A new 401(k) offering combines managed funds with a financial wellness component to encourage investors to address issues that lead to high financial stress.
Founded by Tom Ruggie and Michael Case Smith, Edge 401k Funds offer plan sponsors a way to proactively engage participants in financial wellness.
The funds are currently available on over 20 platforms, including TD Ameritrade, Fidelity and Charles Schwab. They mimic Morningstar’s indexes, Smith said. When a plan sponsor adds the Edge funds to the 401(k) roster and an employee selects or is automatically enrolled in them, “two things happen,” Smith, managing director of Edge 401k Funds, said in an interview with ThinkAdvisor. “They get that global balanced asset allocation — aggressive, moderate, conservative — and the other thing they get is a phone call.”
Participants in the fund get a phone call from a “money coach” assigned to answer questions about asset allocation and to offer guidance on day-to-day financial issues. Even if an employee declines that guidance, they get a call every quarter.
“The outbound call is really the secret sauce,” Smith said. “If somebody engages in the program and wants some tough love, we’ll build out an action plan, set some goals and hold them accountable; ‘I’m going to call you in three weeks.’ It’s that human behavior, that person nagging them, that really moves the needle on the effectiveness of the program.”
Smith said he’s seeing a lot of engagement from plan participants. “If I’m standing in front of 115 employees, I lay out the program, ‘Hey guys, I can talk your ear off about correlation coefficients and style-box funds, or if you want the kind of money concierge the C-suite gets and someone to do asset allocation for you, check the box.’ Out of 115, 100 are going to say, ‘Absolutely!’”
Of those, maybe only 20% ask for help with a financial action plan, but the rest are still getting a quarterly call to stay in touch and keep up with life changes.
Smith acknowledged that there are other firms that provide financial wellness programs and employee assistance programs, but “they’re $50 to $100 a head whether people use it or not. Nobody’s looking to spend another $100 per participant.”