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Rolling over your Retirement Plan to an IRA Doesn't Have to Be Cumbersome
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00:00This morning on BRN, evolving and improving the participant rollover process.
00:09Joining me now is Jacqueline Wren of SS&C Technologies.
00:14Jacqueline, great to see you.
00:16Thanks for joining us on the program this morning.
00:18Good morning, Jeffrey.
00:20How are you?
00:21I'm hanging in there.
00:22I'm hanging in there.
00:23But, you know, I'm excited to talk over rollovers because my understanding, and we're going
00:28to get into this, is that maybe the market up to this point hadn't been as efficient
00:31in terms of facilitating that.
00:33I know you and SS&C have some great solutions we're going to be talking about this morning.
00:37But let's start with some basics here.
00:40How big is the rollover market today in 2025?
00:44Yeah, so looking ahead to 2025, you know, the rollover, the IRA rollover market is estimated
00:50to be about $900 billion.
00:52So, yeah, so the majority of that is going to flow from 401k plans and employer-sponsored
00:59plans this year.
01:01I mean, that is sizable.
01:04That's nothing to sneeze at.
01:05And again, you know, it's so important to be able to facilitate that.
01:09We'll talk about that in a few minutes.
01:10But let's talk about the importance of rollovers because there are a lot of different members
01:16of the retirement ecosystem.
01:17How important, what's the criticality of rollovers for record keepers, advisors, the employer,
01:25all these different constituencies that are in and around the retirement system?
01:31Yeah, yeah, exactly.
01:32Right.
01:32And there's a number of different audiences that kind of compromise the rollover model,
01:38if you will.
01:39And they all have, you know, kind of, they come at it from different points of view,
01:43you know, and I think if we come at it kind of the individual on the front line, so to
01:48speak, is the participant, right?
01:50And as participants age and they look to consolidate assets and they're preparing for retirement,
01:56they're really looking for guidance, right?
01:58And they're also looking for a streamlined rollover process.
02:02Really difficult for, you know, for individual participants to go ahead and open up an IRA and
02:08then interface with their plan sponsor and record keepers to fill out a host of distribution
02:13forms, input all of the information, IRA account numbers, all of that good stuff on a form and
02:20have it be in good order.
02:21So they're kind of challenged there.
02:23And we want to kind of look to see, I think, as an industry, what we can do to guide them
02:28and make that easier for them.
02:30Plan sponsors kind of come at it from a little bit of a different point of view, right?
02:34Plan sponsors or fiduciaries, they want to make sure that they're providing their participants
02:38choice.
02:39So when participants are getting ready to retire or they're consolidating assets from previous
02:44job changes, they want to make sure from a rollover perspective, they can present a really
02:50comprehensive product that gives the participant choices from an IRA perspective, automates the
02:56processes, and probably most importantly for plan sponsors, really reduces that time frame
03:01or the time out of market that a participant will spend.
03:05I think from a record keeper's perspective, you know, the record keeper kind of being the
03:09facilitator and the flow and the movement of all of this, they're really looking for streamlined
03:15processes, right?
03:16Record keepers have multiple distribution process flows in place today.
03:21So they're looking to leverage or create technology that allows them to make more efficient
03:26transactions and process fewer checks, right?
03:30In our day and age, lots of issues can arise with checks.
03:35Participants don't deposit them in IRAs within the 60-day limit.
03:40You know, checks get returned to record keepers.
03:43Checks can open up this whole process to, you know, bad actors and kind of fraud issues.
03:49So they're really looking to kind of streamline this process and leverage ACH and create efficiencies
03:55for participants and plan sponsors alike.
03:59And then I think last but certainly not least are advisors, right?
04:02When we look at the size of the rollover marketplace, the majority of these rollovers, certainly at
04:07least half of them will be intermediated by advisors.
04:11So we really need their engagement in the process as well.
04:13Clearly, they're looking to guide participants, but they're looking for a more streamlined process
04:19to move money out of the plan into the IRA accurately and efficiently for their investor
04:25clients.
04:26You know, I'm chuckling to myself because, as you know, I'm a reform record keeper.
04:30I've been there having to chase down rollover money within the 60-day timeframe.
04:36So I'm very familiar with it.
04:38Suffice to say, is it a smooth process today?
04:41It's had to have gotten better since I started in the late 1990s, though, Jacqueline.
04:45Yeah, well, you know, I think as an industry, we'd all like it to be better than where it
04:51is today, right?
04:52But, you know, just if we look at it, take an example, right?
04:55You know, if a participant looks to initiate a rollover from their plan today, first of all,
04:59they've got to open up the IRA, right?
05:01That's got to be done, whether they do it themselves, self-directed, or they do that with their advisor.
05:07And then once the account is opened, then they need to interface with their plan sponsor.
05:12And ultimately, the record keeper is the plan administrator.
05:16They have to fill out forms providing the IRA account information, the name of the institution.
05:21They need to provide funding instructions.
05:24And then those forms all need to be processed, right?
05:27Whether they require plan sponsor approval or the record keeper's oversight and approval
05:32to process the transaction.
05:33So basically, in a paper-based world where those distribution forms are paper-based, whether
05:38they're downloaded from, you know, a plan sponsor website or so forth, that whole process from
05:46submission to approval to then moving the money out of the plan to the IRA, it can take anywhere
05:52from like 38 to 42 days to process, right?
05:56Assuming all of that paperwork is completed accurately.
06:00So I think as an industry, we're really looking to see what we can do to streamline that process.
06:08Jacqueline, we live in the digital age.
06:10And as you were talking, you know, I have my phone here.
06:12I can transfer money to you.
06:14I could Venmo, and I'm not paying you for this appearance at all, but I could Venmo you
06:17money right now.
06:20So are there challenges with, it seems to me that there's challenges to receiving money
06:24back and forth between one carrier to another, one record keeper to another.
06:29And then I have to think that there could be some fraud issues as well.
06:34Yeah, yeah, there definitely are.
06:36Well, you know, I mean, I think in this scenario, right, where the participant is filling out
06:42the information and so forth, they're the originator of the information.
06:47So if, you know, if they're completing a form, they have to enter in the right IRA account number,
06:53right?
06:54Are they using the right account number?
06:55Do they do a typo?
06:56Things like that.
06:57So there's basically data integrity issues, right?
07:00If participants are giving you the right information, if a participant's on a phone with a call
07:06center rep, again, they have to communicate account numbers to call center reps and everything.
07:11So the call center reps are keying it correctly into the distribution instruction.
07:16So I think all of that kind of just opens us up for data integrity issues from a processing
07:22standpoint.
07:23But then as we all know, as an industry, right, there are bad actors that are out there that
07:28regularly are getting much more sophisticated through phishing and a number of different
07:32things in extricating information from participants and getting to the point where they can take over
07:38accounts.
07:38When they can take over accounts, a lot of these bad actors are looking to initiate these
07:44kinds of transactions.
07:45So when checks get cut and mailed to participants home, that opens up the interception of these
07:52assets.
07:53So when you look at the rollover model, to the extent that you can automate it, that you
07:59can leverage standing IRA instructions, that you can leverage ACH to facilitate the movement
08:06of the plan into the IRA directly so the participant doesn't have to handle a check or worry about
08:12the 60-day rule.
08:14Much more efficient model for everyone, right?
08:17Money gets where it needs to be.
08:19The participants secure.
08:21Record keepers not dealing with correcting, you know, bad information that was entered,
08:27dealing with stale data checks, reconciling all that information.
08:31Much more efficient in that respect when we can kind of quote unquote eliminate the forms.
08:37Let's talk about rollover central because, you know, as I'm, again, thinking about the
08:42process that I used to use when applying it, obviously it's gotten better in the last 30
08:47years, but how does rollover central, which is through SS&C, how does that facilitate a
08:54much more streamlined process?
08:56Yeah, well, you know, rollover central is a technology application that, you know, SS&C,
09:01knowing what we know about record keeping, we really kind of took it on to say there's
09:06got to be a better way to rollover transactions for participants.
09:10So I think the first thing is we really developed it with the record keeper in mind.
09:15So, you know, from a record keeper's point of view, they can implement a secure SSO protocol
09:20to cut to allow participants to come into rollover central and then the number of transaction
09:26processing APIs with SS&C.
09:28And that's kind of the extent of the information.
09:31But the way that rollover central works is when a participant is securely access or moved to the
09:38front door of rollover central, if you will, by their record keeper.
09:42So that participant can be presented with a choice of IRA options, right?
09:47So they can look at robo advice solutions, self-directed solutions, and they have the
09:52ability to open up an IRA.
09:54Rollover central is integrated with multiple IRA providers.
09:58So through, you know, different technology protocols, XML handshakes, very secure transaction
10:04base, we're able to open up new IRAs for participants real time.
10:08And within a single web session, get the IRA account number assigned.
10:13Now, once that IRA account number is assigned, that's kind of the first part of the rollover
10:18process, right?
10:19That's the first step.
10:20The IRA account is open.
10:22But the second, and in many ways, the more complex step is then to get the assets moved
10:27from the participants 401k plan into their IRA.
10:32And the beauty of rollover central is that once that account is opened on the back end, rollover
10:37central interfaces with the record keeper and passes it for all intents and purposes, an
10:43API via API, a rollover transaction request with the IRA account number, all the participants
10:50information, and probably most importantly, the ACH instructions for that IRA provider.
10:56So the record keeper receives that information and then can process that transaction, batch it
11:02with their nightly processing, and they're able to move those assets directly from the
11:06plan to the IRA provider as part of their nightly batch.
11:11And so, you know, again, that's kind of eliminating checks.
11:14It's a direct deposit scenario for the participant.
11:17And maybe even best of all, rollover central provides a reconciliation process where we're always
11:23monitoring all of the transactions open through rollover central.
11:27And then the processing and movement of assets to those IRAs between record keepers and IRA
11:32providers.
11:33Yeah, it sounds like you shorten the time period of 38 to 40 days, which has to make a lot of
11:39people feel good, including the recipient record keeper, but also the participant and the plan
11:43sponsor, all those constituencies you mentioned.
11:47So, you know, you talk about APIs, XML to pull data.
11:51I'm not a techie, but I've been around enough techies to know some of it.
11:54Is this difficult to implement, whether you're a record keeper, an advisor, someone in the
12:00ecosystem that we talked about earlier?
12:02Yeah, it really isn't difficult to integrate with a record keeper.
12:07You know, we clearly tie into with their existing distribution processes.
12:11But as I said, using SSO protocols and APIs is a fairly standard thing in our industry.
12:17You know, and I think the same for advisors, right, to the extent that these services are
12:23available at the plan level, it's pretty easy for an advisor to avail themselves.
12:27You know, I think the other advantage, too, is that when we think about it, you know, for
12:32new IRAs, we can facilitate new IRA account openings.
12:35But for many participants, particularly those getting ready to retire, they probably already
12:40have an existing IRA.
12:42And so they're really looking to consolidate assets.
12:45And the great thing about Rollover Central is you can open up a new IRA or you can consolidate
12:50assets into existing IRAs.
12:53And for record keepers, right, a fair number of participants will call into call centers to
13:00get assistance with IRA rollover transactions.
13:03And record keepers can allow their call center reps to utilize the Rollover Central technology
13:09to process money movement from the plan into existing IRAs.
13:14And they can avail themselves of this very same comprehensive, streamlined, no-formed rollover
13:22flow using ACH instructions as well.
13:25So it creates a lot of efficiencies there in the processing model.
13:29Yeah.
13:29So let's kind of tie it all together.
13:32I mean, it's efficient.
13:33It's streamlined.
13:34Money gets from point A to point B in a shorter period, a much shorter period of time.
13:38But what's the overall return on investment?
13:40If I'm thinking about whether or not to use the system, you know, apply it to my business
13:47model, what's the net gain and the return on investment here?
13:51Yeah.
13:51So I think, you know, the way to look at it is I think, you know, for, I think when you
13:57kind of think about those different audiences that we talked about, for the participant, it's
14:02very streamlined, right?
14:04They don't have to worry about checks.
14:06They're not kind of the overseers, kind of the, you know, they don't have to have stewardship
14:10over what, you know, what step in the process is the rollover transaction.
14:15I think advisors kind of fall in that bucket too, in terms of moving money for their constituent
14:21clients.
14:21From a record keeping perspective, I mean, I think you look at the process in that, you
14:26know, record keepers are regularly in RFPs answering questions about rollover services.
14:32How do they facilitate it?
14:34How do they ensure choice and so forth?
14:37So I think rollover central kind of gives them this kind of baked in middleware that
14:42they can kind of snap in fairly easily into their record keeping platform.
14:47And I think it allows them to, you know, first of all, when you think about it, reduce the
14:52number of checks that they're dealing with in rollover processes.
14:55Again, we talked about it earlier, but cutting the checks, they don't get routed to the correct
15:01place.
15:02They get returned to the record keeper.
15:04That all requires reconciliation and back-end administration oversight.
15:09So I think to the extent that you can limit that.
15:11The other thing is physically, if you're printing and mailing checks, there's a cost to that.
15:17You know, that's like $1, $1.50 a transaction.
15:19And then on top of it, if it exposes you to fraud, if you weren't cutting as many checks
15:26because you were facilitating the movement via ACH, that kind of reduces a lot of those
15:31fraud risks.
15:32So I think there's a lot of advantages there.
15:35Yeah.
15:35And let's not forget the outbound, the cost to do an outbound call or take an inbound call,
15:40the back and forth.
15:41I mean, I remember that that is expensive.
15:44Yeah, you're exactly right.
15:46I mean, when you think about it for participants, and a lot of participants do need guidance making
15:51these, you know, transactional requests.
15:54But when they call into a call center, I mean, you know, your average time, if I'm on the phone
15:59with a rollover transaction, it probably costs a record keeper about $50.
16:03And the key thing here is that it's probably not resolved within a single call.
16:09So they'll process the initial request, but then there are follow-up requests with the
16:13participants as they look to understand what's the status of my money.
16:17And that's, you know, that requires research for record keepers and so forth.
16:21So there's a lot of, I think, cost savings from a servicing, you know, expense.
16:25When you think about how much time is spent by call center reps addressing participants'
16:31rollover needs and questions.
16:33Yeah, absolutely.
16:33And I think just anecdotally, it addresses some of the leakage.
16:37You know, if you can have money go out of a plan into another plan very quickly or an IRA,
16:41someone can be able to find their money without fail.
16:45Jacqueline, we're going to have to leave it there.
16:47Great to see you.
16:47Thanks for the, I love talking rollovers.
16:49I mean, it's been a while since I've done it, but I've loved talking about it.
16:53And we look forward to having you back on the program again very soon.
16:56Yeah.
16:56Well, thank you, Jeff.
16:57We appreciate the opportunity.
17:00And don't forget to subscribe to our daily newsletter, The Morning Pulse, for all the news
17:03in one place.
17:04Details, of course, at our website.
17:07And we're back again tomorrow for another edition of BRN.
17:09And until then, I'm Jeff Snyder.
17:11Stay safe.
17:12Keep on saving.
17:13And don't forget, roll with the changes.
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