The Job Changer Sales Opportunity

Transcription

1 The Job Changer Sales Opportunity Make Your Mark on the Billion Dollar Rollover Market RISK MANAGEMENT FINANCIAL SOLUTIONS CF

2 The Time: Now. The Potential: Wow! People are changing jobs at an historic rate. Job changer rollovers of tax-deferred retirement plans represent a vast and largely untapped market opportunity for financial representatives. As the retirement plan landscape continues to change from defined benefit plans to defined contribution plans, job changers find themselves in control of the assets that will determine their financial security in retirement. Why wait for them to retire? Establish a rollover relationship now and set the foundation for future planning needs as job changers continue to accumulate and consolidate retirement assets. Job Changer Opportunity: Top Ten Market Facts 1. Workers in Motion: The US labor force is highly mobile. Nearly 4 in 10 workers left jobs in Big Numbers: Job changers ages with a rollover opportunity number up to 3.5 million each year. 3. Six Times More Opportunity: Job changers outnumber retirees by 6 to Big Dollars: Over $125 billion in retirement assets become eligible for rollover each year due to people changing jobs Money in Motion: Over $70 billion in rollover assets leave plan provider firms annually. 6. Seeds of Security: Average rollover balance for job changers is over $41,000. Nearly a quarter are $50,000 or more. And keep in mind, many prospects have balances sitting in multiple plans. 7. Close the Information Gap: Currently 3 of 4 job changers don t consult a financial advisor while making their 401(k) rollover decision. 8. Know Your Competition: Mutual fund companies, banks and discount brokerage firms attract a significant portion of job changer rollover assets. 9. All-in-One Appeal: Over a third of job changers cite the desire to consolidate assets as the primary reason for rollovers. 10. Look at Your Book: More than half of job changers who eventually roll over assets already have a relationship with the firm to whom they roll over. Know the pros and cons of all the distribution options. A direct rollover may be your client s best choice. 1 Bureau of Labor Statistics, This and all following job changer data on this page are from LIMRA International, Opportunities in the Rollover Market, 2009.

3 A Job Change for Your Client Taking Aim: Where to Find Job Changers New account openers at your institution or firm Job fairs Employment and outplacement agencies Franchise exhibitions Education expos for non-traditional students Government job retraining programs Job search support groups LinkedIn and other social networking outlets Professional groups State unemployment offices Local plant and office closures, downsizings, relocations, buyouts and mergers and acquisitions Unions and employee organizations Realtors, property sales reports and change-of-address service bureaus Spouses of relocating workers Volunteer organizations Benefit plan clients in your book of business 2 Personal planning clients in your book of business Profile of a Job Changer 1 Average Age 47 Male 55% Household Income > $50K 59% Private-Sector Employer 77% DC Plan Participant 83% Average Years in Plan 9 Have a Financial Representative 32% Help Needed: Demonstrate Your Expertise Consider who job changers currently consult with about their retirement plan decisions. 1 32% No One 32% No One 25% Family/Friend/Associate 22% Financial Planner/Advisor 12% Call Center Rep 11% Employer/HR Benefits Counselor 6% Mutual Fund Rep Among job changers, consulting with a financial representative is associated with: Higher household investable assets and income Larger plan amounts Older ages Don t Overlook Other Opportunities Plan Consolidation: Does the job changer have other existing plans to be consolidated? Consolidation may provide access to new features and simplify tracking and administration. Beneficiary Designations: Some Americans today change personal relationships almost as often as they change jobs. Are beneficiary designations on all the job changer s retirement plans current, appropriate and efficient? 1 Opportunities in the Rollover Market, LIMRA International, See the Know the Law Section. 1 Opportunities in the Rollover Market, LIMRA International, 2009.

4 Guide Job Changers Past Potential Pitfalls Checking It Out: Accepting a qualified plan distribution check payable to the job changer personally and then exceeding the 60-day deadline for rolling the distribution into an IRA. A direct (trustee-to-trustee) rollover avoids this problem. Coming Up Short: Receiving a qualified plan distribution personally and then failing to roll 100% of it into an IRA. That includes the 20% of the taxable amount of the distribution that the previous employer must withhold for federal income taxes. Again, a direct rollover avoids this problem. Going on a Spending Spree: Cashing out a distribution. A percentage is instantly lost to taxes, plus a 10% tax penalty if the job changer is under age 59½. Any distributed money also loses its tax-deferred status. Staying Status Quo: Easy isn t always best. Financial planning is seldom an employer s primary expertise. The result: A job changer may receive an incomplete picture and not know all available options. Or a former employer may suggest a course of action, such as leaving the funds in an existing plan, which may be easier but could limit a job changer s options and flexibility. Overlooking the Little: Leaving behind a 401(k) account with a balance of between $1,000 and $5,000. Without instructions to do otherwise, the former employer may open an IRA in the job changer s name and roll the funds into it. Accounts with balances under $1,000 can be automatically cashed out. Even they are subject to taxes and penalties if not properly rolled over. Overlooking the Large: Leaving behind a 401(k) account of more than $5,000 in the former employer s plan. The assets will be subject to 401(k) plan rules, including mandatory federal tax-withholding on any cash withdrawal and potentially restricted investment choices that may limit diversification. No new contributions can be made. Access to certain plan provisions may be lost. Distribution options may be very limited. Going Solo: What job changers don t know can hurt their retirement security. For example, some people wrongly assume that the 20% tax withheld on a rollover distribution is the entire amount they will owe the IRS; and that they will not have to pay any more taxes when they file their return. Not usually true. The total tax bill will depend on their other income and their tax bracket. A hard-earned nest egg built over a period of years deserves more than do-it-yourself service. Know the Law The activities of a financial professional recommending IRA rollovers to 401(k) participants are subject to US Department of Labor supervision. If you or your firm is a fiduciary of the plan from which a rollover will be made, be aware that making a recommendation concerning a distribution or rollover, advising on how to invest rollover funds in an IRA or even answering questions about these matters may subject you to ERISA fiduciary responsibility and prohibited transaction rules. Consult your firm s compliance or legal professional for information and guidance.

5 Be an Agent of Change Get Your Sales Rolling: Materials are Ready for You Ready to get rolling in the job changer market? Order the client brochure and customizable prospecting mailer, both tailored to the job changer market. Contact your regional representative for help with ideas and resources that are ready for action. Order the Client Brochure (CF ) Changing Jobs? We Can Help! Roll With It RISK MANAGEMENT FINANCIAL SOLUTIONS Order the Client Mailer (CF ) Roll With It Changing Jobs? We Can Help! Western & Southern Financial Group, based in Cincinnati, OH, is a dynamic family of financial services companies whose heritage dates to Member companies include Western-Southern Life Assurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company, and Touchstone Securities, Inc., a registered broker-dealer and member FINRA/SIPC. Western & Southern Financial Group and its member companies do not offer tax advice. For specific tax information, consult your attorney or tax advisor.