HSAs: A Credible Reason to Engage your Clients’ Children

Registered Investment Advisory (RIA) professionals, brokers and planners are devising ways to “break the ice” with their clients’ adult children. As clients age and technology disruptions accelerate, advisors need to ensure they come up with genuine reasons to open a dialogue with their clients children. 2-hour lunches or Red Sox box seat tickets won’t win the hearts and minds of a generation that prides itself on transparency & social responsibility.

The stakes are high for advisors because a massive wealth transfer will be under way over the next 30–40 years. Some peg the number at $30 Trillion. But advisors should have a genuine value proposition for their clients adult children; otherwise it may come across as disingenuous or self-serving.

So how should advisors think about approaching a generation that barely knows what a checkbook looks like? Engaging client children in a conversation around health savings accounts (HSA) may actually be the perfect middle path to take towards bridging to the next generation while maintaining credibility.

HSA attributes are particularly compelling for a younger Millennial audience. In fact, any young, single, & healthy workforce employee today is a prime candidate for an HSA. And anyone with even modest wealth should take a look.

The Young Invincibles

Why the young? The data are conclusive: young adults spend a lot less. The plot below shows how spending increases by age and according to gender. Males between the ages of 20 and 40 are subsidizing all the rest of us … big time. Thus, the question begs: why pay for more expensive insurance? Advocate for a qualified high deductible plan and train your clients’ children how treat it as a stealth IRA.

If junior cries poor, advisors should suggest their clients make gifts to their kids in order to max out their annual HSA contribution.

Gender Differences

Advisors can get even more nuanced with the conversation. As a whole, young males spend the least on healthcare. I find the second plot below to be kind of funny. From age 0–14, males are more expensive. An unscientific poll of friends concludes younger boys are total spazzes and generally clueless. (I was no exception to this assumption given I had broken my ankle three times and received stitches 4 times by the time I was 12. They knew me by name in 1987.)

The plot shows how much more or less males spend vs females based on age. The difference reaches 60% at age 30. Females are carrying the childbearing role and us men are eating chicken wings watching Monday Night Football. Their Tuesday morning headache makes them forget their annual physical … for the fifth consecutive year.

So advisors talking with a 25–35 year old Millennial male have a layup staring them in the face.

How about those children still trolling their parents health plan while they are under 26? It’s now even easier for your clients to cut the cord and make a gift into Jr’s HSA.

Remind the adult children that HSA balances not spent on qualified expenses can be invested just as a 401(k). Except the withdrawals will never be taxed!

Also remind them that if they have an IRA, a qualified distribution to an HSA is allowed once in their life. The primary constraint in doing this is that they must remain enrolled in the qualified plan for 12 months from the time the rollover is executed.

Last, remind adult children of clients that the HSA account can also double as an emergency spending account. They can withdraw any amount that can be proven as a qualified medical expense. So a $50 healthcare bill paid out-of-pocket last year can be tapped from the HSA. So tell them to keep any healthcare receipts!

Conclusion

An HSA discussion with your clients’ children can be viewed as an “age-based asset location lesson”: save into an HSA when you are young and invincible. HealthyHive HSA customers can also link other retirement accounts to their profile. So now you have a second touchpoint opportunity waiting for you: a more comprehensive discussion about their overall retirement plan. Investment professionals interested in learning about HealthyHive’s HSA SaaS can email us at info@hiveaway.com to schedule a call.