The Opportunity, and Peril, in Retirement Asset Consolidation

Retirement investors holding assets at numerous firms want a single platform for saving, investing needs

401k, retirement, consolidation, advisorHow to ensure they choose you.

How do you ensure you’re the one? It’s hardly news to know retirees like to simplify once they leave the workforce, and that includes the advisors they employ.

The latest research from Cerulli Associates backs that generally held view, and finds that retirement investors holding assets at numerous providers want a single platform for their saving and investing needs.

However, they often need encouragement and assistance to act.

The Boston-based research and consulting firm notes that the average investor maintains 3.6 financial provider relationships upon approaching retirement.

“Unfortunately, maintaining a variety of financial relationships can undermine a retiree’s advisor’s ability to create an optimal income plan,” Scott Smith, director at Cerulli, said in a statement. “For example, an investor withholding the existence of $100,000 invested in certificates of deposit at a local bank could result in the advisor recommending an earlier start to receiving Social Security distributions.”

Despite holding assets with more than three providers, most investors surveyed have a preference for relying on a single platform for their saving and investor needs.

“There remains a discrepancy between the investor’s preference and their actual willingness to consolidate accounts,” Smith explained. “On average, 44 percent of investors indicate a preference to consolidate their assets, while only 15 percent report doing so, pointing to a consolidation opportunity among 30 percent of advisors.”

“If advisors want to address this opportunity, they must understand that factors contributing to this outcome could stem from multiple factors on a psychological and logistical basis,” he added. “This includes a lack of trust in advisors, maintaining privacy, engaging in diversification, lack of awareness, and perceived difficulty or confusion in consolidating assets.”

If offered the path of least resistance, retirees will take it, Smith concludes.

“Providers and advisors must present the investors with an outline of the risks they face with multiple providers, and the benefits of consolidation,” says Smith. “To maximize the impact of these efforts, providers should consider offering assistance to clients in consolidating assets and simplifying financial affairs.”

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