Retirement plan providers lose assets to competitors 90% of the time when their clients retire or change employers, a study has found.
That can be costly to the mutual fund, insurance, and banking companies that lose out: The average rollover from 401(k)s and similar tax-advantaged retirement plans into individual retirement accounts is $64,000, according to the study by Spectrem Group, San Francisco.
To retain those assets, the plan providers should position themselves as financial advisers well before the time of the rollover, the study says. That means making contact with the plan participants often and developing marketing materials.
"Every company is trying to figure out how to become an advice-giver," said Catherine S. McBreen, a retirement services expert at Spectrem.
Fund companies, insurers, and banks should also make rollovers into their own products easier, the study said.
Defined contribution plans housed $1.5 trillion at the end of 1997, with 401(k) plans accounting for most of that. More than 25 million individuals now participate in 401(k) plans.
Assets in 401(k)s are expected to grow 14.2% a year through 2003, according to Spectrem Group.