Advisor Insights

Partnering With the Right HSA Provider

W. Scott Simon

Depending on the source of information, there are 300 to 400 HSA providers in America; some even say there are as many as 2,000 if you count banks that offer their own demand deposit accounts (checking accounts) that pay a small rate of interest to HSA holders. In this market, many banks derive transaction-based revenue, which comes from debit card transaction fees, the spread earned on cash in the accounts of HSA holders, as well as any float income earned on cash held.

This business model--which does advisors little good revenue-wise--is the same that banks use in the Flexible Spending Account milieu. The "S" in that market stands for "spending" with FSA holders having to "spend it or lose it" by the end of each year. That can mean lots of transactions and, consequently, lots of fees--for banks. This transactional rat-a-tat-tat business revenue is largely devoid of a fiduciary mindset.