Nine percent of individual retirement account (IRA) owners transferred their account assets from one IRA to another firm’s IRA in the past 24 months, according to a survey by the LIMRA Secure Retirement Institute.
Among these investors, recommendations from trusted advisers and existing relationships with the new provider were the main drivers influencing their decisions to switch. Except among households with higher financial assets, pursuing lower-fee investments was not a top reason IRA owners considered when choosing a new provider.
The study found that 16% of IRA owners switched to another firm because it was recommended by a friend or family member. This push was stronger among men (32%) than it was among women (24%). LIMRA adds that 13% of IRA owners are about as likely to say that reputation and recommendations drew them to a specific IRA company as they are to say that they had an existing relationship with that company.
Women were more likely to cite an existing relationship as one of the reasons they switched companies, the analysis shows. A third of female IRA owners who switched said they had other accounts or products with the chosen firm compared to less than a quarter of men.
“IRA companies that focus heavily on their low-cost offerings may be missing a substantial portion of the IRA-to-IRA transfer market,” LIMRA explains. “Adviser interaction, reputation, and branding dominate owner decisions among those moving their money to a company where they do not already have accounts or products. Depending on their customer segmentation strategies, companies that do not (or cannot) compete on fees alone should highlight their brand and overall customer services, and leverage their unique strengths.”
Moreover, LIMRA points out that “younger IRA owners may try out different companies and see what works for them. Their relationship with the investment firm is not as established.” The survey found that a company’s investment choices and services were particularly important to younger IRA owners.
For the older group, targeted rollover programs may be key. LIMRA found that 10% of IRA owners at age 60 and older who switched firms said the company offered to help through every step of the transfer process.
Advisers also played a significant role for this fragment of the population. LIMRA says that among IRA owners between the ages of 55 and 70, six out of 10 said their advisers were the most influential in their asset transfer decisions. For Millennials surveyed, call centers were more important. LIMRA notes “Interestingly, 22% of these IRA owners said the decision to move their money was most influenced by the call center rep from their former IRA firm. This suggests that companies should ensure their representatives are well versed on the features offered by their company and are able to share these to clients when they call.”
The full report, “Money in Motion: Understanding the Dynamics of Rollovers, Roll-ins, and IRA Transfers (2017),” can be found at limra.com.