The convergence of 401k financial wellness and fintech is on the rise and exciting the industry. Behavioral finance aspects aside, it’s the way in which participants engage in financial wellness that’s attracting interest.
“What’s up with fintech?” Bill Chetney rhetorically asks. “Technology is such that merchants can electronically give cash back in the form of loyalty rewards. And now Acorns and Ebates are taking it to the next level, and companies like EvoShare—which applies cashback programs to 401k savings—are going beyond even that. None of it would be possible without the technology that exists today.”
Impulse saving, the idea fueling EvoShare (as opposed to impulse spending), is what Chetney, founder of advisor aggregation firm GRPAA, boldly claims is one of the “most interesting tech things—ever.”
The topic, and fintech in general, will be extensively covered at GRPAA’s National Conference at San Diego’s Hotel Del Coronado, October 3-6, 2019, which Chetney says is open to all entities interested in ‘finnovation.’
“About 15 years ago there was a similar notion called America Saves, but it was just way ahead of its time. The technology wasn’t there for it to be efficient. Now it’s efficient enough to ‘harvest’ cash back from 12,000 different entities. And those numbers will double again, whether it’s EvoShare, Ebates or Acorns.”
Large money managers and recordkeepers are trying to find ways to communicate with participants and bring retirement saving benefits, sometimes 40 years off in the future, to front-of-mind today.
EvoShare reinforces immediate and positive behavior when a card is swiped and a purchase is made, which means more money for retirement.
“Or, more related to financial wellness in general, if it’s an HSA provider, you just saved more for your health care. If it’s a 529 provider, you just saved more for education. And it’s branded in the mind of the consumer/saver, meaning if it’s Capital Group, then Capital Group did this great thing for you. If it’s Franklin Templeton, then Franklin Templeton did this great thing for you.”
Currently, participants might be informed of an increase in their balance a few times a year with the arrival of quarterly statements (if they’re opened).
“What if three of four or five times a week, when you use your credit card, it said, ‘Hey, something good just happened, brought to you by your advisor and Capital Group?’ It’s pretty powerful and brings immediacy to something that’s 40 years out.”
Less pain, more gain
Impulse saving is based on the idea of “less painful, incremental contributions rather than one, big painful chunk.”
“When I started in the retirement business, everybody ran around at tax time and tried to get somebody to put $2,000 in their IRA, but it’s hard to come up with $2,000, even though you’re going to have all this tax savings. When the 401k came along, it was, say, $11 a paycheck. You end up with the same $2,000 (or more), but it’s just less painful.
“I wouldn’t call it impulse savings; I’d call it guilt savings,” Chetney colorfully concluded. “We all know we’d like to save more, but if we go out to dinner for $100 and it says ‘you just saved 10 bucks for retirement that will eventually be worth $80 because you’re so young,’ you feel a bit better about the money you just spent. It then prompts you to maybe throw in $10 more, since you just blew $100 on dinner anyway. You do a little bit of saving as you’re spending.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
