Rising healthcare costs combined with growing pressure on registered investment advisors to differentiate their practices have more and more providers bundling health and retirement plan advice.

And while large providers like Marsh & McLennan and Gallagher have long packaged services such as health, 401(k), and payroll support for big employers, bundled services now have started cropping up in the mid- and regional markets.

"There’s definitely a wave in the industry where you’re starting to see bundled benefits packages," says Peter Weitz, managing director of the Weitz Financial Group in Fort Lauderdale, Fla., which specializes in the 401(k) market.

Earlier this month, Atlanta-based OneDigital announced plans to buy Overland Park, Kan.-based Resources Investment Advisors for an undisclosed amount. Through this deal, OneDigital said it will be the first to offer both retirement plan consulting and wealth and healthcare benefits to small- and medium-sized businesses under one umbrella.

“There’s record-high employment, competition for talent and stressed-out employees. Companies are looking for services that make it attractive for employees to work for them.”
Dennis Gallant
Aite Group

For its part, Hightower Advisors has empahsized a focus on "holistic wellness" after a string of RIA acquisitions that expanded its offerings and assets under administration.

"I think companies often like having a single relationship," says David Altimont, senior vice president and partner at Lockton Retirement Services. Lockton offers a health plan advisory practice as well as wealth and retirement services, and Altimont says that the firm’s combined buying power helps them bargain to drive down clients’ benefits costs.

Escalating healthcare costs

According to the National Business Group on Health, large companies estimate that the total cost of healthcare will increase to $15,375 per employee in 2020, up by 5% from $14,642 last year. For small- and mid-sized employers that tend to lack the bargaining power big companies wield, the plan premiums and annual cost increases are often higher.

Healthcare is "the number one area we see our clients trying to maintain or lower costs," says Lockton’s Altimont.

High healthcare premiums and deductibles can strain workers, and in turn affect retirement planning and savings. And many employers have responded by taking a more comprehensive view in designing wellness programs to incorporate elements of both health and finances, advisors say.

"There’s record-high employment, competition for talent and stressed-out employees. Companies are looking for services that make it attractive for employees to work for them," says Dennis Gallant, senior analyst at Aite Group’s wealth management practice.

Against such a backdrop, Gallant expects the trend of RIAs incorporating healthcare advisories alongside retirement plan services to continue, he says.

The growing prevalence of high-deductible plans has put a greater spotlight on health savings account plans. Though they have been around for years, advisors appear to be giving these tax-advantaged savings plans greater attention, Gallant notes.

The number of HSA accounts will reach an estimated 38.1 million by 2021, up from 16.7 million in 2016, according to Aite. Though most HSA holders use all their savings for health-related expenses as they crop up, a small but growing subset of HSA investors treat their accounts as long-term accumulation vehicles. And advisors see managing those assets as a new opportunity to differentiate themselves.

Staying independent

Employer-focused health benefits providers and retirement advisors used to stay in their respective lanes, says Todd Jones, senior vice president at Captrust Advisors. But today, he says, his firm finds itself fending off competition from service providers they may have partnered with in the past.

Insurance subsidies can be lucrative, enabling firms to charge little or nothing for retirement planning, he says, but there’s a tradeoff.

"If you want to be 100% certain that the advice you get is not coming under the guise of some agenda and if you have revenue-sharing or any of that, it gets very muddy," says Jones.

And that means there remains an essential place in the market for independent 401(k) advisors.

"There is still good reason to want an independent, conflict-free, unbiased advocate for your organization or your retirement plan."

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