Retirement investment platform ForUsAll partnered with Coinbase to offer employees exposure to cryptos, in what the company said is a first of its kind.
“For too long, too many Americans haven’t had the same access to alternative investments that wealthy and professional investors have had. Our mission is to provide every American with the tools necessary to build a brighter financial future, and making these alternatives more readily available is a key step towards that,” Jeff Schulte, CEO of ForUsAll, said in a statement. “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy — alternative investment options, combined with our original core offering of low-cost index funds, and personalized help.”
ForUsAll said in the statement that employers now have the choice to include cryptocurrency via a self-directed alt window inside the 401(k) alongside their investment lineup. From there, participants will be able to transfer up to 5% of their portfolio into a cryptocurrency window where they can invest in more than 50 cryptocurrencies. ForUsAll said it will closely monitor allocations, alerting employees when their overall crypto allocation exceeds 5% of their portfolio, making it easy to rebalance into more traditional mutual funds.
Paul Selker, president of Spark Street Digital, told GOBankingRates that the option to invest in crypto is going to get people excited about putting money into their 401(k), as well as help them overcome the natural tendency to let their contributions stay static over time. His company’s average contribution percentage with ForUsAll is 8.5% with 100% employee participation.
While Selker said he’s a “bit of a crypto skeptic,” and cryptos should be just a “tiny slice of one’s portfolio,” he believes ForUsAll’s approach to offering crypto is appealing. “They’re not going to let anyone go off the rails with a huge investment in some fringe coin,” he said. “What I like about ForUsAll is that they are always looking for ways to get people’s contributions higher. Offering crypto is part of that — it’ll get people contributing more, putting money away for the future.”
“When we created our institutional platform, our initial focus was making cryptocurrency accessible to institutional investors and high net worth individuals,” Brett Tejpaul, head of Institutional Coverage at Coinbase, said in the statement. “The next evolution is to broaden our reach and we are thrilled to be working with ForUsAll, the leading 401(k) technology platform, to expand access to cryptocurrency through 401(k)s.”
“The reality is that alternative asset classes which increasingly include small allocations to cryptocurrency have become an important part of many institutional portfolios. Without access to these portfolio building blocks and expert help to prudently use these asset classes, the average American may be at a structural disadvantage,” David Ramirez, ForUsAll co-founder and CIO said in the statement. “Alternative investments, including small allocations to cryptocurrency can help improve portfolio diversification and expected returns. However, the volatility and the complexity of these asset classes make prudent education and advice for employees essential.”
Tom Pageler, CEO at financial infrastructure provider for fintech Prime Trust, told GOBankingRates that this is a smart move on behalf of ForUsAll and Coinbase, who “have teamed up to meet the growing demand of digital assets for the next generation of investors.” He added, “It’s also a reflection of emerging wealth tech solutions that allow individuals to buy, sell, and hold digital assets as part of a diversified strategy.”
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However, some retirement experts doubt there is sufficient interest to include cryptos in retirement plans, due to their volatility.
Lew Minsky, president of the Defined Contribution Institutional Investment Association, a research and advocacy organization for investment managers, told GOBankingRates that at this point, “I’m not seeing a lot of interest in the subject from plan fiduciaries, or focus on the product development side from the industry.”
“If there is a place for crypto investments within defined contribution retirement savings plans, it will likely be as a small allocation used as a diversifier in a professionally managed portfolio, like a target date fund or managed account,” Minsky clarified.
The sentiment is echoed by Matthew Appelstein, head of the Americas at asset management firm Eastspring Investments, who told GOBankingRates that he’s not a supporter of crypto as “it is such a volatile area. It is impacted by exogenous events more so than almost any other asset class and we have not seen Interest on our end from retirement plans.”
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Last updated: June 10, 2021
Note: this article was updated to include quotes from Paul Selker (Spark Street Digital)