Morningstar-HelloWallet deal ups the ante for financial wellness services

Viewing workers' retirement savings in the context of their full financial picture may be the next frontier for retirement plan services

Jun 2, 2014 @ 1:15 pm

By Darla Mercado

Morningstar Inc.'s acquisition of HelloWallet Holdings Inc. is expected to push other 401(k) service providers to step up their game with respect to participants' financial wellness.

Last Thursday, investment research giant Morningstar announced an agreement to pay $52.5 million to snap up HelloWallet, a firm that provides financial wellness services to retirement plan participants. Morningstar already had a $13.5 million minority stake in HelloWallet, so it will shell out $39 million in the approaching days to complete its purchase.

What makes the Morningstar-HelloWallet deal especially notable for the rest of the industry is that Morningstar will incorporate its managed accounts and investment capabilities with HelloWallet's financial wellness services. “The pieces are in place, but through this combination, we can bring this overall holistic solution together as it hasn't been done before,” said Brock Johnson, head of retirement solutions for Morningstar.

Morningstar is already a player in the world of custom target-date funds. Its RIA subsidiary Ibbotson can act as a fiduciary under ERISA sections 3(21) or 3(38), and it can act as a co-fiduciary under the former and a fiduciary investment manager under the latter.

From a competitive standpoint, the acquisition makes Morningstar a well-rounded powerhouse of 401(k) services to both plan sponsor and participants.

“Will this become a tool Morningstar uses to encourage people to rely more on them?” asked mutual fund consultant Geoff Bobroff. “As time goes on, these participant accounts become more sought after. If the participants develop an affinity to Morningstar, then it's a fertile ground for them to do more than they otherwise would have done.”

The transaction fits into the latest trend in the retirement plan services industry: 401(k) specialist advisers and service providers have been turning their focus toward obtaining reliable retirement income rather than chasing investment returns. With advisers, forward-thinking 401(k) specialists are making workers' debt management a part of their service offering.

Indeed, viewing workers' retirement savings and income stream in the context of the full financial wellness picture is the next frontier for retirement plan services.

“This is part of a larger move to decumulation and looking at what it means in a real way to provide people with a decent living in retirement when they stop working and stop accumulating,” said Marcia S. Wagner, managing director at The Wagner Law Group. “There is no way for participants to do it on their own. This is holistic.”

The field for retirement plan service providers who also offer participants financial wellness services is fairly small but growing. For instance, Putnam Investments has its Lifetime Income Analysis Tool, which helps workers visualize their plan savings in the form of retirement income.

Philip Steele, president of Pension Architects, currently oversees a 401(k) participant services program called Civility. Mr. Steele charges for the service, which aggregates workers' account data feeds and allows employees to meet with financial coaches, on a fee-only basis. The coaches, who meet with workers quarterly, don't sell products to the employees. Rather, they're there “to clean up [workers'] finances,” said Mr. Steele. Currently, the service is available to about 60 to 75 employers.

“I think that HelloWallet and the other tools I've seen that get more involved in a person's personal finance, budgeting and debt — that's the direction that we as an industry need to go,” Mr. Steele added.

Advisers should also know that there's a place for them in the world of financial wellness within 401(k)s. For one thing, plan advisers can incorporate these programs and tools to show that they're getting results and driving savings at the workplace, said Jason C. Roberts, CEO of Pension Resources Institute.

For advisers who aren't fiduciaries, driving savings can also help them be more selective when it comes to determining which employees will make good wealth management clients.

“There might be an opportunity for the adviser, particularly if the fiduciary services are provided by a third party, to better serve the household needs of the participant and be more selective on wealth management clients,” he said. “You can properly serve the IRA rollover.”

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