Most investment advisors do not include health savings accounts (HSAs) in clients’ long-term financial strategy, according to a new survey from HealthSavings Administrators, an HSA provider. The survey found that nearly 60% of advisors did not even offer HSAs to clients.
Participants can qualify for an HSA if they are enrolled in a high-deductible health insurance plan and can contribute annually to the account. Afterwards, these funds can be used on out-of-pocket eligible medical expenditures, including deductibles and copays. Accounts can also be invested, akin to a 401(k).
HSA balances carry over from year to year, and participants benefit from a triple tax advantage, as deposited cash, interest and capital gains on invested accounts, and medical expenses are all untaxed. But despite these advantages, HealthSavings’ survey of more than 230 advisors indicated that only 26% of advisors discussed HSAs with clients.
The lack of conversation around HSAs may partially derive from uncertainty about them; 36% of advisors said they did not fully understand how an HSA works, while 40% did not believe their clients understood HSAs. Nearly half of advisors said HSAs are considered only to be spending accounts, and of advisors who do offer HSAs, less than half of their eligible clients were actually investing. Investment-focused HSAs are central to retirement planning, according to HealthSavings Administrators Chief Revenue Officer Craig Keohan, who said advisors would benefit from seeing HSAs as "strategic long-term investment vehicles."
“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,” he said.
HSA assets and accounts are growing. According to data from Devenir, a firm that tracks HSA market data and creates investment solutions, the number of accounts rose by 13% from 2017 to 2018, with HSA assets totaling $53.8 billion in 2018. Though this remains a tiny piece of the retirement marketplace, Devenir expects total HSA assets to rise to $75 billion by 2020.
But according to the survey, 22% of advisors do not know they have a chance to earn revenue through HSAs, either as a percentage of assets or with a fixed fee. And the opportunity to earn on invested HSAs continues to grow; $16.7 billion of the total 2020 estimated assets will come from investments, according to Devenir.
