IRA Rollover Myth: The Costly Decision
Rollovers from 401(k) accounts to other retirement plans, such as IRAs, have become increasingly popular in recent years. However, a new finding by Pontera, the leading fintech platform, challenges the common belief that a rollover is always the best option. Surprisingly, 59% of surveyed financial advisors chose not to roll over their clients’ 401(k) accounts in 2022. Instead, they opted to retain these accounts due to better plan benefits and the ability to manage them effectively through Pontera’s platform. This finding is encouraging news for the millions of working Americans who can now maintain their trusted financial advisors while preserving the advantages of their 401(k) plans.
From 2016 to 2021, the total amount of rollovers from retirement plan accounts reached an astonishing $2.9 trillion in IRA asset growth. More than half of this amount is estimated to have been facilitated by financial advisors. However, many investors are unaware that a rollover can come at the expense of valuable 401(k) benefits, such as lower fees, access to institutional funds, tax advantages related to employer stock, creditor protections, and loan options. Research conducted by Pew Research indicates that retail investors could lose $45.5 billion over the next 25 years due to higher fees alone, based on the $516.7 billion in IRA rollovers from plan accounts in 2018.
Professional Management of 401(k)s by Financial Advisors
Financial advisors have been providing compliant advice on retirement plans for years. They have traditionally logged into their clients’ accounts or reviewed plan documentation to offer recommendations. Despite this, advisors often suggest rollovers due to the complexity and scalability challenges associated with manual 401(k) advisory methods. Additionally, a potential conflict of interest arises when advisors recommend rollovers to generate additional revenue. In response to these concerns, the Department of Labor introduced PTE-2020-02 in December 2020, aiming to address this conflict and provide enhanced protection.
Eliminating Conflicts of Interest
Advisors who prioritize quality, equitable, level-fee services are successfully eliminating conflicts of interest by offering comprehensive management of both 401(k) plans and IRAs. Pontera, in particular, has played a significant role in supporting advisors in this endeavor. By seamlessly integrating with Pontera’s platform, advisors can provide professional management of their clients’ 401(k) accounts, ensuring that their recommendations are always in the best interest of the client.
The Benefits of Pontera: Simplifying 401(k) Management
Pontera’s platform streamlines the management of retirement accounts, allowing financial advisors to view and manage their clients’ 401(k) accounts within a consolidated interface. The platform also prevents advisors from taking actions outside of plan account management, safeguarding the security and integrity of the accounts. Thousands of financial firms, including registered investment advisors, broker-dealers, asset managers, and plan advisors, partner with Pontera to serve retirement savers across America. Pontera’s commitment to providing exceptional services has earned them recognition as the “Best Retirement Management Platform” in the 2023 FinTech Breakthrough Awards.
Testimonials: Empowering Clients and Advisors
Ironwood Wealth Management, a financial firm that leverages Pontera’s platform, has witnessed the positive impact firsthand. CEO and Founding Partner Cean Kenefick-Rogers expressed how Pontera has simplified the process for clients seeking 401(k) recommendations. Through Pontera, eligible clients can receive professional management for their 401(k) accounts, alleviating the burden of managing their own portfolios. Clients, like healthcare technology leader Greg Zych, have expressed their satisfaction with Ironwood’s expertise and personalized plans.
Pontera’s platform has emerged as a valuable tool for Americans looking to maximize their retirement benefits. By encouraging advisors to retain 401(k) accounts, Pontera is helping to eliminate the excessive rollover trend that costs Americans billions of dollars annually. With their exceptional benefits, retirement plans are designed to provide individuals with a secure and prosperous future. Pontera’s mission is to ensure that Americans can access these benefits while receiving the guidance and expertise of trusted financial advisors.
To learn more about how Pontera empowers retirement savers through personal financial advisors, visit pontera.com/my401k. Individuals seeking professional advice can easily search for a personal advisor in their area on the Pontera website.
About Pontera
Founded in 2012, Pontera is a leading fintech company dedicated to helping millions of Americans achieve better retirement outcomes. The platform enables financial advisors to effectively manage, balance, and report on assets held in various retirement accounts, including 401(k)s and 403(b)s. With its seamless integration capabilities, Pontera enhances advisors’ ability to improve clients’ financial outcomes by integrating with existing portfolio management tools. Headquartered in New York City, Pontera continues to revolutionize the retirement planning landscape. Discover more about Pontera at pontera.com.
