At a time when House Republicans just voted against the expansion of state-run retirement plans for workers without job-based plans, a new robo-advisor targeting those employees has just launched.
(Related on ThinkAdvisor: House Votes to Block State-Run Retirement Plans)
Finhabits, an RIA based in New York City, focuses specifically on minority workers who lack a retirement plan, offering both traditional individual retirement accounts and Roth IRAs as well as taxable investment accounts, via a bilingual (English and Spanish) electronic platform.
"Seventy-four percent of Latinos and 60% of African-Americans don't have retirement accounts … because most work in smaller businesses that often don't offer a 401(k) plan," the firm's founder and CEO, Carlos Garcia, told ThinkAdvisor. "Current service providers are not serving them, so we created a service from the ground up."
(Related on ThinkAdvisor: How Discrimination Influences Financial Decisions)
In addition, minority investors who have retirement savings but have faced discrimination tend to overestimate investment risks and under-allocate equities, which leads to inadequate retirement savings, according to a 2016 study from the University of Miami School of Business Administration.
The Finhabits service starts with a questionnaire asking investors about their age, money needs, employment, net worth and income. Then Finhabits helps investors create a portfolio of low-cost index ETFs from Vanguard and BlackRock, which include U.S. and international stock ETFs as well as ETFs comprising government bonds, corporate bonds, tax-exempt bonds, inflation-protected bonds and, for taxable accounts, REITs.
"Each portfolio has a well-balanced mix of these groups to help investors reach their goals and limit risks," said Garcia. "And once they start investing we can help them develop the habit by giving nudges."
