Clients are increasingly reassessing their financial strategies in response to rising inflation and ongoing workforce reductions. While they may not explicitly voice concerns, their actions indicate a cautious approach, particularly regarding retirement account rollovers. In 2022, a record $1 trillion shifted between retirement accounts, but only 22% of these transactions involved financial advisors, according to data from the research firm Hearts & Wallets. This suggests clients are navigating significant financial decisions independently, even during pivotal moments in their financial lives.
Despite the average rollover amount sitting at $133,000, with 83% being under $100,000, these transactions are significant. Clients cite reasons like simplifying finances, enhancing planning efficiencies, and seeking better service as the primary motivations for these moves, highlighting a desire for clarity rather than complexity in financial matters.
An interesting trend has emerged among late-career individuals aged 53 to 64, where rollovers into new employer plans doubled to an estimated $160 billion by the end of 2025. Employers are responding by enhancing the offerings within retirement plans, which helps improve employee retention and decreases the flow of funds into individual retirement accounts (IRAs).
Overall, the retirement asset pool continues to grow, with IRAs now holding $18.9 trillion and defined contribution plans holding $13.9 trillion, leading to total retirement assets reaching $48.1 trillion in the third quarter of last year. The key takeaway for financial advisors is not just to capture these rollovers but to establish themselves as trusted guides, aiding clients in navigating their financial journeys.
Bold points:
- Why this story matters: Reflects changing client behavior amid economic uncertainty, emphasizing the need for clarity in financial decisions.
- Key takeaway: Financial advisors should focus on being present during key financial moments to foster stronger client relationships.
- Opposing viewpoint: Some argue that the independence of clients suggests a decreased need for professional financial guidance.
