IRAs Remain Largest Pot of Retirement Assets

November 20, 2012 · Filed under Automatic IRA Rollovers, Financial Services, Retirement Research · Tagged , , , , , ,

IRA assets encompassed 28% of all retirement assets at of the end of the second ICI Logoquarter, according to a November 2012 Investment Company Institute (ICI) research report.  The report also noted that assets in IRAs at the end of June 2012 totaled more than $5.1 trillion, a slight drop from $5.2 trillion at the end of the first quarter of 2012, but remain the largest single pot of retirement funds. The entire retirement marketplace was valued at $18.5 trillion.

This report confirms that the largest growth in the retirement industry continues to be in the IRA marketplace.  At the end of 2011, according to the ICI report, IRAs were 27% of the entire retirement plan marketplace. The growth to the current 28% level can be attributed to not only high unemployment resulting from layoffs, but also the fact that baby boomers are retiring.

According to the Pew Research Center, on January 1, 2011 the oldest baby boomers began to reach age 65. At that time, the number of individuals per day reaching age 65 was approximately 10,000. That same Pew study also showed that those 65-and-older, a group which currently constitutes 13% of the United States’ population, will represent 18% by 2030.

Also, at the SPARK Conference in November, Bob Wuelfing of RG Wuelfing & Associates reported that net cash flows into IRAs from 2002 through 2011 were nearly double the cash flows into defined contributions plans ($1.55 trillion compared to $833 Billion). 

This means that the IRA business will continue to grow. So, organizations that are not focused on this business are missing out on revenue, particularly organizations that are involved in processing or servicing retirement plans. Having an IRA strategy is simply good business and can help organizations replace revenue currently lost as a result of rollover distributions. Firms that make IRAs a focal part of their businesses can utilize the power of the IRA to not only replace revenue, but enhance it as well.

Down the road, de-accumulation of IRA assets will play a larger role in retirement strategy, but that is a topic for another blog and another day.

Happy Thanksgiving everyone!

Lowell Smith | President
InspiraFS

Leave a comment »

Online Investment Advice Lacking for IRAs

November 13, 2012 · Filed under Automatic IRA Rollovers, Financial Services, Investment Advice · Tagged , , , , ,

During my nearly 30 years of retirement and financial services experience, I have come to the conclusion that there are 4 types of investors: Do-it-Yourselfers, Validators, Advice Seekers and Do-Nothings.

In the Individual Retirement Account (IRA) world, these four personalities act predictably:

  • Do-It-Yourselfers generally open brokerage accounts
  • The Validators want someone to essentially double check their decisions in whatever investment vehicle they choose
  • The Advice Seekers want to have someone manage the accounts for them
  • The Do-Nothings never open an IRA unless they are automatically rolled into one

Do-it-Yourselfers and Do-Nothings can easily find a solution.  The problem, however, is that the Validators and the Advice Seekers in particular may have difficulty getting the service they desire.

Why do the Validators and Advice Seekers have so much trouble?  One reason is that many Financial Advisors will only talk to individuals above a specific dollar threshold.  On the Advisor side that tends to be around $100,000 while on the Bank Trust Department side that minimum number is closer to $1,000,000.

Secondly, even if a lower-balance accountholder can actually talk to someone, most firms will not offer true advice; only education and guidance. That may work to a degree for the Validators, but not for the Advice Seekers.

Another reason could be that the questionnaires and tools that are readily available to investors online don’t do enough. While those resources may help you make decisions, they don’t typically help evaluate options fund-by-fund, but rather address what asset classes you might want to invest in.  And while retirement-plan participants may receive online advice in their plans and periodic enrollment meetings, that isn’t the case in IRAs.

So what’s my point?  Well, I believe this new GuidedChoice IRA will solve the Advice Seekers’ dilemma and potentially address some of the Validators’ needs.  Current retirement plan participants who utilize and like the GuidedChoice advice engine will be able to seamlessly rollover their old 401(k) funds into an IRA created and managed by GuidedChoice.

Even individual looking for an online and call center supported advice provider can sign-up for a GuidedChoice IRA.  This will be a unique offering in the marketplace and fills a void because the advice is available to any account size.

It will be interesting to see the progress of this new and inventive IRA product.

–Lowell Smith
President | InspiraFS

Leave a comment »

InspiraFS enters strategic partnership with Benefit Trust Company

September 24, 2012 · Filed under Uncategorized · Tagged , , , , ,

Inspira, the retirement industry’s low-cost IRA provider, has signed an agreement with Benefit Trust Company that gives Inspira another Custodial and Trading platform to offer to its clients. The two companies are also planning to mutually market Inspira’s IRA rollover services to the Benefit Trust Company’s existing clients and prospects.

Benefit Trust Company, a privately owned, non-depository trust company based in Overland Park, Kansas, joins Mid Atlantic Trust Company and MG Trust as IRA custodians on Inspira’s platform. The partnership with Inspira allows Benefit Trust Company to further expand its already robust suite of IRA services for its current partners while also providing another attractive service offering to prospective clients.

“This partnership is a win-win for us,” said Bradley Scafe, President of Benefit Trust Company. “We believe that by utilizing an up-and-coming platform like Inspira’s, we’ll be able to retain assets that often transfer out of our platform as a result of automatic and voluntary IRA rollovers, enabling us to maximize our current business and increase our marketability going forward.”

About Inspira: Based in Pittsburgh, PA, Inspira was founded in 2002 and provides bundled providers, recordkeepers, third party administrators, financial advisors, affinity groups, broker dealers, CPAs and payroll companies with turnkey, cost-eliminating IRA solutions.

For more information about Inspira, contact:

Mark Fleckenstein
Director of Marketing
markf@inspirafs.com
412-440-6991

About Benefit Trust Company:

Benefit Trust Company is a privately held, independent trust company, chartered as a non-depository trust company in the state of Kansas, with assets in excess of $14 billion under trust and custody. Benefit Trust Company has administrative responsibilities for $45 billion in daily settlements and establishes daily net asset values in excess of $4 billion.

Benefit Trust responds to the need for customized solutions to meet the demands of highly sophisticated Plan Sponsors, Investment Advisors and Record-keepers / TPAs.  Our full-service team approach creates a strong, responsive partnership with our clients and is the cornerstone of Benefit Trust.

For more information about Benefit Trust Company, contact:

Michael A. Ravnsborg
Benefit Trust Company
mravnsborg@benefittrust.com
913-663-0736

Leave a comment »

Inspira Joins WMSI’s Automatic IRA Rollover Program

August 16, 2012 · Filed under Automatic IRA Rollovers · Tagged , , , , , , , , , , , , ,

Wealth Management Systems, Inc. (WMSI) announced today that Inspira is being offered as an IRA Choice within its Automatic Rollover Program, expanding options for record keepers and plan sponsors managing rollover plan assets for missing and nonresponsive participants.  

WMSI, the leading provider of rollover services within the financial services industry,  and Inspira, the industry’s premier provider of independent IRA services, announced today that Inspira’s Total IRA™ is currently being offered through WMSI’s Automatic IRA Rollover Program. The Total IRA™ option features a competitive guaranteed return in excess of current money market rates which, when offered in combination with WMSI’s expert administration and automated account processing capabilities, will be a winning combination for both record keepers and plan sponsors.

“Total IRATM not only offers a default investment that enables even small involuntary accountholders to continue to grow assets but also gives those accountholders the opportunity to diversify that original investment into over 30 mutual funds screened and monitored by an independent investment advisor, ” said Inspira founder Lowell Smith Jr. “Our goal is to focus on the needs of these low balance accountholders, giving plan fiduciaries the ability to feel comfortable in their fiduciary decision to use Total IRATM as their Automatic IRA Rollover Solution.”

For WMSI, the partnership expands IRA choices for clients and prospects and provides access to a unique default fund investment.

“Managing the accounts of terminated employees can be a real administrative burden – one that increases plan costs and potential liabilities for plan sponsors,” stated John Geli, WMSI’s Chief Executive Officer. “Our automatic rollover program is designed to alleviate these burdens by automating administration and account opening processes and by offering a choice of IRA options. Through our partnership with Inspira, our clients gain access to an additional, unique automatic rollover option that we can offer to our rapidly expanding client-base.”

About Inspira

Based in Pittsburgh, PA, Inspira was founded in 2002 and provides bundled providers, recordkeepers, third party administrators, financial advisors, affinity groups, broker dealers, CPAs and payroll companies with turnkey, cost-eliminating IRA solutions. Total IRATM is a registered trademark of Inspira.

For more information about Inspira, contact:
Mark Fleckenstein
Director of Marketing
InspiraFS, Inc.
markf@inspirafs.com
412-440-6991

About Wealth Management Systems, Inc. (WMSI)

Wealth Management Systems Inc. is the leading provider of technology based rollover services within the financial services industry. WMSI’s platform significantly streamlines the rollover process for participants while addressing the unique needs of IRA Providers, Financial Advisors, TPAs, and Plan Sponsors. Additional information about WMSI is available at www.wealthmsi.com.

For more information about WMSI, contact:
Jacqueline Rynn
Chief Marketing Officer
Wealth Management Systems Inc. (WMSI)
jrynn@wealthmsi.com
203-245-4254

Leave a comment »

What Plan Sponsors can expect from Fee Disclosure…

June 28, 2012 · Filed under 408(b)(2) Fee Disclosure, Uncategorized · Tagged , , , , , ,

This piece from Christopher Carosa over at Fiduciary News looks at how several firms intend to handle their Disclosures.

I found these two paragraphs particularly interesting:

“In terms of 408(b)(2) fee disclosure, “the plan sponsor should expect a clear disclosure on all of the compensation received by the Advisor or its affiliate, for the services provided to the plan. This should include direct and indirect compensation,” says Carlos Panksep, managing director of CEFEX. Panksep adds, “The clearest way to provide the disclosures is in a Service Agreement which is signed by both parties. The Service Agreement should describe all of the services provided by the Advisor, its compensation, and its fiduciary status. If there is indirect compensation, the agreement should identify the payer and describe the arrangement for compensation. The plan sponsor should expect an explanation of compensation which is determined on a transaction basis or charged directly against the plan’s investments and reflected in the investment’s net value. Astute Advisers should also disclose any potential conflicts of interest which may be related to the plan’s investments.

“Famed ERISA attorney Fred Reish has already spoken about his primary concern with the DOL’s new Rule (see “New 408(b)(2) “Guide”: Not Necessarily What 401k Plan Sponsors Hoped,” FiduciaryNews.com May 8, 2012) . His biggest fear is 401k plan sponsors will be the recipients of a core dump of information containing so much – relevant and irrelevant – data it will be nearly impossible for them to understand. Already, as the same article indicates, we have seen some fee disclosure examples, particularly from bundled service providers, exceeding a dozen pages. This information overload strategy may leave room for service providers who provide simpler, easy-to-understand formats some ammunition as they market against providers offering reams of unreadable text and tables.”

Should be an interesting year coming up in the Retirement Industry. How is your firm planning to handle Disclosure?

Leave a comment »

The Revised Definition of Fiduciary: Why the Rich get Richer

July 29, 2011 · Filed under Uncategorized

The battle lines have been drawn.  The opinions of industry insiders expressed.  And now we wait to see whether or not the U.S. Department of Labor and the Employee Benefits Security Administration (DOL in particular) will change the definition of who is a fiduciary to an employee benefit plan.  In regards at least to retirement plans, the fact is that, if unaltered, the largest players in the retirement plan marketplace will be the greatest beneficiaries.  In essence, the rich will get richer. 

The most significant impact of the definition change is that individuals who are simply providing investment products to the retirement plan and collecting upfront finder’s fees and/or ongoing commissions will become fiduciaries just like the Register Investment Advisors that always held themselves out as fiduciaries.  Theoretically, now all individuals selling assets to retirement plan sponsors will be on the same playing field, a field that involves potential prohibited transactions.  The goal seems to be to have all plans billed on a fixed percentage or flat fee basis so that assets offered in the plan will not change the compensation of the advisor.  Seems like a noble cause.  However, since the mutual fund companies, insurance companies or other product providers are not fiduciaries, they have greater opportunity to capture more revenue and assets without fear of engaging in a prohibited transaction – essentially they now have the IRA playing field, the largest pool of assets in the market, tilted to their advantage.

It is currently problematic for a fiduciary advisor to offer an IRA to participants of a plan, but a broker can offer an IRA with no trepidation.  That always seemed unfair because the role of an advisor is to offer investment products that are in the best interest of clients, even in the IRA world, while commissioned-based advisors (formerly referred to as brokers) could openly prospect plan participants and offer high-commission products with impunity (not that they all do that).  Under the new regulations, both have to deal with the potential prohibited transaction issues regarding soliciting IRAs from plan sponsors.  However, the asset providers such as Charles Schwab, Fidelity, Vanguard and others who often also record keep many of these plans, have no such restrictions.  

For years, the industry has touted the need for plans to pick investment options from multiple providers knowing that some asset providers have funds that under- and over-perform the market.   If the new regulations are enacted, those big providers who likely will offer rollover products only comprised of their investments will gain a greater share of the market.  This is probably an unintended consequence.  But if I were a mega-player in this industry, I would be rooting for the DOL to issue the new definition of fiduciary as originally proposed.

Leave a comment »