The Oregon Senate has given final approval to a bill that
would allow private-sector employees without an employer-sponsored retirement
plan to join a state-sponsored plan.
The Portland Tribune reports that the bill will now go to
Governor Kate Brown. It would create a board within the Oregon State Treasury
to develop a plan similar to an individual retirement account, to which
participating workers would contribute via payroll deduction. The plan would be
modeled after the 529 Oregon College Savings Plan that is run under contract.
While businesses would be required to make a state-sponsored
savings plan available to workers by mid-2017, HB 2960 would not compel them to
contribute to a plan, and workers could opt out of participating.
In January, the Retirement Savings Task Force in Oregon recommended to the Oregon
legislature that a retirement security program be created to address the lack
of plan access or lack of savings for private-sector workers in the state. The
task force recommended that employees be automatically enrolled in the plan
with the right to opt out. Employees should be notified of their right to
enroll and provided financial education upon employment, the committee’s report
said. However, the plan would also be available to the unemployed. The plan
would also include automatic escalation of deferral amounts, with a right to
opt out.
If signed by Governor Brown, Oregon would join California
and Illinois in offering a state-run
plan.
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A new Hearts & Wallets study “assesses the robo
phenomenon through the prism of trend-setting Millennials,” comparing robo-adviser
brands as perceived by investors ages 21 to 39.
According to Hearts & Wallets, this market segment represents
34.2 million households making decisions about $2.1 trillion of investable assets.
Even more important than Millennials’ current asset total is their potential
for substantial future earnings and wealth inheritance—and their trendsetting
attitudes on technology and customer experience.
“Although small in comparison to total U.S. investable assets
of about $41 trillion, younger consumer preferences will have an outsized
impact on financial services as firms race to respond to new trends,” the study
finds. Given their willingness to use technology and digital media across new
aspects of life, Millennials are pushing financial services firms to reassess long-standing
assumptions about the way people want to manage and think about money.
Hearts & Wallets’ assessment finds a small number of emerging
firms are competing aggressively for robo-adviser market share—notably Wealthfront, Betterment, Personal Capital and LearnVest. They face strong and
well-supported competition from bigger name firms such as Vanguard, Charles
Schwab and TD Ameritrade, which have all taken steps towards open architecture
access to robo-adviser platforms for their adviser forces.
Looking across the
marketplace, Hearts & Wallets finds the emerging firms are generally not
positioning themselves as a full replacement or direct adversary for
traditional advisers—especially not in the older client segments. Instead, a more
genial relationship is taking shape in which the emerging robo firms function
more as a supporting product or platform that allows clients with the prerogative
to access more self-service and direct access to tools and investments.
This is the case
with LearnVest, for example, which was recently acquired by Northwestern
Mutual. Analyzing that deal, Hearts & Wallets feels the
LearnVest platform, rather than being positioned as a replacement for Northwestern
Mutual’s traditional advisory staff, is being positioned as a new type of “motivational
financial planning platform, seen by young consumers as an entirely new category
of support.”
Another key theme emerging from Hearts & Wallets’
analysis shows Millennials are “accustomed to overwhelming choice in the
information age,” leading to increased importance of “brand personality” as a
tool in selecting a firm that matches their own tastes and expectations. The
study found a process of elimination helps consumers “winnow their options to a
select set of the best personality fits.”
“Younger consumers have been weaned on complexity,” the
study suggests, “and they are excellent comparison shoppers. It’s more fun to
figure out if I’m the kind of person who uses Wealthfront than to sort through
7,000 mutual funds. Staying neutral seems safe but may not be an effective defense
for bigger firms. Neutral is boring, while a true personality fit delights the consumer.”
For both robo-advisers and traditional firms, Hearts &
Wallets finds clarity of pricing and a clear definition of the scope of service
are high on Millennials’ lists of demands. “Younger consumers love that the
robo-advisers tell them what they are getting and answer the three screaming
unmet needs first identified by Hearts & Wallets in 2010: Tell me what you
do, tell me how you earn money, and tell me how to evaluate you.”
The study also examines how consumers respond to the robo-advisers’
use of games and behavioral finance themes to personalize products in
meaningful ways.
“The new entrants use design as a competitive weapon,” the
report notes. “App-like features draw the consumer in. To compete, traditional
firms need to recognize younger consumers are connoisseurs of interface and design, and build their offerings accordingly.”
These findings are drawn from the study “New Needs, New Competitors, New Solutions:
Young Investors Speak, Revealing the Real Reasons for the Robos ‘Emergence’ and What to Do Next,” which analyzed a large sample of young investors with
more than $10,000 in investable assets. About half the respondents currently
participate in a workplace retirement plan.