Products May 30, 2014

Morningstar Acquires HelloWallet

May 30, 2014 (PLANSPONSOR.com) – Investment research firm Morningstar, Inc. has entered into an agreement to acquire online financial wellness provider HelloWallet Holding, Inc.
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The transaction will bring together HelloWallet’s financial wellness expertise with Morningstar’s independent, research-based retirement advice to create a holistic retirement savings and advice offering, Morningstar said. Morningstar, through its advisory subsidiaries, is the largest provider of managed retirement accounts by participants served, with almost one million individuals enrolled.

Brock Johnson, head of retirement solutions for Morningstar based in Chicago, tells PLANSPONSOR he believes the two firms are a “natural strategic fit” with HelloWallet assisting with savings strategies and Morningstar then complementing those strategies with investment advice. Aside from Morningstar’s managed account offerings, Johnson believes the acquisition will provide “ a broader solution set” that answers the demand by the market for a more holistic approach to saving and investing, offering more comprehensive services to participants.

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Through HelloWallet’s website and mobile applications, employees input their goals and priorities and add their financial information, including income, bank accounts, credit cards, retirement plans, insurance, and investments. HelloWallet creates budgets and analyzes trends in financial behavior to recommend how members can prioritize financial decisions, identify ways to stretch their paychecks, and make the most of their benefits, such as 401(k) plans, health savings accounts, flexible spending accounts, and insurance. HelloWallet also automatically alerts members when they need to make changes.

Johnson says, “There is definitely value in the HelloWallet brand. In addition to tools currently offered by HelloWallet, I can see such tools being expanded over time, whether they relate to health benefits, participant engagement or just generally helping participants achieve better outcomes.”

HelloWallet was founded in 2009 by Dr. Matt Fellowes, a consumer finance expert and former Brookings Institution scholar. In January 2012, Morningstar became a HelloWallet investor with $6.75 million in Series B funding. Fellowes will remain with the firm in a leadership role.

HelloWallet has a loyal and committed client base of retirement plan sponsors, such as Marsh and McLennan, United Technologies, and Salesforce.com, as well as key relationships with leading retirement plan providers. As for previous collaborations with firms such as Vanguard (see "Vanguard Partners with HelloWallet for Financial Education”) and Aon Hewitt (see “Aon Hewitt Teams with HelloWallet”), Fellowes tells PLANSPONSOR, “I don’t see this acquisition having any effect at all on those collaborations. We are thrilled with those partnerships, and see them being maintained and grown going forward.”

Johnson expects the acquisition to benefit retirement clients and the participants they serve, in addition to providing value for advisers and asset managers. “We want to bring together HelloWallet’s expertise in behavioral and consumer research and analytics with Morningstar’s investment management capabilities to create the first holistic solution for the retirement market. HelloWallet’s done a tremendous job—its unique approach to financial wellness has changed the way employers view benefits programs and the way employees manage their daily finances. Working together, HelloWallet and Morningstar have an opportunity to significantly improve the financial and retirement outcomes of workers,” he says.

Benefits May 29, 2014

Younger, Newer Employees the Plan Participation Challenge

May 29, 2014 (PLANSPONSOR.com) - Millennials continue to be the big challenge for retirement plan participation, Wells Fargo Institutional Retirement and Trust finds.
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Wells Fargo’s quarterly analysis of key trends among the 4 million eligible employees for whom it provides an employer-sponsored 401(k) plan shows about one-third (34%) of Millennial workers participate in their 401(k) plans on average. However, this number jumps up to 70% for Millennials who are automatically enrolled in their 401(k) plans.

“As evidenced by the difference in participation for Millennials in plans with auto enrollment versus those in plans without auto enrollment, where they had to opt in to the plan, automatic enrollment can be very effective in getting people into the plan,” Joe Ready, director of Wells Fargo Institutional Retirement and Trust, tells PLANSPONSOR. “Education and communication campaigns are also essential—and for the younger groups, this involves more than just the traditional print mailer.”

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In addition, although participation is improving a bit among employees with one to four years of service, new hires are actually losing ground. Only 22% of people hired in the past year are participating in their workplace retirement plan.

Participation is improving for those who earn at least $40,000 per year. Less than half (48%) of workers earning $20,000 to $39,000 are participating, compared with just more than half a year ago.  Only 17% of those earning less than $20,000 are participating, compared with 22% a year ago.

There is good news, however, as younger and newer employees who are participating in their 401(k) plans are saving at better levels and are more diversified in their investments. Wells Fargo’s recommended contribution index, which measures how many people are saving a minimum target of 10% in their 401(k) plan, including employer match, is up 1.4 percentage points, which is noticeably better than the modest gains in prior years (0.6 percentage points in 2013 Q1, 0.5 percentage points in 2012 Q1).

All generations except the Silent Generation have seen at least a four-percentage-point increase in Contribution Index over the past three years. Additionally, the Contribution Index has improved three percentage points among new hires over the past three years, and now stands at 24%. Those hired one to two years ago have seen an improvement of four percentage points—with 30% saving at a minimum target of 10%.

“I am encouraged by the uptick in participants [with contributions of at least] 10%, including employer match,” Ready says. “It’s not enough to just get in the plan; people need to save adequately, also.”

The number of participants meeting a minimum level of diversification—either a minimum of two equities and a fixed fund or an asset allocation fund such as a target-date fund, and less than 20% in employer stock—in their 401(k) account is up two percentage points this year. Wells Fargo says the big driver is the growing use of managed products; 74% of participants now have at least part of their balance in a managed investment product, up from 65% three years ago.

According to the study, among generations, Millennials are still the most diversified. By tenure, new hires continue to be the most diversified, but there has been no change in that group over the past three years. The biggest gains are among those with three to nine years of tenure, who have seen a jump of 10 percentage points over the past three years. This correlates with the wave of plans that adopted managed investment products as their default investment in the wake of the 2006 Pension Protection Act, Wells Fargo says.

By salary, diversification is highest among the lowest earners: 82% for those earning less than $20,000. The other salary groups are clustered tightly, ranging from 75% to 77%.

The analysis also finds loan usage has leveled off, but still more than 19% of participants have an outstanding loan.

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