CHICAGO — Data gathered by Boston-based research firm Cerulli Associates Inc. confirm what most observers have long suspected:
Fidelity Investments is the nation’s individual-retirement-account powerhouse.
In a report released to clients on June 6, Cerulli said that Boston-based Fidelity was the leader year-to-date, with $539.2 billion in IRA assets under administration, followed
by San Francisco-based Charles Schwab & Co. Inc., with $292.7 billion, and Charlotte, N.C.-based Wachovia Corp., with $159.8 billion.
“No one has known who the leader is before,” said Tom Modestino, a senior analyst with Cerulli. “There have been lots of assumptions, and finally we know the leaders. This is data that’s never been out there. It’s definitely eye-opening to a lot of firms.”
The data collected by Cerulli covers 35% of the $4 trillion IRA administration market, the company said. Mr. Modestino said some companies have been hesitant to pass on their information, but he believes that doing so would give financial services companies better insight into their competition.
“We can help these companies better benchmark themselves,” he said. “[Until now] there’s been nothing to benchmark, and we’re hoping that what we’re providing will be able to do that.”
Time to switch?
Mr. Modestino said that it’s important for advisers to monitor closely the styles of these companies and determine if they should switch custodians.
“From an adviser’s point of view, if they’re not working with Fidelity or Schwab, and they’re struggling to build a business around IRA rollovers, maybe they need to think about better partnerships with these firms,” he said.
The analysis shows that prices and fees aren’t as important in a rollover as relationships with clients and brand recognition.
The fact that price and fees aren’t a priority doesn’t come as a surprise to author and accountant Ed Slott, editor of Ed Slott’s IRA Advisor, a monthly newsletter based in Rockville Centre, N.Y.
“People are looking for better advice,” he said. “They realize this is a long-term investment, and it’s got to run them through retirement.”
Mr. Slott said he’s noticed a number of advisers receiving IRA transfers from banks and other entities that haven’t been responsive to the needs of clients.
“These are people who have saved a lot of money and don’t want to make a mistake in the final turn,” he said. “They’re looking more for competent advice rather than price.”
Pointing to the success of direct marketer Fidelity and adviser-driven Wachovia, Cerulli analyst D.J. Lucey said: “There are different ways to succeed, and it depends on the size of accounts. The adviser is a key component.”
For its part, Fidelity offers no-fee IRAs, which are attractive to many advisers, said spokeswoman Deborah Pont. She said the company also has the Savings Incentive Match Plan for Employees IRA, which is attractive to many investors because it can be started with as little as $200 a month.
“We’re really making it simple for people,” Ms. Pont said. “You can open up an IRA online, and it takes 15 minutes. People like that convenience.”
