Deals and People July 19, 2023

Financial Finesse Invests in OfColor to Empower Employees of Color

The financial wellness platforms aim to address the ‘soaring rates of financial stress among employees of color’ with this partnership.

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In an effort to improve financial well-being among employees of color, Financial Finesse Ventures announced that it will invest in OfColor Inc., a minority-owned financial wellness platform that is “available to all, but unapologetically focused on the financial empowerment of employees of color.” 

The goal of the partnership is to accelerate OfColor, amplify Financial Finesse’s diversity, equity and inclusion initiatives and make strides toward closing the racial wealth gap, a press release stated. 

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Financial Finesse Ventures is an arm of wellness platform Financial Finesse and was founded in 2022. 

“We are beyond excited to partner with OfColor, a company whose mission speaks to my own goal of bringing critically needed financial wellness coaching to as many people as possible,” said Liz Davidson, CEO of Financial Finesse, in a press release. “OfColor is already making a name for itself as an influential changemaker in the industry. Together we will be able to meaningfully address the soaring rates of financial stress among employees of color, chip away at our country’s chronic racial wealth gap, and transform millions of financial lives.” 

With this capital investment, Financial Finesse will introduce OfColor to the more than 12,000 employers it currently serves, helping to scale OfColor’s reach and impact. In addition to funding, Financial Finesse will “consult with OfColor, leveraging its institutional knowledge of the financial wellness market to drive continued innovation, operational efficiencies and advancements in technology, data and analytics.” 

Yemi Rose, founder and CEO of OfColor, launched the platform in 2020 and has grown its client base by attracting numerous Fortune 100 clientsand leveraging fintech tools, culturally relevant content and financial coaching and therapy led by BIPOC coaches.  

“I wanted to build a platform where someone can talk to someone that looks like them and has similar experiences,” Rose says. “If you think about how the financial racial wealth gap impacts people of color, it’s through this lack of resiliency that manifests itself in hardship withdrawals. … So I wanted folks to be able to leverage fintech tools that help them to save, budget or build their resiliency.” 

Rose adds that it was important to offer financial literacy content that is relevant to the unique experiences of BIPOC employees.  

“There’s a lot within the personal finance writing, when directed at folks of color, that really ignores the systemic barriers to wealth creation and puts the onus solely on the individual,” Rose says. 

When a user logs on to OfColor, Rose explains that the user goes through an onboarding experience and is asked to select financial priorities. Then the platform matches the user with a financial coach based on their responses, and generates financial literacy content based on the topics they selected. Rose says all of the content, both written and video, is produced by people of color. 

Users can sign up for group coaching sessions on specific topics and can attach their bank accounts to the platform to take advantage of several personal financial management tools. 

With the Financial Finesse partnership, Rose says OfColor will have a dedicated space within the Financial Finesse hub website, so users will have the ability to come to one place for coaching sessions, financial literacy information, access to retirement information and more. 

“It’s an integration of the platforms without necessarily assimilation,” Rose says. “The goal is to ensure that employees can still access all our services easily, because employees like to go to one place and [access] a lot of [tools], as opposed to having different accounts and passwords.” 

Financial Finesse also announced Tuesday that it will expand its coaching benefits to Capital Group’s large plan sponsor clients. This offering comes at no additional cost for plan sponsors or their participants, according to Financial Finesse.  

When asked about details of the transaction, Maggie Weinberg, senior marketing director at Financial Finesse, stated, “As a standard business practice Financial Finesse Ventures does not disclose the details of specific investments.”  

Compliance July 18, 2023

Verizon Reaches $30M Settlement in 401(k) Complaint

The 2016 lawsuit accused Verizon of failing to monitor a hedge fund in its retirement plan TDFs.

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Verizon Communications Inc. has agreed to pay $30 million to settle a complaint from 2016 related to allegations of an underperforming hedge fund in its retirement plan target-date funds, according to a July 7 filing in the U.S. District Court for the Southern District of New York.

Class representative Melina Jacobs and Verizon agreed to the proposed settlement, pending court approval, over allegations of Verizon and its employee benefits committee failing to uphold its fiduciary duty in monitoring the performance of a hedge fund called the Global Opportunity Fund and not taking “corrective action regarding the Fund despite obvious and long-term underperformance.”

In the case, Jacobs et al. v. Verizon Communications Inc. et al., Verizon’s attorneys had argued that the company had been following its fiduciary duty in monitoring the target-date funds managed by investment firms Russell Investments and J.P. Morgan. Other allegations regarding underperforming target-date funds and a lack of disclosures related to participant fee statements were dismissed in multiple rulings. Fidelity was also removed as a defendant in the lawsuit because it had not been a plan fiduciary.

But U.S. District Judge Paul G. Gardephe had allowed the Global Opportunity Fund argument to continue, with a trial set to begin this month, according to the court filing. Instead, after two days of negotiations, the parties came to an agreement on the $30 million payment. One-third of the settlement will go to the law firms representing the class, with the remainder going to plan participants as tax-deferred contributions to their accounts or rollovers into individual retirement plan accounts.

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The plaintiffs were represented by law firms Glancy Prongay & Murray LLP, Schneider Wallace Cottrell Konecky LLP and Edgar Law Firm LLC. There are about 160,000 members in the class, according to the court filing.

Verizon did not immediately respond to a request for comment on the proposed settlement.

The plaintiffs’ attorneys wrote that, based on comparing the Global Opportunity Fund to an equity investment benchmark, the damages for the period between April 30, 2010, and January 31, 2017, would be between $102.6 and $231 million. They went on to say that the settlement amount, representing about 13% to 29.2% of those damages, “is appropriate, given the wide range of potential damage outcomes at trial—as well as the possibility of a verdict in favor of Defendant that would result in zero recovery for the Class.”

The Global Opportunity Fund, which had been included in part of the portfolio for target-date funds in the plan, used a strategy aiming to “add value, relative to its benchmark, by investing in the most attractive markets on a global basis, while simultaneously underweighting, or shorting, markets that are viewed by the fund managers as overvalued.”

The fund allegedly had a target rate of return of 12%, which “was subsequently lowered at least twice,” according to the filing. The plaintiff alleged that between 2007 and 2016, the fund “severely underperformed,” as its annualized net performance ranged from -10.32% to 13.88%, with negative returns in three years, ending with an earned aggregate of 1.4% at the end of 2016.

 

 

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