Capturing the Million Dollar Rollover... · 2016-01-21 · A word about the regulatory environment….. The rollover market has been under close scrutiny by various regulatory bodies

Capturing the Million Dollar Rollover

FOR FINANCIAL PROFESSIONAL USE ONLY/NOT FOR PUBLIC DISTRIBUTION

Name: ___________________________________________

Date: ___________________________________________

Welcome….

Never before has the IRA rollover opportunity been this attractive. The aging population has increased

the number of opportunities, while the capital market performance since 2009 has dramatically

enhanced the average size rollover. That said, where there is opportunity there are also challenges,

namely increased competition and an uncertain regulatory environment.

A word about the competition…..Traditionally, competition for rollover assets came from other advisors and financial institutions. More

recently, the so-called “robo-advisor” has also entered the marketplace. While these service providers

will continue to be important players, perhaps the greatest competition for rollover assets is the plan

itself. Advisors must remember that most plans allow distribution-eligible participants the opportunity

to leave their balance in place. Further, more companies are proactively communicating this message

and in some cases providing retirement cash flow planning, adding guaranteed income options to the

investment lineup and considering other options to encourage retirees to remain plan participants long

after they separate from service. Exploring the advantages and disadvantages of leaving money behind

in the plan will be an important part of our work together today.

A word about the regulatory environment…..The rollover market has been under close scrutiny by various regulatory bodies the last few years.

For example:

• On March 7, 2013 the Government Accountability Office (GAO) reported, “There is concern

that 401(k) participants may be encouraged to choose rollovers to IRAs in lieu of options

that could be more in their interests.”

• FINRA issued Regulatory Notice 13-45 which reminded brokers of their obligations with

respect to the recommendation and marketing of IRA rollovers to the public

• On April 14, 2015, the Department of Labor issued newly proposed regulations that would

impose a fiduciary standard on advice pertaining to rollovers from employer plans and the

investment management of IRA assets

It is likely that these regulatory developments will continue to evolve during the months to come.

Advisors are strongly encouraged to follow these developments closely and seek counsel from

their home office legal and compliance professionals. One thing is for certain: there is perhaps

no greater responsibility then the careful stewardship of our client’s retirement money.


Advisor exercise: The one, actionable take-away I hope to leave today’s workshop with is:

We believe this confluence of events presents a chance for advisors to reevaluate how they

position their services in the marketplace and refine their messaging with a higher degree

of confidence and conviction. The objectives of today’s workshop are threefold:

• Revisit, and if necessary, revise your rollover value proposition;

• Formulate responses to questions that are likely to be posed by rollover recipients; and

• Understand the financial planning implications of leaving money in an employer plan versus

rolling the money to an IRA through five real-life case studies.

We look forward to your active participation and hope today’s workshop exceeds your expectations.

Today’s Objectives:


Part 1 Value Proposition1There are many different ways to craft a compelling value

proposition. Today we will offer you one framework with IRA

rollover clients in mind, but advisors are free to use any approach

that works best for their particular business model and practice.

A value proposition should answer the following three questions:

• What do clients want when hiring you for help with their rollover?

• What do you provide rollover clients?

• How are you different from other available options when

it comes to rollovers?


3

Take a few minutes and provide answers to these three questions. To help you get started,

we have provided some of the answers other advisors have suggested in the past.

Question 1. What do clients want when they hire you?

Sample answers: “free time”, “financial security”, “peace of mind”, “clarity”, “confidence”

My answers: _________________________________________________________________

Question 2. What do you provide rollover clients?

Sample answers: “resources”, “expertise”, “reputation”, “objectivity”, “integrity”

My answers: _________________________________________________________________

Question 3. How are you different from other available options when it comes to rollovers?

Sample answers: “my team”, “professional credentials”, “market niche”, “background”, “client engagement model”

My answers: ___________________________________________________________________

The next step is to string these answers together into your unique value proposition.

Before getting started, it may be helpful to keep the following in mind:

• A value proposition is communicated orally and should flow comfortably during conversation.

A mission statement, on the other hand, is usually a written statement, longer in length and

is more descriptive of the services to be provided.

• Oftentimes, there is not the opportunity to present the value proposition exactly how it is

prepared in advance. Rather, the key points are typically communicated over the course

of a conversation.

• There is no right or wrong way to approach this exercise, and over time, most advisors’ value

propositions change. The most important element in our view is that the value proposition

resonates with clients, piques their interest and invites them to ask for more information.

Advisor exercise 1


4

Using the answers above, construct a first draft of your value proposition. A sample is provided to help get started. It is highly unlikely we will finish this exercise today. When you get back to your office, continue working on the draft and when finished, ask a trusted colleague, family member or friend for feedback. Oftentimes, it may take three or more drafts before being satisfied with a finished product. Your Janus Director is also available to provide assistance.

First draft: ______________________________________________________________________

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Second draft:

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Third draft:

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Advisor exercise 2

Sample value proposition:

“Most of our clients hired us because they were looking for peace of mind that they will be able

to meet their expenses in retirement. We start with a thorough financial planning exercise that,

when completed, provides our clients clarity about their financial future. We also take time to

really know our clients; we recognize their voice on the phone when they call, are familiar with

their family situation and even know their favorite restaurants and places to vacation. This deep

understanding is important because it helps us align our investment work with the sort

of lifestyles our clients want in retirement.”


Part 2 Answering Tough (but fair) Questions2The second part of today’s workshop is to help advisors prepare

for various questions that are likely to be asked by participants.

With more services being offered by plan sponsors in an effort

to retain distribution-eligible participants, along with the recent

regulatory developments, we suggest advisors consider how they

might respond to what we call “tough, but fair, questions.”


6

Consider the following questions and draft how you would respond. Also, consider what

other questions may be asked by the client that is not listed. How would you respond?

Client question: “My employer told me I can leave my money in the 401(k) plan for as long as I would like. If that is the case, why would I do an IRA rollover?”

My answer: _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Client question: “My 401(k) plan is free. What are the fees if I roll over my account?”

My answer: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Sample answer:

“Your employer is correct, you may leave all or part of your 401(k) in the plan for as long as you

would like. Many of our clients, however, chose to roll their balance to an IRA because we are

able to collaborate on an individualized investment strategy that takes into account whatever

plans they have during retirement. Once I learn more about your particular situation, we can

review the potential advantages and disadvantages for all your options.”

Sample answer:

“The fees participants pay in an employer plan vary, and will depend on a number of factors

such as the size of the plan, the plan’s service provider and how participants choose to invest

their money. There are new regulations which require your employer to disclose plan fees

annually. May I suggest you provide me a copy and we review the information together?

Similarly, costs in an IRA will depend on a number of factors if we choose to move forward.

We work hard for our clients, and we believe the costs are reasonable. Of course, all of this

information is disclosed before any investments are made.”

Advisor exercise


7

Client question (only if your firm requires certain disclosures at the point of sale): “This looks like a lot of material. What is contained in this information?”

My answer: _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Sample answer:

“This information describes the distribution options that are available to individuals who are

eligible to take a distribution from their employer’s plan. I would encourage you to read the

information carefully. Of course, we are happy to answer any questions you might have.”


Additional Questions

8 FOR FINANCIAL PROFESSIONAL USE ONLY/NOT FOR PUBLIC DISTRIBUTION

Other potential client question: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

My answer: _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Other potential client question: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

My answer: _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Part 3 Case Studies3


In our last step, we’ll review several client scenarios to help

advisors better understand advanced distribution planning

strategies including the potential benefits of an IRA versus

leaving money behind in the plan.

Tom Jones, age 56, separates from service earlier this year. He currently has a $780,000 balance, diversified across several asset classes. In addition to his 401(k), his spouse will receive a pension at her retirement in five years, and the couple has approximately $60,000 in savings. You learn that Tom needs approximately $100,000 immediately to take a long-awaiting trip to Europe and to remodel the house. He does not anticipate needing any additional money in the near future, as his wife’s salary will cover the household expenses. What are Tom’s distribution options?

Advisor analyis: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Additional notes: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Case Study 1

Helen Brady, age 61, is planning to retire later this year. Currently she is the CFO for a very successful Silicon Valley-based technology firm. Between her stock options and restricted stock, she does not anticipate needing any part of her $1.25M 401(k) anytime soon. Her 401(k) consists of $100,000 in various mutual funds with $1.15M in her company stock. The stock is currently valued at $100 per share, while her average cost basis is $20. She is single and has three adult children. What strategies should Helen consider?

Advisor analyis: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


Case Study 2


A client, Mike O’Conner, maintains his $650,000 401(k) with his former employer. The funds are invested in a money market, earning practically no return. He also has a $300,000 SEP IRA and $25,000 Roth IRA held at your firm. Finally, he has a beneficiary IRA worth $225,000 that his father left him last year. The money is at his father’s former bank. As a self-employed professional, Mike is very concerned about asset protection. He wants to know how his 401(k), SEP and Roth are protected in the event of a lawsuit brought by creditors.

Advisor analyis: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


Case Study 3

Donna Lewis, age 66, is retiring as School Superintendent for one of the country’s largest districts later this year. Her $825,000 403(b) consists of $775,000 of pre-tax deferrals and earnings and $50,000 of after-tax Roth contributions. She switched to a Roth after the school districted added the option five years ago. She is interested in rolling her account to an IRA. Her annual income is approximately $250,000. What are Donna’s options?

Advisor analyis: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


Case Study 4

11FOR FINANCIAL PROFESSIONAL USE ONLY/NOT FOR PUBLIC DISTRIBUTION

Roger Thomas, age 60 recently received a pension buyout offer from his employer. Rather than receiving a monthly pension of $5,000, he can receive a one-time lump-sum distribution of $825,000. If he chooses to keep the pension, his employer informed him that an insurance firm, not the company, would be responsible for providing his monthly checks. Roger and his wife are in good health, lead a vibrant life and are looking forward to a long and prosperous retirement. What factors should be considered to help Roger make a decision?

Advisor analyis: _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Additional notes: ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Case Study 5


Final Advisor Exercise: The most important thing I learned today is:

Next Steps: A Unique Opportunity to Sharpen Your Skills

13FOR FINANCIAL PROFESSIONAL USE ONLY/NOT FOR PUBLIC DISTRIBUTION

Congratulations on completing today’s workshop. We sincerely hope you have gained some

valuable information, which will immediately make a difference in your practice and the lives

of your clients. If you would like to explore additional opportunities to practice the skills learned

today, we offer individualized coaching sessions that include a video recorded role-play exercise.

Facilitated by one of Janus’ Retirement Directors, you will have a chance to try out your new value

proposition and practice answering tough, but fair, questions. After the exercise is completed, the

video is immediately reviewed and feedback offered. We repeat the exercise, fine-tuning your

messaging each time, until you feel comfortable and ready for real-life clients and prospects.

If you are interested in learning more, please contact your Janus Sales Director.

A retirement account should be considered a long-term investment. Retirement accounts generally have expenses and account fees, which may impact the value of the account. Non-qualified withdrawals may be subject to taxes and penalties. For more detailed information about taxes, consult a tax attorney or accountant for advice.

The opinions expressed are as of June 2015 and are subject to change at any time due to changes in regulatory, legal, marketand/or economic conditions. The comments should not be construed as a recommendation but as an illustration of broader themes.

Janus Distributors LLC.

C-0615-89926 05-30-16 166-15-30720 06-15


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Capturing the Million Dollar Rollover... · 2016-01-21 · A word about the regulatory environment….. The rollover market has been under close scrutiny by various regulatory bodies