At a time when House Republicans just voted against the expansion of state-run retirement plans for workers without job-based plans, a new robo-advisor targeting those employees has just launched.
(Related on ThinkAdvisor: House Votes to Block State-Run Retirement Plans)
Finhabits, an RIA based in New York City, focuses specifically on minority workers who lack a retirement plan, offering both traditional individual retirement accounts and Roth IRAs as well as taxable investment accounts, via a bilingual (English and Spanish) electronic platform.
“Seventy-four percent of Latinos and 60% of African-Americans don’t have retirement accounts … because most work in smaller businesses that often don’t offer a 401(k) plan,” the firm’s founder and CEO, Carlos Garcia, told ThinkAdvisor. “Current service providers are not serving them, so we created a service from the ground up.”
(Related on ThinkAdvisor: How Discrimination Influences Financial Decisions)
In addition, minority investors who have retirement savings but have faced discrimination tend to overestimate investment risks and under-allocate equities, which leads to inadequate retirement savings, according to a 2016 study from the University of Miami School of Business Administration.
The Finhabits service starts with a questionnaire asking investors about their age, money needs, employment, net worth and income. Then Finhabits helps investors create a portfolio of low-cost index ETFs from Vanguard and BlackRock, which include U.S. and international stock ETFs as well as ETFs comprising government bonds, corporate bonds, tax-exempt bonds, inflation-protected bonds and, for taxable accounts, REITs.