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Study Finds HSAs Are Underutilized

Despite the tax advantages of health savings accounts (HSA), nearly 60% of advisors are not offering them to their clients, according to a survey of more than 230 registered investment advisors (RIAs) by HealthSavings Administrators


According to the findings, 26% of advisors admit they do not discuss HSAs with their clients at all. The responses revealed that a lack of knowledge about HSAs, how they operate and how they fit into a long-term financial strategy are the primary drivers for the disconnect. While 36% of advisors noted they do not fully understand how an HSA works, 40% claim clients don’t either. Further underscoring the need for more education, nearly half said that clients perceive HSAs as spending accounts only.

The survey also revealed that 22% of advisors are not aware they can earn revenue by offering an HSA. As individually owned accounts, HSAs can be invested like a 401(k) or an IRA. This means an RIA can be compensated for managing an HSA account based on a percentage of assets or a fixed fee. According to the latest research from Devenir, invested assets in HSAs are estimated to grow to $16.7 billion in the year 2020 — providing advisors with ample opportunity for compensation and client satisfaction.

Long-Term Investment Misfire
When advisors do offer HSAs to clients, nearly half (47%) still position them as spending accounts and 72% as savings accounts. Those findings reveal a deep-seated belief among advisors and clients alike that HSAs are short-term financial vehicles, despite industry research lauding the extensive benefits of investment-focused HSAs. While 73% of those surveyed claim they do offer investment-focused HSAs, less than half of their HSA-eligible client base (41%) is actually investing in an HSA for long-term growth. 

Misunderstandings about how to leverage HSAs as long-term investment and retirement strategies are a primary factor for the mismatch. For example, 70% of respondents noted their clients are completely unaware of HSAs as a means of transferring wealth to family members. Anyone can fund an HSA for a loved one, as long as that loved one is HSA-eligible and has an HSA. In 2019, up to $3,500 can be deposited in an HSA for an individual under self-only health coverage, and $7,000 can be deposited for an individual under family coverage.

Service and Reputation Matter Most
Despite the current disconnect among advisors about how HSAs can benefit their practice and their client base, 79% of respondents who offer an HSA noted they are satisfied with their current HSA offering. When asked about what they care about when working with an HSA provider, an overwhelming majority of respondents (98%) cited reputation/trust and customer service as the top two factors. Low administration fees were also cited by 90% of respondents as a primary consideration.

“The call for better HSA education among consumers, plan sponsors and advisors is nothing new. What is changing, however, is the why,” noted Craig Keohan, chief revenue officer at HealthSavings Administrators. “With health care costs continuing to rise, there has never been a more critical time for advisors and consumers alike to build their knowledge about HSAs and where they fit into the retirement planning mix. Investment-focused HSAs are the future of the industry, and advisors will benefit by using them as strategic long-term investment vehicles that will help ensure happy, healthy retirements.” 

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