BOSTON — Defined contribution providers retained only $32 billion of $150 billion in rollover assets last year because of difficulties implementing effective strategies that link their institutional and retail platforms, according to a new report by Cerulli Associates Inc.
The almost $120 billion loss was a record, indicating that defined contribution providers continue to have problems in capturing assets that are rolled over from qualified plans into individual retirement accounts, the report noted.
"A major reason for the lack of retention is the relations (of DC providers) with plan sponsors," said Luis Fleites, senior analyst for Boston-based Cerulli. "Plan sponsors have a huge role in rollovers."
Defined contribution providers' marketing efforts to capture rollovers need to reach plan sponsors as much or more than participants, he said. "Plan sponsors will say how you (a DC provider) can approach and market to participants for distribution presentations or offer kits directed to rollover products," he said. "Plan sponsors are concerned that providers are really trying to help participants and not just trying to sell products."
Underscoring the importance of the rollover market to financial services providers, the report estimates that some $1.9 trillion will roll over from defined contribution plans to IRAs from this year through 2010.