Financial advisers promote services like "comprehensive
financial planning" and "financial wellness" to differentiate themselves from digital advice startups and justify their fees, but now at least one robo-adviser is looking to do the same.
BrightPlan, a Silicon Valley financial technology firm, has a new digital product providing financial wellness to retirement plan participants. BrightPlan Coach personalizes a financial plan for each employee and provides ongoing guidance on spending, financial goals, investing, debt management,
estate planning and insurance.
[Video: Financial wellness: The intersection of wealth and retirement]
BrightPlan Coach will also recommend funds from an employer's 401(k) program that best fit the employee's financial plan and can even make recommendations for investment accounts held by other financial institutions. Participants looking to get human advice can access a team of advisors from Plancorp, a $4 billion RIA that BrightPlan acquired 40% of in 2017.
To help participants see how they are progressing, BrightPlan Coach
calculates a score using a 500-point system that reflects participants' overall financial well-being and changes in the market. The technology suggests next steps a person can take to improve their score.
BrightPlan will calculate a similar score for employers to identify opportunities to offer financial education, promote under-utilized benefits or offer new benefits.
"Financial wellness is the most important new employee benefit in a generation, and it fundamentally redefines the contract between employers and employees," BrightPlan founder and CEO Marthin De Beer said in a statement. "By providing employees access to sophisticated and personalized financial advice, employers are investing in their most valuable asset — their people."
The platform is offered as a benefit to employees that is paid for by the company. Mr. De Beer said BrightPlan will negotiate costs to employers on a per-case basis. Employees can open an automated managed account on BrightPlan's robo-adviser for a 40-basis-point management fee, but Mr. De Beer said this is just a small piece of the company's strategy.
"We are a planning platform," he said.
When asked why the company pivoted away from the hybrid robo model it had offered since 2017, Mr. De Beer said automated investing was becoming commoditized with so many entrants to the market, especially from existing financial institutions, and marketing directly to consumers was too costly.
Unlike
Betterment, which got into the
401(k) market in 2015 with Betterment for Business, or Financial Engines, which gathered $169 billion in assets before merging with Edelman Financial Services, BrightPlan is not selling the actual retirement plans or managing the assets.
"We are an HR benefit provider," Mr. De Beer said. "We don't sell any product ... we don't compete with 401(k) administrators."
But BrightPlan will compete with those in the industry who see financial wellness programs, which go beyond retirement savings accounts to offer advice on budgeting, debt management and health-care expenses, as a way to differentiate themselves in the crowded 401(k) market. Facing low-cost digital competitors and a squeeze traditional 401(k) fees, many record keepers and retirement plan sponsors are also using technology to introduce financial wellness programs.
Implementing these services can be expensive, however, and a recent report from research and consulting firm Cerulli Associates found many firms are struggling to measure the success of financial wellness programs and justify the costs.
