Another cryptocurrency foray into 401ks was announced today.
ForUsAll, a retirement investment platform for small businesses, introduced the Alt 401(k), its turnkey retirement investment platform that allows employers to provide alternative investment options within 401k plans—what the company is calling a “first of its kind.”
The San Francisco-based fintech company is enabling employers to offer cryptocurrency as the plan’s first alternative investment by selecting cryptocurrency platform Coinbase Institutional.
“By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy—alternative investment options, combined with our original core offering of low-cost index funds, and personalized help,” Jeff Schulte, CEO of ForUsAll, said in a statement.
Employers have the choice to include cryptocurrency via a self-directed alt window inside the 401k alongside their investment lineup. From there, participants are able to transfer up to 5% of their portfolio into a cryptocurrency window where they can invest in over 50 cryptocurrencies. ForUsAll closely monitors allocations, alerting employees when their overall cryptocurrency allocation exceeds 5% of their portfolio, making it easy to rebalance into more traditional mutual funds.
“When we created our institutional platform, our initial focus was making cryptocurrency accessible to institutional investors and high-net-worth individuals,” said Brett Tejpaul, head of Institutional Coverage at Coinbase. “The next evolution is to broaden our reach and we are thrilled to be working with ForUsAll, the leading 401k technology platform, to expand access to cryptocurrency through 401ks.”
Professional investors have been shifting more of their investments to alternatives, which generally include private equity, venture capital, real estate and, recently, small allocations to cryptocurrencies. Leading institutional investors are investing up to 80% of their funds in alternatives, including small allocations to cryptocurrency. Recent institutional surveys suggest that 36% of institutions are making small to moderate allocations to cryptocurrency.
“The reality is that alternative asset classes which increasingly include small allocations to cryptocurrency have become an important part of many institutional portfolios. Without access to these portfolio building blocks and expert help to prudently use these asset classes, the average American may be at a structural disadvantage,” said David Ramirez, co-founder and Chief Investment Officer, ForUsAll. “Alternative investments, including small allocations to cryptocurrency can help improve portfolio diversification and expected returns. However, the volatility and the complexity of these asset classes make prudent education and advice for employees essential.”
ForUsAll said that cryptocurrency within the Alt 401(k) may provide tangible advantages for investors including:
- Tax efficiency: Cryptocurrency purchases in a 401k are typically treated just like other investments for tax purposes—any gains are tax-deferred until you withdraw money out of your 401k or may be tax free forever with Roth. Moreover, 401k investors do not generate taxes when they sell their cryptocurrency to rebalance their portfolio after significant appreciation.
- Diversification: Cryptocurrency may add diversification benefits, and a small relative allocation may increase expected return without increasing the level of overall expected risk in their account.
- Help for Employees: Like most emerging technologies, cryptocurrency has the potential for both great returns and great risk. To help employees use cryptocurrencies appropriately, ForUsAll provides personalized help and automatically alerts participants when their allocations exceed 5% of their portfolio.
- Savings incentive: Recent studies looking at interest in cryptocurrencies show that roughly half of people surveyed are interested in owning digital assets. Giving workers access to cryptocurrency in their workplace retirement plan, especially among younger employees who have disproportionately adopted cryptocurrencies, may help to engage participants and increase savings overall.
- Convenience and security: ForUsAll’s Alt 401k plan gives employees access to owning cryptocurrencies that are stored using secure storage methods such as “cold” or offline storage. Employees can access their crypto holdings similarly to how they access other retirement investments, without having to manage digital wallets or private keys.
“Technologies like blockchain and cryptocurrency have the potential to transform our economy. Small early investments in this space may make sense as part of a diversified portfolio,” continued David Ramirez. “Combining access to these assets with education and portfolio monitoring may allow more Americans to benefit from these emerging technologies.”
ForUsAll was founded in 2012 by the same team that helped build Financial Engines, the largest registered investment advisor in the country. The company is focused on providing a retirement platform that provides modern day investments, like ESG funds, cryptocurrency and other alternative investments. Today, ForUsAll manages over $1.7B in AUM and serves over 70,000 employees.
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