Simplification is top reason that investors move retirement assets

One-third of investors say shifting their money was done 'to simplify my finances,' according to a Hearts & Wallets survey, while 26% want 'to get more involved myself.'

Here’s some advice for financial advisors seeking to encourage potential clients to get off the fence and move their retirement assets over for them to manage: Keep it simple.

According to a report from financial research firm Hearts & Wallets, the leading motivator for one-third of investors to shift their money is “to simplify my finances.”

The second and third reasons respectively are “to get more involved myself” (26%) and “to consolidate for better planning” (25%).

The study points out that motivation is important given that transactions can take a great deal of time to complete. For example, the report states that 35% of rollovers of $500,000 or more can take more than 2 years. Transfers, on the other hand, tend to take less time with the vast majority taking less than 6 months.

“When your finances are complex and disorganized, it can be difficult to make informed decisions about your money,” said Warren Waters, senior vice president and wealth advisor at SageView Advisory Group. “Simplifying your finances can help you get a clear picture of your financial situation, which can make it easier to make smart financial decisions.”

“As you reach your 50s or 60s, you may have accumulated wealth in various places, such as mutual funds, brokerage accounts, IRAs, and 401(k)s from previous employment,” said Scott Gegerson, president of Truvium Wealth Management, part of Stratos Wealth Partners. “It can be challenging to keep track of all these accounts and you may even risk forgetting about some if you’re not diligent.”

As for the more than a quarter of respondents who cited the desire “to get more involved myself,” they better plan to budget accordingly, says Scott “The Finance Professor” Rothbort, founder of LakeView Asset Management at Kingswood U.S.

“Don’t substitute the knowledge and experience of an expert for the need to get more involved on your own,” Rothbort said. “The optimal strategy is to have more open and frequent lines of communication with your investment manager.”

As for the consolidation crowd, advisors say that January is a good time to bring things together.

“Clients may be more motivated at the start of a new year to organize and consolidate their assets,” said Richard Fennema, financial planner with Ark Financial Management. “In addition, the volatile market these days lends itself to clients looking into additional planning opportunities. There’s nothing better than a volatile market to test someone’s risk tolerance.”

The portion of rollover transactions going to external platforms plummeted to 39% in 2022, down from 53% in 2015, according to the report. Larger rollovers of $250,000 or more are also motivated by a desire for “better planning” and “better service,” and to “get more involved,” the study showed.

“Motivations can be harnessed to spur action for money movement, just as motivations can encourage consumers to take action on exercise or weight loss goals,” Laura Varas, CEO and founder of Hearts & Wallets, said in a statement.

“Simplify can mean different things, depending on the type of account and customer,” Varas added. “The competitive landscape within money movement is changing, and firms should understand where the money is going and why.”