The data is readily available. And there’s a new way to use it to capture millions of investment dollars and increase your firm’s AUM.
It’s really very simple: Right now, when many people change jobs, they often do not roll over the funds from their previous employers’ 401(k) into a new IRA. Instead, the money just sits there in the old 401(k).
Wouldn’t it be advantageous, therefore, to find out which of your clients had 401(k) funds that were still in former employers’ plans, and still under management with a different advisor? Imagine if you could pinpoint these clients and accounts. Think of how you could increase AUM if you helped your clients take the simple step of moving their money to an IRA on which you provided advice and management.
Depending on how many of your clients have yet to move their funds, we could be talking millions of dollars in AUM.
It’s very easy when you use account aggregation data.
If you’re using the services of a data aggregation provider, it’s a no-brainer to have the aggregator build in an alert system that notifies you when a client’s 401(k) has received no contributions in the past 30 days, or 45 days, or whatever time period you designate.
Generally, there are two reasons for this account inactivity. The first is hardship. For whatever reason, the contributor is not able to find the funds to put into the 401(k). The second reason—the more common one—is precisely what I alluded to before. The employee is no longer employed at their former company.
The rationale for this inaction is overwhelmingly “I just haven’t gotten around to it.” It’s a case of employees having a lot going on in their lives, and simply losing sight of the necessity to perform this simple task. And there’s always just plain inertia. We’ve conducted informal polls that confirm the prevalence of these “left behind” 401(k) accounts—perhaps you’ve seen this phenomenon in your professional travels.
The monthly alert: Good for your client, good for your firm.
Once you received your alert that that the 401(k) was inactive—and you discovered it was with your client’s former employer’s plan—you could quickly facilitate the transfer to an IRA under your management. That’s good for your firm, since you increase AUM. And it’s good for your clients, since they’re getting attentive service on their investments, instead of neglect.
It really is a case of leveraging the data that an aggregator like ByAllAccounts can give you, and using it to your advantage. Or, to put it another way, it’s a way we make our data actionable for you.
Simple idea—huge ramifications. Lots of dollars are at stake.
You may also be interested in:
3 Ways Account Aggregation Can Help Your Practice in 2014 (Blog post by Cynthia Stephens, VP of Marketing, ByAllAccounts)
Get the Facts on Account Aggregation (Complimentary Collection)
The Data Automation Imperative: Tips for Keeping Management, Compliance, and Operations in the Know (Complimentary Whitepaper)