Roth IRA Conversion Confusion Creates Opportunity for Investment Advisors, Study Finds

By Staff Report

Oct. 13, 2009

The pending rule changes around Roth IRA conversions present a huge business opportunity for financial advisors to have deeper conversations with clients, according to a new survey by Charles Schwab & Co. Inc.

Starting January 1, people making more than $100,000 annually will be eligible to convert their traditional individual retirement accounts or 401(k) plans with previous employers into Roth individual retirement accounts. Currently, only those who make less than that amount a year are eligible to convert.

However, 61 percent of Americans surveyed by Schwab who made more than $100,000 annually were unaware of the Roth conversion rule changes, while only 14 percent of these 400 individuals said they could explain the rule changes.

As a result, 71 percent of the people polled said they would be likely to consult with a financial advisor on Roth IRA conversion issues.

“Advisors have a chance to initiate a conversation on a topic that for many clients is very confusing,” said Scott Slater, managing director, business consulting, in Schwab’s advisor services division.

The rule changes also gives financial advisers an opportunity to talk to clients about their entire financial portfolios, to which they might not ordinarily have access, said Howard Schneider, president of Practical Perspectives, a research and consulting firm in Boxford, Massachusetts.

“This isn’t just about how the advisors can manage the portfolio and earn the client an extra 100 basis points,” Schneider said. “This rule change provides advisors with a great entry into a deeper discussion about what clients want in retirement.”

Filed by Jessica Toonkel Marquez of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail

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