Uber offers drivers retirement options without altering employee status 
Uber is to offer retirement financing services for its drivers in Seattle, Boston, Chicago, and the state of New Jersey, with plans to roll the option out nationally, after teaming up with fintech start-up, Betterment. Drivers can use their Uber app to "open a Betterment IRA (individual retirement account) or Roth IRA for free. People who drive with Uber can get started with no minimum account balance." After the free year expires, users with a balance under $100,000 will be subject to an annual fee of 0.25% of their average annual account balance. The Betterment deal is being seen as a way for Uber to appease drivers, which it refuses to classify as employees; Uber will not make any contributions to the retirement accounts.

Uber is now offering drivers their very own retirement plans. Sort of.

Today, the world's biggest ride-hailing service teamed up with Betterment, a so-called robo-advisor that gives people a simple way of investing and managing money online. Now, Uber drivers can readily use Betterment to invest money for retirement.

Uber drivers in select places---Seattle, Boston, Chicago and New Jersey---will soon see a new widget inside their Uber apps where they can open an IRA account, and a nationwide rollout is planned for later this year. The first year of service is free for Uber drivers, Betterment says, and afterwards, the wealth management company charges its regular fee---a percentage of assets under management. That's about 0.25% a year on average, which is less than the fees typically charged by traditional financial advisers. The two companies have not disclosed all the details of their arrangement, but Betterment confirms that Uber will not provide matching funds when drivers move money into their investment accounts. In other words, any money that goes into an account will have to come from the driver.

The partnership highlights a new trend among on-demand companies like Uber. So many are now offering extra benefits designed to attract workers---and hopefully retain them in an industry notorious for high churn. The other big ride-hailing company in the US, Lyft, already offers gas discounts and easy car rentals through corporate partnerships, and Uber recently promoted new driver initiatives, including paying drivers for a wait time exceeding two minutes.

Uber doesn't want to turn drivers into official employees---a controversial issue---but with its Betterment agreement, the company is at least moving in that general direction. Or so it seems. A Betterment account may not make sense for the average Uber driver, and Uber isn't spending the money needed to change that. "It’s nice to be able to offer to your independent contractors amenities,” says Dmitri Iglitzin, a labor lawyer who has been involved in the effort to unionize Uber drivers in Seattle, "but it’s really nice if the amenities don’t cost you anything.”

Betterment is part of a new breed of online financial services firms that have cropped up in recent years. This also includes Wealthfront, FutureAdvisor, and Personal Capital, and after the rise of these startups, entrenched financial players like Charles Schwab are now offering similar services. But robo-advisers still have a way to go before they can prove the worth of their services in the longterm, especially during a less-than-rock-solid period in the stock market.

For Betterment, a partnership with Uber makes sense. It currently manages about 185,000 customer accounts and over $5.5 billion in assets, and now, it can tap into a new reservoir of potential customers. Uber does not disclose how many active drivers it has in the US, but last year, one estimate put the number at more than 300,000--and that base has likely grown.

The rub is that Betterment may not appeal for a lot of those Uber drivers. As Jon Stein, CEO of Betterment, explains, Betterment's core customer is a professional, around 36 years old, who earns about $100,000 a year. An Uber driver, meanwhile, makes less than $13.25 a hour after expenses, according to a recent analysis. It may not be a top concern for them to invest.

According to Iglitzin, drivers aren't likely to see Betterment as a benefit---even if it's free for a year. He points out that low-wage workers who are given 401K plans are likely to withdraw the cash and take the tax penalty. He compares Uber’s offering to a similar situation from three years ago when McDonald’s offered a financial planning guide to its fast-food workers amid a growing movement to raise the minimum wage. The guide was not well received.

You have to give Uber at least some credit for providing the option. But this is not the full answer. As lawsuits wind slowly through the courts, the ultimate fate of the on-demand economy---including whether or not benefits should be obligatory---is still up in the air.