There are a few paid apps that can move contacts across the groups, or another popular solution is to “share” the iPhone contact and email it to yourself, from there you can save it as a contact in the right group.
Settings -> Mail, Contacts and Calendars -> Contacts – Default Account iOS version 5 seems to set Exchange as the default contact group, I believe this effects iOS 4 and below. I came across this earlier when someone mentioned their upgrade had missing contacts (turned out to be over 40). This could cause contact loss when upgrading or switching iPhones, or will cause missing contacts on multiple devices e.g.
New contacts default to the “On my iPhone” contact group, which aren’t synced with the Exchange account. Apple iPhone syncing contacts with Microsoft Exchange server
