For Financial Professional Use Only Chris Fullerton Regional Vice President WM Funds Distributor,...

For Financial Professional Use Only

Chris FullertonRegional Vice PresidentWM Funds Distributor, Inc.

October 12, 2006

Catch the WaveNavigating the Rollover Marketplace


The Rollover Wave Is ComingThe Rollover Wave Is Coming

Catch It!


Navigating the Rollover Seas

Rollover Market—A Sea of Opportunity

Rollover Do’s and Don’ts

Navigation Guide: How to Catch the Rollover Wave

Prospecting Administering Investing


$13T in U.S. Retirement Assets

Source: Financial Research Corporation (FRC), Employee Benefit Research Institute (EBRI), January 2006

Who will get to manage the $$$ when Boomers retire?

IRA & Keogh$3.0T

Private Insured$1.7T

Government$3.5T

Defined Benefit$1.9T

Defined Contribution$2.9T


An Ocean of Opportunity

Over $8.3 trillion in assets “in play” right now

Key Trend: Boomers will push rollovers to $5 trillion by 2010*

Will the top carriers keep these assets after participants retire?

* Source: “Affluent Boomer Pre-Retirement Survey,” Tom Dente, author. Bain and Company. February 2005


Rollovers are the Largest Source of New Client Assets

Source: Independent Rep Best Practices Survey; Tiburon Research & Analysis, May 2003

Sources of New Client Assets Across All Independent Reps

Moved from allother sources 12%

Moved from full-service brokers 13%

Periodic investments from earnings 17%

Other sources of new money 22%

Retirement Plan Rollovers 36%


36%

14%

9%7%

5% 4% 3% 3% 2% 2%

16%

<$10,000 $10,000 to$20,000

>$20,000 to$30,000

>$30,000 to$40,000

>$40,000 to$50,000

>$50,000 to$60,000

>$60,000 to$70,000

>$70,000 to$80,000

>$80,000 to$90,000

>$90,000 to$100,000

>$100,000

What is the Average 401(k) Plan Account Balance?

Average Job Change Rollover: $54,168

Average Retiree Rollover: $97,511

Source: Investment Company Institute, September 2005 Average balance $56,878. Based on information from the Employee Benefit Research Institute (EBRI) and ICI Participant-Directed Retirement Plan Data Collection Project, the largest database on participants in 401(k) plans.

Distribution of 401(k) Account Balances by Size of Account Balance, 2004(percent of participants with account balanced in specified ranges)

Note: Percentages do not add to 100 percent because of rounding.


Boomer retirement is triggering rollovers

Rollover assets are the most frequent source of new business

QP participants are not loyal to current providers

Getting rollover business, large or small, can lead to more business

Participants are in dire need of good advice

Rollover Insights








Do consider rolling over after-tax contributions from a QP into an IRA, but be sure to have them account for the accounts separately.

Do invest rollover dollars to a new qualified account within 60 days if the check is payable to the participant.

Rollover Do’s


Do name new beneficiaries on the account after a rollover.

Do take care when considering a trust or estate as beneficiary.

Do remind a surviving spouse beneficiary that he/she may roll the inherited assets into his/her own retirement plan, into a spousal IRA, or into their own IRA.

Rollover Do’s


Do use a direct trustee-to-trustee transfer for after-tax assets going from one qualified plan to another.

Do consider rolling over lump sums from a defined benefit plan to an IRA.

Rollover Do’s


Don’t forget to re-name beneficiaries after mandatory rollovers are made from a company plan.

Don’t try to roll over after-tax distributions from one type of qualified plan to a different type of qualified plan [e.g. 401(k) to 403(b)].

Rollover Don’ts


Don’t roll over money directly from a qualified plan to a Roth IRA. Only IRA money can be moved into a Roth IRA.

Don’t roll over assets if the participant needs access to funds.

Don’t roll over defined benefit (DB) plan distributions taken in the form of a lifetime annuity.

Rollover Don’ts








Simply…

When a worker leaves a company while owning retirement plan assets.

What Triggers a Rollover Opportunity?


70% rolled over assets from employer plans to traditional IRAs because of a job change, layoff, or termination

27% rolled over due to retirement

8% were for other reasons*

Source: Investment Company Institute, February 2005*Note: Participants allowed to select multiple responses.

Why Participants Executed a Rollover

91% rolled their entire balance out of their employer plan


Pre-Retirees RetireesM

ass

Mar

ket

Aff

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NW

More investment options

Conduit to a Roth

Set up a stretch IRA Roth IRA avoids RMDs

Consider in-service withdrawals

Simplify with asset allocation

Look to insurance products to guarantee income

Simplify with asset allocation

Sales Idea

Have you thought about what you’ll do with your retirement plan balance?

Why would you move your account? Why would you leave it where it is?

Are you happy with the plan’s provisions, investment choices, and administrator?

Will you get the support you need going forward from the company or plan administrator?

What do you want your money to do? Stay safe? Grow?

Do you know and understand all of your options and their impact on your future?

Tap Your Current Clients

Key Questions to Uncover Rollover Opportunities:

Q

Q

Q

Q

Q

Q



Look for Prospects

Referrals from current clients

Look for local layoffs announcements

Hold seminars targeted to job changers

Net Unrealized Appreciation rules

Beneficiary rules (mandatory rollovers)

Substantially Equal Periodic Payment rules (SEPP, or 72 (t) withdrawals)

Hardship withdrawal rules Beneficiary rules

(mandatory rollovers)

RMD deadline Beneficiary rules (stretch) “Trust as beneficiary” rules

RMD deadline Beneficiary rules Rules for converting to

annuity

Note: For all participants, know the 60-day rule, the 20% withholding rule, and the once per year

rule/unlimited direct transfer rule.

Technical Concepts To Know

Pre-Retirees RetireesM

as

s M

arke

tA

fflu

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NW









Achieving Smooth Workflow

Streamline administrative activities:

Build a file of asset transfer forms

Get new account rollover forms

Develop procedures for annual reviews of life events


The Top 10 plan administrators account for 60% of all plan assets.

Source: Financial Research Corporation (FRC), Pensions & Investments, December 31, 2004

Don’t get Swamped by Paperwork

Top 1060%

All Others40%








Catching the Investing Wave

The average prospect does not understand investment lingo.

Qualified plan money comes from automatic investing.

“Set it and forget it” means investors lose track of their qualified investments.

Rollover solutions need to be simple, easy to understand, and efficient to execute.

An “active asset allocation” fund can solve the investment problem.


$100M

Ultra HNW Private Banking Services$20M Advisory Teams

HNW Strong Lineup of Alternative Investments$1M Holistic Financial Planning

Affluent Premium Services & Benefits$500K Upscale Investment Options

Emerging Personalized Investment AdviceAffluent $100K Customized Solutions

Mass Simple & Easy Rollover Solution$0 Automated Asset Allocation & Advice

Why “Active Allocation” Inside a Rollover?

* Source: Financial Research Corporation (FRC), December 31, 2004

Asset allocation does not guarantee a profit or protect against a loss.

Asset allocation forms the base of the “wealth building strategy”* and offers benefits while keeping things simple.

Steps Used in a Wealth-Based Product & Service StrategyIn

vest

or

Aff

luen

ce


Active Asset AllocationThe Specific Mix of Asset Classes

Portfolio Composition Equity/Fixed Income Mix

Portfolio A

60/40

Portfolio B

60/40

Fixed Income Assets

% Govt + Mtge 63% 20%

% Corporate 20% 38%

% High Yield 7% 25%

Equity Assets

% Large-Cap 71% 69%

% Small-Cap 10% 7%

% Growth 50% 35%

% Value 50% 65%

Expected Risk* 10.7 10.7

* Risk is measured by standard deviation. Standard deviation measures the historical fluctuation of returns around the arithmetic average return of the investment. The higher the standard deviation (as one measure of risk), the greater the variability of the investment returns.


Summary

The rollover market is there. Build the foundation you need now.

Prospecting, administering, and investing can all be enhanced by using the right tools.

A streamlined process calls for an efficient, effective investment solution.


Catch the Wave

The information provided in this presentation should not be considered legal or tax advise. You should consult a qualified tax, legal or financial advisor to discuss your specific tax situation.

The WM Group of mutual funds is advised by WM Advisors, Inc., distributed by WM Funds Distributor, Inc., and sold through WM Financial Services, Inc. (all affiliates of Washington Mutual, Inc.) and independent broker/dealers.

Thank You!

Questions?

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