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Advisor Insights

The Deal With Health Savings Accounts

Despite currently modest annual contribution limits and the low rate of investment within HSAs, these accounts may provide advisors with a long-term opportunity with clients.

Over the past few years, an inordinate number of articles have been written in the investment/financial media about the value of health savings accounts as investment vehicles. This seems to make little sense, for two reasons. First, estimates vary, but somewhere between 5% and 15% of assets in HSAs are now actually being invested, as compared to the 85% to 95% of assets that are held in money-marketlike cash accounts. Second, the annual contribution limits for HSAs--for both individuals and families--are relatively low.

Is there a business opportunity for advisors to charge into the HSA marketplace when the bulk of assets in HSAs are not being invested, and when what can be contributed annually is still a fairly small amount?