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Is Financial Planning for All a Pipe Dream?

Does the 401(k) and workplace platform offer unique opportunities?

The hype around financial wellness compared to results has led many to question whether offering meaningful personalized financial planning to the masses is realistic. Along with limited engagement and the cost to help less affluent people, the results have been discouraging with some high-flying wellness providers that raised significant funding from once eager VC firms looking for a gentle exit.

Does the defined contribution model present unique opportunities to deliver advice to the masses, something which the B-to-C model that digital robo advisors have used proves to be economically unviable?

Along with access to at least some data through the record keeper, payroll provider and health care systems, there is more trust and oversight at the workplace, making employees feel more comfortable and likely to engage with the only financial advisor many will ever meet.

To overcome cost barriers, many wellness platforms lead with digital solutions, some with limited live help, which usually means limited results and low single-digit engagement. Ultimately, someone will have to pay for viable models and, if not the plan sponsor, that someone, either an advisor, record keeper or asset manager, will likely try to subsidize the cost by cross-selling other services.

This presents yet another hurdle: if most participants have limited resources, how profitable can they be?

Some advisors, like Captrust, leverage third-party wellness tools while offering one-on-one advice for all for $20-$50 per employee, knowing that just 20% will engage, most likely the most wealthy without an advisor. They estimate that one in eight will have at least $1 million, which, while viable for Captrust, does little for the other 97%.

American Funds, partnering with Financial Finesse, may have found a model to help all types of workers whose employers offer a 401(k) or 403(b) plan without cross-selling.

In a limited pilot launched in the spring of 2022, they offered FF’s digital and call center to 10 clients who use their target date fund, not record keeping, and to 10 new plans through an advisor who would make their TDF the QDIA.

The results are promising. Four of 10 prospects were willing to switch to the American Funds TDF accounting for $65 million, while the advisor, Sean Bjork in the Chicago area, was able to bring in another $185 million by offering the FF service to prospects in two plans. At 40 basis points, that’s over $1 million in recurring and accruing revenue. They retained the 10 investment-only clients and are now offering the same deal to larger record-keeping clients.

The program appealed to Bjork because there is no cross-selling by the FF CFPs who are not licensed and he commented that the program not just helped him differentiate his services, it was actually a “game changer.”

Ultimately, however, results need to be achieved not just for American Funds but also for the plan sponsor and participants. “Sponsor buy-in is key,” noted Bjork. “Without promotion, just 10% of participants use the service, which grew to 30%- 45% for engaged plan sponsors.”

Lumping Financial Finesse with most of the other wellness providers, especially those that lead with digital service, is not fair. Led by founder and CEO Liz Davidson and started in 1999, FF employs 29 CFPs and has 20,000 clients. “It’s easier to work with a single team at larger employers,” said Davidson. “They are being held accountable [for results]. But Capital Group made it easier [for smaller plans] as they cut through the layers. Engagement was off the charts.”

Davidson sees a 60% increase in call activity due to personalization and AI.

There’s a lot of money spent (and wasted) on employee education and advisor value add programs that have little to no practical results. Though Bjork extolled the value of the American Funds pilot, he stressed the funds had to win on their own merits and were only used to break a tie.

Though there are more regulations, liability and layers to navigate in DC plans, the American Funds pilot with Bjork and Financial Finesse collaboration is an example of a workplace model that could actually make financial planning and advice available to all or at least a lot more workers.


Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.

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