Firm Offers Financial Wellness via Investment Menu

The new fund series is described by provider Edge 401k Funds as the only offering of its kind where financial wellness services are offered directly through the 401(k) plan investment menu and paid for by the funds’ expense ratios. The firm says the fund series can be added to an existing plan or included as part of a new 401(k) plan.

Edge 401k Funds is a trade name of RWM Asset Management. Edge 401k Funds’ founders Tom Ruggie and Michael Case Smith say they developed the concept in response to the large number of retirement investors who are “uninvolved 401(k) plan participants who have a great need for proactive financial assistance in many aspects of their lives, beyond the 401(k) and including budgeting, taxes, estate planning and more.”

The series consists of three separate funds similar to asset allocation funds—conservative, moderate and growth—that are collective trusts managed through Alta Trust, Ruggie tells PLANSPONSOR. The company uses a questionnaire which puts participants in one of nine allocations that could be a blend of funds. According to Ruggie, the funds mimic Morningstar indexes for conservative, moderate and growth portfolios, with minor tactical tweaks. “For example, our conservative portfolio is adjusted to prepare for rising interest rate environment,” he says.

“As more businesses recognize the importance of wellness initiatives as part of a healthy workforce and overall employee productivity, we believe our innovative approach will help solve concerns and reduce hard costs related to financial-related stress,” Ruggie adds.  

Participants allocating to the Edge funds inside their 401(k) will be proactively contacted by qualified customer relationship managers from Edge 401k Funds three times a year, who will then schedule time for those participants to speak with a financial coach regarding their overall financial wellness needs.

Topics for discussion include overall budgeting, debt management, funding education, and overall savings plans. Participants will also be encouraged to reach out to Edge 401k Fund’s financial coaches with questions, the firm says.

According to Ruggie, when bringing in a new client, his firm will hold an onboarding session, during which it meets with new participants to explain the funds and financial wellness services. At that time, the firm will get contact information and ask participants what is their preferred method for being contacted. “We will contact them in the best way for them,” he notes.

The funds have already been made available on more than 20 platforms including many large insurance companies, the Charles Schwab Trust, Fidelity Trust, and TD Ameritrade and Trust. The related investment fee for the funds is similar to certain target-date funds and generally less than the typical actively-managed fund found in retirement plans, according to the firm. In addition to covering the cost of professional investment management, the related fees also cover the cost of the financial wellness services delivered. In many cases overall fees can be actually lowered, Ruggie and Case Smith contend.

“It’s an opt-in situation, so the rationale would be that participants are opting in to make the financial wellness services available to them,” Ruggie explains. “However, we realize there will be certain people that will not respond to our contact and utilize the financial wellness services, but we will keep contacting them.” He says the firm predicts it will really make a difference for participants at certain life events, such as the birth of a child, marriage, or even when they realize they really need to start getting serious about saving for retirement. For this reason, he says, the firm anticipates a higher percentage of participants using the financial wellness services will develop over time.

“While saving for retirement is often touted as the most important financial objective, it is far from the only financial concern many individuals struggle with,” says Case Smith, managing director of Edge 401k Funds. “Individuals may not have the expertise or desire to choose investments on their own, but they are concerned with gaining stronger financial footing.”

Ruggie, who is president of Edge 401k Funds, notes the biggest stress for employees is financial stress; having a coach will help them deal with that stress, so they will be healthier and better able to put money away for retirement. He compares it to a health wellness program, which statistics show reduces the cost of health care and improves employee productivity.

“One of the hurdles we get is employers are concerned that it’s a new fund,” Ruggie says. “But I explain that we replicate Morningstar indexes and our funds will be in the range of those.” He notes that statistics show participants’ behavioral patterns are more likely the reason for poor performance, not a lack of good investment choices. “People who have a financial coach tend to put more in retirement plans and tend to have better performance because they not making emotional decisions in good or bad markets.”

Ruggie also points out that, other than perhaps a small cost to add the funds to their plans, there is no additional cost to the employer for offering financial wellness services. “The response from existing and potential clients has been very strong,” he says.

More information is available at http://edge401kfunds.com.

—John Manganaro and Rebecca Moore