retirement accounts
Betterment-Uber Partnership—Bromance Or Gig Economy Revolution
September 01, 2016
Last week Betterment and Uber announced a partnership to offer Betterment individual retirement accounts (IRAs) to Uber drivers. The program is already available to drivers in four cities—Boston, Chicago, New Jersey and Seattle—via the Uber app.
Who Are These Guys?
Betterment is a robo-advisor. The technical definition of a robo-advisor (robo-adviser) according to investopedia.com is: “an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners.”
Basically, Betterment has an online platform and app that allows you to save for retirement or other goals by investing in exchange traded funds (ETFs). To get started you answer a few questions that Betterment’s computer system (aka, automated algorithm) analyzes and then chooses your investment options. You don’t have to, nor could you if you wanted to, choose your own investment funds. Its purpose is to automate the investment choosing and saving process for people who don’t want to or feel they cannot make these decisions alone.
And Uber (originally UberCab) is an app-based ride hailing service whose drivers are independent contractors. The app hit the market in 2010.
A Match Made In Tech Heaven
I’m not surprised by this new partnership—Betterment and Uber have a lot in common. They are both successful tech start-ups that went up against well-established industries—financial advisors and taxicabs, respectively. They both rely on technology to deliver their products in a way their traditional competitors never did. They both emerged during the Great Recession of 2008 but hit the ground running in 2010-2011. They enjoy a lot of media attention and support from venture capitalists. And, increasingly, they market their products to businesses as an employee benefit.
Betterment founded Betterment for Business to offer 401(k) plans to small businesses. Uber has several partnerships with businesses:
Uber for Business – Businesses can set up an account to provide rides for their employees
UberCENTRAL – Businesses can set up an account to pay for rides for their customers
UberPOOL – New York City employees enrolled in a WageWorks commuter flex program can use their commuter benefits account to pay for rides with pre-tax dollars Continue Reading...
Comments
Another Day, Another National Retirement Plan Acronym
July 21, 2016
Congressman Joe Crowley of New York is just the latest politician to formally rollout his legislative version of a national retirement plan. The Act is titled the “Secure, Accessible, Valuable, Efficient Universal Pension Accounts” (SAVE UP Accounts). Its target customers are workers whose employers do not currently offer a retirement savings plan. It has many of the same features as other federal and state retirement plan proposals:
- Automatic enrollment in an IRA-like plan
- Pre-tax employee contributions
- Limited number of low-cost investment funds
- Opt-out option
- Requires an employer contribution indexed for inflation and based on employee hours worked (waived if employer is contributing to an existing retirement account)
- Provides a limited employer tax credit to offset the cost of employer contributions
- Sets target benefit amounts
- Creates a collective investment pool to protect against losses
According to an article in Plan Sponsor, a recent report by Natixis Global Asset Management ranked the United States tenth among wealthy nations for retirement security. Some of the reasons put forth in the report for the tenth place ranking are income inequality, lack of access to a workplace retirement plan and a low contribution rate. The report suggests that the U.S. “learn from the experiences of other countries around the world.”
But the people in the countries ranked one through nine have numerous advantages over U.S. citizens when it comes to saving. Chief among them is lower health care costs and less income inequality, not to mention the many social programs like paid leave and childcare benefits. Continue Reading...
Brokers Are Getting Some Unwanted Attention For All The Right Reasons
June 16, 2016
Benefit brokers are familiar with managing the “do we really need you” attitude of their clients. They devote a lot of time and energy proving they bring value to their clients that they could not get without them. And many of them do. They help clients choose insurance, retirement savings and other risk management products. Some are able to do this and save the client money even after factoring in their own fee…
Still many people begrudge brokers for receiving the type and amount of compensation they receive. They agree to the fee because it seems like such a small part of a much bigger transaction and they understand that that’s the way these transactions are done. However, thoughts about what brokers do and how well they do it to earn their commission linger.
These persistent thoughts about broker compensation came to the surface first with the health care reform law, then with retirement plan transparency regulation and later with the fiduciary rule.
Out In The Open At Last
With health care reform, brokers didn’t wait to be noticed. They moved from the middle to the front to express their concerns about navigators assuming their role, health insurance companies eliminating their commissions and regulators ignoring their existence. They felt disrespected and expressed their resentment in both negative and positive ways. Some brokers left the industry; others narrowed their focus and a few created profitable and disruptive niches that got a lot of attention. Too much attention… That was the case with Zenefits.
Zenefits is a technology company that provides software companies use to manage Human Resource administrative functions like benefit plan enrollments and changes, time and attendance tracking and ACA compliance. Zenefits is also a health insurance broker. In 2015, Zenefits, the brokerage, ran into regulatory trouble when it was revealed that it allowed unlicensed brokers to sell health insurance policies. It’s CEO and 250 employees were fired in early 2016. This week Zenefits is getting some more unwanted attention—it’s firing 106 more employees and encouraging others to leave and accept a severance package.
While the Zenefits health insurance broker story is interesting, it can’t compare to the drama happening in the retirement services sphere.
Retirement Plan Fees and Investment Performance In the Spotlight Continue Reading...
Still many people begrudge brokers for receiving the type and amount of compensation they receive. They agree to the fee because it seems like such a small part of a much bigger transaction and they understand that that’s the way these transactions are done. However, thoughts about what brokers do and how well they do it to earn their commission linger.
These persistent thoughts about broker compensation came to the surface first with the health care reform law, then with retirement plan transparency regulation and later with the fiduciary rule.
Out In The Open At Last
With health care reform, brokers didn’t wait to be noticed. They moved from the middle to the front to express their concerns about navigators assuming their role, health insurance companies eliminating their commissions and regulators ignoring their existence. They felt disrespected and expressed their resentment in both negative and positive ways. Some brokers left the industry; others narrowed their focus and a few created profitable and disruptive niches that got a lot of attention. Too much attention… That was the case with Zenefits.
Zenefits is a technology company that provides software companies use to manage Human Resource administrative functions like benefit plan enrollments and changes, time and attendance tracking and ACA compliance. Zenefits is also a health insurance broker. In 2015, Zenefits, the brokerage, ran into regulatory trouble when it was revealed that it allowed unlicensed brokers to sell health insurance policies. It’s CEO and 250 employees were fired in early 2016. This week Zenefits is getting some more unwanted attention—it’s firing 106 more employees and encouraging others to leave and accept a severance package.
While the Zenefits health insurance broker story is interesting, it can’t compare to the drama happening in the retirement services sphere.
Retirement Plan Fees and Investment Performance In the Spotlight Continue Reading...
Protecting Retirement Savings Accounts From Wall Street
April 07, 2016
After much compromise, redrafting, haggling, interference, bullying and support, the Department of Labor issued its final version of the fiduciary rule on April 6, 2016. The fiduciary rule requires retirement plan advisors to put investors interests above their own when it comes to the products they recommend. Advisors will have to disclose, in writing, all fees, compensation and potential conflicts of interest associated with their retirement account recommendations.
Finalizing the fiduciary rule was a long and difficult process for the DOL and it did not get everything it wanted due to the intense opposition of those in the financial industry who saw the rule as a threat to their business practices. These in-the-best-interest-of-the-client opponents articulated their reasons for their opposition, including the costs of updating their computer systems and legal procedures. Basically, they are claiming that the disclosure paperwork they have to hire lawyers to draft, the minor changes they have to make to their computer systems and training their workforce to not take advantage of investors will be costly and burdensome to them.
Yet their lukewarm arguments were good enough to get the support of many members of Congress. Even after Wednesday’s announcement, some in Congress are still trying to stop the final rule from taking effect. But even if Congress succeeds in delaying the final rule (advisors already have two-years to get in full compliance with the final rule), Wall Street has heard the message of the Obama Administration and other retirement plan reform supporters.
You may or may not agree with Senator Elizabeth Warren’s statement that retirement plan service providers and fund managers are “bleeding savers dry,” but Wall Street knows she’s not alone in her opinion. Continue Reading...
Denise Perkins
