As baby boomers near retirement, firms will have to ask themselves how dedicated they are to capturing retirement rollover assets in individual retirement accounts (IRAs). According to a new report by Financial Research Corp. (FRC) of Boston, one of the key ways a defined contribution provider can capture those assets is to have a dedicated rollover-services call center separate from a traditional 401(k) call center.

The industry is anticipating that a tremendous amount of rollover assets will soon be up for grabs. The Spectrem Group, a consulting firm in Chicago, estimates that more than $3.7 trillion will flow out of qualified retirement plans by 2005, $474 billion of which will occur in 2002. Of the $3.7 trillion, Spectrem believes more than 50% will move into IRAs.

The FRC report, "Money on the Move: Strategies for Capturing Retirement Rollovers," outlines several strategies for gaining rollover assets. One of the more novel tactics is to build a separate and more advanced call center from existing 401(k) centers in order to provide a higher level of service. While price and performance will, of course, be major factors in investor behavior, service will be another important differentiating factor, said Chris Brown, director of research at FRC and author of the report.

"Without [a dedicated call center], firms are relying on people going to a Web site or contacting their own human resources department. That's certainly not something I would want to rely on," Brown said. "A minority might be motivated to do that, but there are a lot of people who don't know what they're doing, and they need a little hand holding."

Reps as Salespeople

Traditional 401(k) call centers act primarily as administrative problem solvers, handling such matters as changing beneficiaries, and those reps most likely are without the necessary expertise it takes to help an investor looking to roll over assets, Brown said. Rollover center reps should act more like consultative salespeople on the telephone. They will have to have been trained in the rules governing rollovers, have obtained a Series 7 license to act as registered reps, understand opportunities offered by tax laws and have strong sales skills, he said.

Building that type of call center can be a costly endeavor. Still, that initial investment will likely pay off in the long term, according to Brown.

"There's definitely added cost by doing this, but the tradeoff, particularly for firms without a captive sales force, is that it's a way of having a sales force via the telephone without having one out in the field," Brown said. "A call center can be a very effective way for firms to retain control of the plan-participant relationship. Otherwise, you're letting investors fend for themselves."

Specialized reps at dedicated rollover call centers can also catch potential rollovers by calling people near the time of their retirement, or when they leave a job, Brown said. Providers should try to negotiate contracts with plan sponsors that allow the provider to perform "outbound campaigns" with those plan participants. Currently some firms send out rollover kits to participants, but without a proactive telephone call from an experienced rollover rep, those kits are often a waste of time and money, Brown added. Further, rollover call center reps can facilitate the paperwork process by filling out the necessary tax forms while on the phone with participants and sending them along with only a signature required.

Also, a rollover call center can cater not only to individual investors but to broker/dealers as well. There are many broker/dealers who do not know the technicalities of executing a rollover and could use a resource to help them with that process, Brown said. Firms can utilize their existing internal wholesalers for that effort and perhaps even create two sub-groups within the dedicated call center - one for participants and one for broker/dealers.

"Some broker/dealers know all about rollovers, but most of them don't," Brown said.

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