My work recently transferred HSA institutions from Optum Bank to Health Equity. At the time many of us were looking how to transfer investments between the two institutions and discovered there was a very limited set of funds that overlapped between the two. As a result the opportunity for an in-kind transfer was precluded for most of the employees who would have chosen to retain their investments had such an option been possible. (Many in fact had to liquidate their investments to cash for the transfer to proceed and for those who lived in the applicable states were pushed into a taxable event they did not prefer).
This made me curious, how does a given institution select a particular collection of funds they offer their customers to invest into? What job position in these companies is responsible for making such decisions? Secondarily why would an investment brokerage, such as Vanguard in this case, offer such a wide variety of seemingly closely related funds? Between the two lists there are 48 distinct fund offerings and only two funds are held in common between Optum and Health Equity. Do brokerages such as Vanguard create funds exclusively for such institutions or they create them before relationships are made and the institutions pick from a predetermined set? How does all this work exactly? It almost feels like a form of vendor lock-in, is that a fair criticism or mostly unwarranted?
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