401(k) record keepers competing with advisers on financial wellness

Advisers are also concerned that these programs are serving as distribution outlets for proprietary financial products

Mar 19, 2019 @ 4:48 pm

By Greg Iacurci

Retirement plan advisers increasingly are offering financial wellness services to 401(k) clients to distinguish themselves in a competitive market. There's just one problem: Record keepers are infringing on their turf.

Broadly speaking, financial wellness programs help employees plug gaps in their everyday finances, going beyond retirement savings to address areas such as emergency savings, budgeting, cash flow and debt management. Some programs deliver guidance online, while others leverage in-person meetings or use both methods.

Advisers such as Barbara Delaney, principal and founder of StoneStreet Advisor Group, offer such services both to 401(k) clients and as a stand-alone program to non-401(k) clients. To Ms. Delaney and similarly situated advisers, record keepers — who often provide financial wellness to employers at no additional cost — pose a threat.

"It will absolutely compete with us," she said.

(More: Financial literacy: An epic fail in America)

Massachusetts Mutual Life Insurance Co. was the latest record keeper to launch a service, called MapMyFinances, which is available automatically to employers that use MassMutual as a retirement-plan record keeper or provider of voluntary insurance benefits.

The insurer is making the service — the second generation of a prior program called MapMyBenefits — the "center point of our offering," said Tina Wilson, head of investment solutions innovation.

The web-based program uses an algorithm to analyze participants' current financial health, and makes recommendations on how to best allocate their employee benefits money to improve that picture. The algorithm considers data on the participant's family situation, budget and personal finances, health care, insurance, and debt, including student loans, credit cards, mortgage and car loans.

But MassMutual is hardly the only record keeper to offer a financial wellness program.

"All the big ones have financial wellness today, and it's almost becoming a must-have," said Brad Arends, co-founder and CEO of intellicents inc., an advisory firm that offers financial wellness services.

Record keepers primarily deliver services online, he said. These firms are "showing off their websites, especially the part of the website that deals with financial wellness" in almost every sales presentation today, Mr. Arends added.

Ms. Wilson believes advisers benefit from record keepers' programs, though. There are more advisers that don't have financial wellness tools than do, she said, and programs like MassMutual's allow such advisers to deepen their client relationships.

"If advisers aren't talking to their clients about broader financial needs, some other adviser is talking to their client," Ms. Wilson said.

Nearly 25% of 401(k) plans have a comprehensive financial wellness program that goes beyond a standard 401(k) education program, according to the Plan Sponsor Council of America. Large plans with more than 1,000 employees are most likely to offer such services, with student loans, emergency funds, budgeting and debt management being the top topics covered, according to the PSCA.

And demand is growing, experts said.

"Employees are expecting financial literacy education and wellness advice at work," in addition to other benefits like retirement and health care, said Fred Barstein, founder and CEO of The Retirement Advisor University. The vast majority of plan participants can't afford an adviser, so these programs are where they get financial advice.

Aside from the competition such programs create, advisers are concerned that record keepers are using financial wellness platforms to distribute proprietary financial products. MassMutual's MapMyFinances, for example, can connect employees both to proprietary and third-party products in the realm of life, accident and critical illness insurance.

"They say it's free, and it's not — they're being compensated by product sales," Ms. Delaney said. "Record keepers are all doing it through the guise of financial wellness."

Ms. Wilson doesn't agree, however, emphasizing that MassMutual's program is customized, only showcasing products selected by the employer and its advisers, who would already have performed due diligence on those products.

"We have businesses that focus on insurance, and those businesses are thriving businesses whether we have financial wellness capabilities or not," she said. "It's fairly cynical to look at these programs and say this is all about positioning MassMutual's products."

(More: 401(k) advisory firms creating in-house financial wellness programs)


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