Vanguard has partnered with HelloWallet, a financial wellness service, to help employees save more for retirement by addressing the money pressures and behaviors that stand in their way.
HelloWallet provides personalized, unbiased guidance to individuals on managing their debt, spending wisely, and maximizing their 401(k) company benefits. It is the latest in a slow steady drumbeat of apps that aim to replace financial advisors that has gained a foothold with retail advice outlets.
“Vanguard’s research and years of experience with millions of investors have shown that most employees simply want someone to tell them what to do. While we will continue to provide educational content and calculators to participants as important sources of guidance, HelloWallet is based on a deep understanding of an individual's needs, preferences, and behaviors, which results in more personal guidance,” said Amy Cribbs, head of Vanguard Participant Experience. “HelloWallet provides a financial wellness component that complements our educational content and advice services. We believe that HelloWallet has a sound approach that can make it easy for employees to manage their personal finances by nudging them into making appropriate decisions.”
For several years a shakeout in the financial advice business has been slowly unfolding. Companies like Vanguard and HelloWallet are collaborating to serve the masses. If you've followed our coverage of deals like this one between Vanguard and HelloWallet, then you know these apps are making some headway. As great companies like Vanguard provide more advice to retail investors using third-party apps for the masses, they slowly encroach on prospective clients advisors might otherwise have captured.
"HelloWallet combines behavioral economics and the psychology of decision-making with sophisticated technology to examine individuals’ debt, spending, and savings behaviors, and provides incremental guidance on making appropriate decisions around those areas," says a Vanguard press release. "Employee members currently access the service through HelloWallet’s website and mobile app. Members input their goals and priorities and add their financial information, including income, bank accounts, credit cards, retirement plans, medical and other insurance, and investments.
"HelloWallet creates budgets and analyzes trends in members’ financial behavior to recommend how they can make the most of their financial opportunities (e.g., 401(k) plan, health savings account, flexible spending account, or insurance), prioritize financial decisions, and identify ways to stretch their paycheck further," says Vanguard.
We're at the beginning of the shakeout, and these apps can't are not so powerful now. However, HelloWallet's deal with Vanguard and other deals like give lean, smart startups access to a mass market to begin to optimize its business. Over a few years, the collaboration between the Vanguards and Hello Wallets of the world will grow stronger. Informed by the behavioral finance and the data about their users, these not-so-good financial apps will grow more engaging, and they will slowly replace more and more advisors.
Some advisors are oblivious to the shakeout. Following one of my earlier stories predicting a shakeout, one prominent advisor posted a tweet saying, "What shakeout?" His business was doing just fine. That's because he has adapted his firm to the current environment. He's not delivering advice that's pretty worthless. He's actually providing financial planning for clients and not just managing their money in a model portfolio. But advisors who do not provide ongoing financial management services to clients are the ones who will have to find new jobs. He's blogging. He's active on social media. If you're like that, you're just fine. In fact you're better than "just fine."
There are only about 65,000 CFP certificants in the nation and only about 60% of them actually practice financial planning. CPAs, CFAs, ChFCs, and CLUs providing maybe add up to another 10,000 advisors with professional credentials providing financial planning advice. So, for advisors who are professionals, there is not a lot of competition.
In the years ahead financial advice professionals can flourish, but brokers won't. If you obtain a professional designation qualifying you to advise people on wealth management and if you provide ongoing financial concierge services as well as investment advice, you're getting your hands dirty and digging into their financial lives deeply, and you will do just fine through the shakeout. You're actually helping people and not just selling products. But at the bottom end of the financial advice business -- the commoditized advice models of the big brokerages -- will be under increasing pressure.
Continued defections of top brokers from wirehouses is one symptom of the shakeout. The most commoditized providers of financial advice services, the big-name Wall Street brokerages, are regularly losing top-level advisors who choose to go independent. Advisors at the big brokerage firms now have more to gain by not being part of a giant firm. They can create more streamlined technology and workflows suited to their personal way of doing business and rid themselves of the regulatory constraints and agenda of their corporate overlord.
This partnership between Vanguard and HelloWallet is emblematic of the changes unfolding in the financial advice business. When you see a company like Vanguard, a champion of the consumer, integrating financial advice apps that aim to replace advisors, you have stop and think how your firm is positioned to compete.