devise them and of the broker/dealer firm to ensure it is effectively rolled out to advisers, speakers said.

"The home office plays a huge role in the success of the project," Kotys said.

Fund companies must understand the broker/dealers' organizational structure thoroughly, and fit the program to it, said Russell, who noted the significant cost of the Dreyfus effort.

"You really have to decide whether to jump in or limp in," she said. Dreyfus took a year to develop New Beginnings, based on research provided by McKinsey Consulting, and then chose its three target firms and took the plunge, she said.

Still, she said, the work is never done. "The biggest challenge is differentiation," Russell said. "The markets move so quickly, and you've got to keep the message fresh."

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