While 36 percent of advisors admit they don't really get how HSAs work, 40 percent claim that clients don't understand them either and close to half say clients see HSAs strictly as spending accounts. (Photo: Shutterstock)
According to a new survey of registered investment advisors from HealthSavings Administrators, despite the triple tax advantages of health savings accounts, the majority of RIA survey respondents—nearly 60 percent—are not offering HSAs to their clients.
In fact, 26 percent say they don't even talk to their clients about HSAs.
And even when they do offer them, 47 percent present them to clients as spending accounts, while 72 percent position them as savings accounts—relegating them to a short-term view rather than the long term that using them as investment accounts can provide.
In fact, although 73 percent of those surveyed claim to offer investment-focused HSAs, only 41 percent of their HSA-eligible client base is actually investing in an HSA for long-term growth.
RIAs might not understand HSAs all that well—perhaps why they aren't tackling the subject with clients—since they display a “lack of knowledge” the survey says, about how they work and how they fit into a long-term financial strategy.
While 36 percent of advisors admit they don't really get how HSAs work, 40 percent claim that clients don't understand them either and close to half say clients see HSAs strictly as spending accounts.
A surprising 22 percent of advisors actually don't know that they can earn revenue by offering an HSA. Such individually owned accounts, the report points out, can be invested in the same manner as a 401(k) or an IRA—thus allowing an RIA to receive compensation for managing an HSA account, based on a percentage of assets or a fixed fee.
And those assets could add up to a substantial sum; research from Devenir estimates that invested assets in HSAs could grow to as much as $16.7 billion in 2020.
Then there's the usefulness of HSAs in retirement strategies—but with 70 percent of respondents saying their clients are “completely unaware of HSAs as a means of transferring wealth to family members,” that's not happening either.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
