To attract customers and assets, Bank of America Merrill Lynch is offering employers a free tool, Financial Wellness Monitor, to help them gauge employees' success at saving for retirement within a 401(k) plan.
The tool calculates an overall "financial wellness score" indicating to employers whether their workers are exhibiting behaviors within their 401(k) plan accounts that may lead to successful long-term savings.
The metrics are based on how much employees are saving, whether they are well diversified, whether they are using target-date funds appropriately and how they are using the company match.
Kevin Crain, head of institutional client relationships at Bank of America Merrill Lynch, said the company began to examine its 401(k) business 12 to 18 months ago and wanted to find a way to "quantify retirement wellness."
"We found that we could offer a lot of nice summaries, but we needed a way to really score things," he said in an interview. "We wanted to create something that wasn't hard for plan sponsors to understand and that focused on key metrics."
BoA began beta-testing the service last year with 300 clients that use the company's advice tool, Advisor Access Solution, which specifically recommends savings options to employees.
Financial Wellness Monitor scores employers' plans on a scale of one to 10. Crain said the beta-testing illustrated a range of scores. Twice as many plans that scored "well" combined automatic enrollment and automatic increase features, he said, but plans that did not score as high had higher opt-out rates when it came to automatic enrollment.
Employees that score high are using the advice tools, Crain said. The average score for employees that used advice tools to make retirement planning decisions was 8.5; the average for those that did not was 6.2.
"I think that the results definitely highlighted the story that we theorized: Advice is critical," he said.
Financial Wellness Monitor can be run quarterly, Crain said, and supplies trend data to illustrate how employees and employers are improving — or not — their retirement savings.
Crain said he is interested in measuring a broader group of employers. "I think we are going to find that some are well and healthy and others that don't do as well aren't using the advice," he said. "I think this tool is a good way to show the value of the defined contribution system. It can be a successful system."
The results could enable BoA to cross-sell additional services to employers, Crain said, and make it attractive to new customers.
Parent Bank of America Corp. reported 401(k) assets grew 15.6% last year, to $81.5 billion, from 2008. Crain said the company is projecting significant growth in clients and assets in 2010.
Analysts are skeptical, however, that employers want to change providers. "Employers are focused on running their businesses and don't want to take the time to switch 401(k) administrators," said Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I. "This is a good initiative for B of A, but significant growth is a question mark."
The company, which had $450 billion of retirement assets under management at Dec. 31, is looking to cross-sell Merrill Lynch's products and services to Bank of America's corporate and middle-market customers. In January it started a marketing campaign to promote cross-selling.