PLANADVISER - January/February 2022 - 34

improving outcomes / plan aggregation
consider other factors, " Hunt adds. " If someone is married,
a spouse may contribute significantly to retirement readiness,
or there may be wealth coming from a pension plan
with some other company. The typical projection doesn't
consider everything. "
Ultimately, greater insight stems from close and frequent
employee engagement, and only participants can control
that. From her perspective, Hunt says, the encouragement
of the plan adviser and the plan sponsor can go a long way
to foster such engagement.
" They just forget about their
old account, and there is
not a great infrastructure in
place to show them their
overall savings picture or to
make consolidation seem
like the sensible thing to do. "
Short Tenures, Old Systems, Lost Accounts
During his time advising participants, Reffett says, the
frequency of their changing jobs did seem to increase
substantially.
" With the trend of shorter tenures, naturally you have
less time in each position to accumulate retirement funds, "
he observes. " Because of that, [participants] may have a relatively
small amount of money in any given retirement plan,
and this makes it more likely that it will be left behind and
never consolidated. It can also leave them with an overly
negative readiness projection, especially if Social Security
is not being factored in, as well. "
Reffett says individuals moving from job to job may get
caught up with thinking about a great new salary or with
relocating to a new city and buying a home.
" They just forget about their old account, and there is not
a great infrastructure in place to show them their overall
savings picture or to make consolidation seem like the
sensible thing to do, " he says.
This is true in the observation of Gaurav Sharma, CEO
and co-founder of Capitalize, a venture-backed fintech
company working to drive innovation in the retirement
savings market. In fact, his firm recently collaborated with
the Center for Retirement Research at Boston College (CRR)
on an analysis that concluded that " forgotten " retirement
accounts amount to nearly $1.35 trillion in total assets, a
sum that represents as much as 20% of the approximately
$6.7 trillion invested in 401(k) plans.
" When it comes to account consolidation, it is a very highfriction
situation, which leads to suboptimal outcomes, "
Sharma says. " This is actually the central thesis behind
the founding of Capitalize and the platform we have built
to facilitate rollovers. Today, the usual process of moving
participants' money to their new employer's 401(k) plan is a
very old-school, manual and cumbersome experience, it's so
disconnected from the otherwise tech-first world in which
we live and in which our financial lives unfold. "
Reffett agrees with that take wholeheartedly, suggesting
advisers can bring additional value to the table by becoming
knowledgeable about account consolidation and providing
more holistic retirement readiness projections. Both Sharma
and Reffett say they have talked to workers who actually
started the rollover process but then quit because it was
that challenging. They note that the adviser is in a position
to help such participants see the process through-and to
help them understand their full readiness picture.
A Better Way Is Emerging
Stinnett and Sharma say the account consolidation and
retirement readiness projection experience is ripe for disruption.
In fact, both of their firms are shaking the status quo,
they say, as are some others in the retirement plan services
ecosystem. In Vanguard's case, the firm is now working with
Retirement Clearing House (RCH) to provide plan sponsors
with a new portability solution meant to simplify making
small-balance 401(k) rollovers. The service is expected to
launch in the middle of this year.
Once operational, the automatic portability program
will be able to facilitate the movement of an employee's
401(k) savings account from a former employer's plan into
an active account with the current employer. Reffett says
he is encouraged by the fact that providers are taking these
steps, and he says Vanguard is not alone in its efforts.
For his part, Sharma is bullish about the prospects for a
better rollover and consolidation experience, not least of all
because his firm is fixed on remaking the space.
" From our point of view, the first step toward better
outcomes is to help people find their money, whether they
know where it is custodied or not, " he explains. " To address
this first step, we have built what I believe to be the premier
database that can help individuals locate their money. At
this stage in our build-out, we believe we can locate well
over three-quarters of all 'lost' accounts. "
Besides helping individuals find their lost money, the
Capitalize platform can then facilitate a rollover into an IRA.
Those who would prefer not to roll over the money at least
now know where it is.
" I would say that, with most providers, things are getting
better, " Reffett says. " The recordkeeper community has realized
that there's a pinch point here and that their business
interest in retaining assets is simply not worth the trouble
that lost accounts cause on their end or on the end of their
clients. I'm encouraged that participants can do more of
this stuff online now. Consolidations are getting easier, and
projections are getting more accurate. " -John Manganaro
34 | planadviser.com January-February 2022
http://www.planadviser.com
PLANADVISER - January/February 2022

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