Targeting the Retirement Market:No Greater Opportunities for Advisers

Draft Presentation

March 25, 2008

© 2008, National Benefit Services, Inc.

This presentation discusses the opportunities for investment advisers to manage retirement assets for high net worth individuals. These are opportunities in addition to those available in managing assets of the entire retirement plan – a subject of another presentation.

The demographics are all favorable

• Massive number of baby boomers retiring

• Increased reliance on defined contribution plans

• Decline of defined benefit plans

• Concerns about Social Security

Two key opportunities for advisors

1. Capture 401(k) rollovers

2. Manage self-directed retirement plan accounts

1. Individual Retirement Accounts

Rollover IRAsOrphaned 401(k) Accounts

$1.1 trillion into IRAs in last 5 years

• 95% from rollovers from employer retirement plans

• 5% from new IRA contributions

401(k) Rollover Market

• 45% of rollovers stimulated by change in employment status

• 49% of rollovers occur in response to stimulus directly initiated by financial service provider

• Opportunity for advisers to engage in dialogue with investors

45% by change in employment status

• Taking a job at a new company

• Starting retirement

49% initiated by financial service provider• Receiving recommendation from financial

advisor• Completing portfolio review• Completing year-end tax review• Contacted by advisor suggesting this• Contacted by retirement plan provider to discuss

options• Reminded by statement from retirement plan• Seeing advertisement about IRA rollovers

“Orphaned 401(k) accounts”

• Over $1 trillion in assets still held in plans of prior employers

• More than one-third of mass affluent households have at least one orphaned account with average balance of over $100,000

Why “orphaned 401(k) accounts

• 56%: simple inertia

• 35%: “satisfied” with plan’s investment options

• Provides opportunity to communicate benefits of rolling over to IRA

Who has the rollover business

• 67%: investment firms• Banks: 18%• Insurance companies: 7%• Other: 8%• Investors pre-disposed to work with

advisers• Marketplace extremely fragmented

allowing smaller firms to effectively compete for business with larger firms

2. Self-Directed Retirement Accounts

401(k) PlansIn-service distributions

Types of Self-Directed Accounts

• 401(k) plans that permit self-directed accounts

• Profit sharing/401(k) plans that permit in-service distributions at age 59 ½

• Defined benefit plans that permit in-service distributions at age 62

401(k) plans that permit self-directed accounts• Allows participant to have managed

account with other than funds in plan

• Additional fiduciary issues to be managed, e.g., investment policy statement, 404(c)

• Argument for in light of LaRue decision

• Attractive option for high net worth business owners and principals of professional service firms

Profit sharing/401(k) plans that permit in-service distributions• Participant can take in-service distribution

at age 59 ½ and have account transferred tax free to self-directed IRA

• Plan can be easily amended if not currently provided for

Defined benefit plans that permit in-service distributions• Pension Protection Act of 2006 permits in-

service distributions from defined benefit plans beginning at age 62

• Plan can easily be amended if not currently provided for including lump sum distribution option

• Most plan sponsors not aware of this planning opportunity