Why should retirement plan advisers care about health savings accounts?
The short answer: The HSA market is growing and there is a void in education and advice, which retirement plan advisers are perfectly positioned to fill.
The money in HSAs allocated to investments was an estimated $5.7 billion in 2016, according to Devenir Group's annual HSA market report. And those assets are growing — they've nearly doubled since 2014.
Additionally, the largest contingent of the U.S. labor force now consists of millennials. They have the highest adoption rate of high-deductible health plans, which are required to get access to an HSA, of any age group.
Many financial advisers are finding it difficult to reach millennials, who would rather interact with a website than a human being. But being able to speak with them about HSAs may prove to be a valuable way to gain access to this growing market, both from a retirement-plan-adviser and individual-adviser perspective.
Further, employers are increasingly looking to integrate health and retirement education, and being able to advise on HSAs can help plan advisers create a competitive moat around their business.
Most retirement plan advisers I know are very savvy when it comes to corporate retirement plans. But in today's world it's not good enough to just “know your stuff.” Companies today want to know, “How can you make my life easier regarding the growing list of issues I have to deal with?”
CONTINUE TO ADD VALUE
If you can be a stellar retirement plan adviser and provide guidance on HSA accounts to a client's workforce, you're now valuable. The way to keep and grow relationships with clients is by continuing to add value. This is one of those ways.
If you are not providing that knowledge, someone else may be, and that's how you lose clients. Don't let that happen.
So, what are some tactical ways plan advisers can use HSAs to retain clients and/or gain new ones?
As with assets in HSAs, the total amount of account holders continues to grow — HSAs saw 22% year-over-year growth in total accounts in 2015, according to Devenir.
Because many medical benefits brokers aren't capable of speaking to the retirement savings advantages of an HSA, this growth is causing a void in education.
To help fill this void, work with companies and their medical benefits brokers to create an experience during benefits open-enrollment that helps employees learn how to get the most from an HSA.
For example, advisers can speak with employees about using HSAs as an additional retirement savings account, and how to consider an employer match made to the HSA within the employee's total compensation package.
My company has an employee benefits group, and we are frequently brought in to educate employees on how HSAs can be used to help pay for medical expenses in retirement. When we've done joint medical benefits and retirement education meetings, it has produced some of the best feedback we've ever received from both employees and employers.
ADVISE ON THE INVESTMENT ALLOCATION
With the growth of this market has also come the advent of new and better ways to serve it. A case in point: the growth in HSA providers that allow advisers to create custom investment allocations, choose the investment options or assist clients with which investments to use.
Health Savings Administrators and HealthEquity Inc. are examples of providers that allow advisers to do one or a combination of the above.
Just as retirement plan advisers run requests for proposal to determine which record keepers are best suited for their clients, they should consider running RFPs for HSAs with an emphasis on the investment aspect of the platform.
In many instances, when medical benefits brokers run an RFP for an HSA provider, they neglect or don't know the right questions to include when it comes to that provider's investment capabilities. However, retirement plan advisers, who are well-versed in these services, have an obvious advantage.
Aaron Pottichen is the retirement services president at CLS Partners, an Austin, Texas-based financial advisory firm focused on employer-sponsored retirement plans.