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App of the Week: HelloWallet

As much as we talk about the advances in investing technologies/platforms on Tradestreaming, personal finance tools are really kicking it.

One of the most popular is HelloWallet. Like the model that its predecessor Mint.com pioneered, HelloWallet is meant to not only track and manage personal spending/budgets, but optimize them as well.

Visualizing your financial life

If you’re like me, you’re a visual person. One of the hardest things to tackle with personal finance is to really understand all the ins-and-outs, money-in/money-out.

Our lives are complex. Spending on individual items needs to be put into the larger context of everything going on in our financial lives.

HelloWallet does a powerful job representing data with useable visuals and the entire service is centered around goals, the guideposts that help determine what we should — and shouldn’t — be doing financially.

After hooking up your bank account and credit cards and filling out simple budgetary items, HelloWallet begins spitting out personalized daily guidance. These zen-like tips are comprised of ways to address lowering spending, reorganizing debt, saving more, etc.

Social benchmarking and conflict-free

HelloWallet also provides social benchmarking by explaining what others in your social/geographic group spend on particular items so you can tell whether you’re overspending or not.

One of the gripes people have with Mint is that its revenue model is to refer its users to 3rd party sites and receive remuneration for any money spent on that new relationship.

HelloWallet doesn’t do that and makes a point of emphasizing that it’s conflict-free. The app comes with a free, no-credit-card-needed 30 day trial. It’s generally $8.95 per month.

Check out HelloWallet.

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401(k) “re-enrollments”: Nudging employees to make bad decisions

Far be it from me to argue with behavioral economist, Richard Thaler (Nudge was awesome, bro) but 401(k) re-enrollment is only good for the sponsors of such plans like T. Rowe Price ($TROW).

The WSJ is reporting this morning on a growing trend for employers to choose something called “re-enrollment” for their employees’ retirement plans.  It goes like this:

Employees have the options of sticking with their current investment selection, if it’s still offered, or choosing another mix. But in a re-enrollment, unless the participant specifically opts out, his or her 401(k) will be re-allocated to the company’s chosen default investment.

Thaler was concerned that employees don’t have enough time/brainspace to make better decisions so it sounds like he likes this approach

“Many [participants] never change their asset allocation or contributions over their working lifetime, meaning that their asset allocation as they get older can be quite different than the one they intended,” says Richard Thaler, professor of economics at the University of Chicago Booth School of Business

Listen, I’m all for nudging children towards better eating habits by the strategic placement and display of such foods in school cafeterias but forcing employees to a made-up allocation for exposure to the stock market…well, not only is that paternalistic, that’s just bad investing.

Digging deeper into target date funds

I understand where the companies are coming from.  The data show that rarely — if ever — do employees change their asset allocations.  Fine — but what target date funds do is determine exactly how much allocation investors in such funds should have to the market.  The hope is that returns will be X over a certain time period (the target date).

But guess what?  These things always had too much exposure for most investors to the broad stock market and remain badly markets, explained and disclosed (and that’s the dig by industry rag, Morningstar).  Another market plummet and wham, a lot of employees who didn’t even realize they had been re-enrolled will wake up with a lot less $$ in their retirement accounts.

The truth is that target date funds are a flawed product for a genuine problem: helping guide retirement investors to make better decisions.  The answer isn’t ensuring they max out on equity allocations.

Only thing this is good for is the stocks of the mutual fund companies who run 401 (k) plans.  This smacks of being “the industry solution” for the vast build-up of cash in most retirement accounts.

Well, O retirement investor, consider yourself (re)warned.

As for actionable investment ideas? I’d love to see exactly how much cash there is on the sidelines and expectations for re-enrollment.  This could be a good catalyst for Franklin ($BEN) and T. Rowe Price ($TROW) as this cash gets crammed into mutual funds.

Read more

  • Your employer knows best. Perhaps. (WSJ)
  • New Problems with 401(k) Target Date Funds (Institutional Investor)
  • A new 401(k) default? Moving money into target funds (Nudge Blog)
  • Morningstar 2010 Target Date Fund Survey (Morningstar)
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Review of virtual family bank, FamZoo

NY Times had a short piece on FamZoo, a virtual family bank.

The site allows families to set up “Bank Parents” using virtual savings and spending accounts to help kids learn and understand about money.  Parents can even link checklists to allowances to assure kids are pulling their weight for chores.

There is some nifty functionality that integrates a mobile offering, as well.  Check out the video above.  The site has a free trial right now, moving to a premium version of $5.99/mo shortly after.