TRANSCRIPT:

Tom Hawkins: Welcome to another edition of the RCH Consolidation Corner Channel, where we provide you with audio content that explores key issues in the preservation and consolidation of retirement savings. In this episode, we examine the importance and relevance of auto portability to the financial advisor community, where the new feature is getting a lot of attention. We hope you’ll find the audio enjoyable and informative.

NARRATOR: Financial advisors are increasingly beginning to embrace auto portability and are recognizing auto portability's long-term benefits for their practice. Auto portability is the automated transfer of small retirement accounts from former employers' plans into active accounts in current employers' plans. The service is delivered through the Portability Services Network, whose recordkeeping members represent 63% of the defined contribution market, on a participant basis.

Most importantly for advisors, auto portability specifically targets separated participants with balances under $7,000 who are subject to a plan's automatic rollover provisions. Traditionally, these participants have been under-saved and under-served, with over 70% cashing out or being forced into dead-end safe harbor IRAs with minimal returns. This relatively narrow focus on small-balance accounts means that auto portability poses no threat to an advisor's business model.

In fact, rather than competing with advisors, auto portability enhances advisors' business opportunities. According to the Employee Benefit Research Institute, $1.5 trillion in incremental retirement savings could be retained through the widespread adoption of auto portability. Advisors whose clients implement this feature will benefit from automatic transfers into their plan of small balances when new employees join, increasing plan assets and creating future wealth management opportunities.

The value of auto portability to advisors becomes clear when considering specific examples. In 2021, Alight Solutions found that three sub-$5,000 cashouts by a participant in their 20's would result in a $295,000 loss in projected retirement savings by age 67.At the plan level, over a 40-year period, it's estimated that a 10,000-participant plan that adopts auto portability could incrementally increase plan assets by over $200 million.

Auto portability's adoption is also advancing steadily. In December 2024, PSN announced that, in its first year of operation, more than 15,000 plans representing approximately 5 million participants had signed up for auto portability, and by March 2025, the number of adopting plans had grown to over 18,000.

Auto portability operates on a negative consent basis, while giving participants the option to opt out. While auto portability's adoption continues to grow, it works alongside consent-based portability for participants from plans that are not yet in the network. This hybrid approach has already successfully consolidated thousands of small-balance accounts.

For advisors, auto portability is a win-win. In the near-term, auto portability focuses exclusively on small-balance accounts without disrupting advisors' business models, while over the longer term the increase in retained retirement savings expands advisors' wealth management opportunities.

For more information on auto portability, visit PSN 1.com.

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