NYC Startup Vestwell Raised $8M To Ensure Your Employer is Offering The Right Retirement Plan

1/3 of Americans have nothing saved for retirement while half have less than $10K saved.  The outlook for retirement savings has been bleak but it doesn’t need to be.  Vestwell is a digital platform targeted towards financial advisors that can use the platform to ensure their clients can offer retirement plans for their employees.  Pensions have all about disappeared and employers need low cost ways to offer retirement investment options for their employees and employees need the help of their employers to achieve their retirement goals.  Vestwell facilitates this seamlessly and efficiently. No longer are employers forced to adopt out-of-the-box plans that do not meet their and their employees needs.

AlleyWatch spoke with founder Aaron Schumm about the startup, their Series A round of funding, and the state of the retirement industry.

Who were your investors and how much did you raise?

Thank you. We are very excited about closing our Series A. We raised $8M, led by F-Prime Capital. The round was entirely inside, with the same VC firms participating in our Series A. To us at Vestwell, it’s great to have such strong commitment from a highly talented team of investors around us.

Tell us about your product or service.

Vestwell is a turnkey solution for financial advisers providing them with the ability to offer clients a retirement plan without taking on the risk and costs typically associated with creating one. We remove the friction points of confusion, cost and compliance overhead that come with traditional retirement plans. Vestwell’s digital platform allows for seamless plan design, automated onboarding, and low-cost investment strategies, making it easier for employers to offer a retirement plan. Vestwell becomes an extension of the financial advisor’s services, acting in everyone’s best interest while scaling through technology and allowing financial advisors to focus on clients.

What inspired you to start the company?

My own experiences are what drove me to start Vestwell. Being a product person by trade, having cofounded a wealth management platform (FolioDynamix, now owned by Envestnet), I experienced first-hand, the difficulties in offering a retirement plan to our employees there. Being a huge advocate of advisors, with a deep understanding of how to build a scalable FinTech platform for the financial services landscape, I thought it was long overdue that we put a better solution in the hands of advisors to help their clients, the way they want to help them.

How is it different?

The 401k industry has been around for 40 years and sliced a million ways. Our differentiators are centered around how the platform is architected to scale an advisors practice while helping ease the pain, expense, and liability an advisor, plan sponsor and participant may be beholden.

Each user (advisor, company, and employee) has their own dashboard and interface that can sit across multiple record-keepers, custodians and executing brokers, without changing the user experience. Advisors no longer have to either shove a company in a box that doesn’t fit the company or customize a plan through various providers that won’t allow an advisor to scale his or her practice. We’ve figured out how to deliver a custom, white-labeled (e.g., ABC Advisors Retirement Platform), solution at a fraction of the cost, but still allow the advisor to do what s/he wants to do for their client while being compensated for it.

What market you are targeting and how big is it?

We work with RIA’s, independent broker-dealers, asset managers, and bank/trust custodians to equip them with a solution for advisors to services plan sponsors and employees at scale. The target plan sponsor size is $500K-$50M (2-2K employees). Upwards of 90% of this market is serviced through financial advisors, but they need a better solution to help their clients more effectively. The total asset breath in this space is upwards of $25T.

What’s your business model?

Primarily Vestwell charges basis points in an a-la-carte fashion based on the services provided. The solution is a full-service, unbundled turnkey suite. We become an extension of the advisory firm. They do what they do best, and we fill in the rest to compliment the advisor.   For example, if an advisor wants to be the 3(21) or 3(38) investment manager on the plan or hire a sub-advisor, they can do so, and we facilitate the technology, administration, trading, custody, and clearing, in a white-labeled capacity.

What should everyone know about retirement?

EVERY employee in America should have access to a 401k plan. It’s crucial for saving for retirement in one of the most effective ways possible, especially given company matching (free money) and tax deferrals. But, one should be mindful of the plan design, legal liability (as a fiduciary) and the cost, including the investment fees and ongoing administration. Paying too much or exposure to too much liability can be detrimental to a company or employee in the future. Fear or uncertainty shouldn’t stop one from setting up a plan or investing in one. It just needs to be clear, easily consumable and structured in a way that aligns everyone’s best interest.

What was the funding process like?

We were incredibly fortunate in our funding process. We hadn’t, officially decided to raise our Series A, with plenty of runway ahead of us. There was a lot of outside interest in Vestwell. But, our Series Seed investors said: “Listen, we are behind you 100% in whatever you feel is best for the company, and we are happy to do the round ourselves to help take Vestwell to the next level.” The group around the table have been a delight to work with, and added a significant amount of value beyond just capital. So the decision to keep the round internal was easy.

What are the biggest challenges that you faced while raising capital?

It’s a massive distraction from the business to raise capital. My focus was to keep the internal employees involved very small and contained, so the rest of the team could focus on funding while I finished up the funding.

What factors about your business led your investors to write the check?

Our investors are all there for specific reasons. We had an opportunity to be supported by teams that knew FinTech, the retirement industry, advisory practice, and B2B2C scaling better than anyone. They didn’t need much convincing. We all saw the fit and the strategic direction of the company. They were happy to support those efforts and take this to the next level.

What are the milestones you plan to achieve in the next six months?

We’ve already signed over 50+ advisory firms and are onboarding plan sponsors continuously. The next few months are focused on scaling faster and faster, while delivering on a few key strategic platform features we think will delight our users.

What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?

Listen, startup life is hard. There is zero glamor in it. I feel that many people have a skewed perception as to what it means to be an “entrepreneur.” But, I do stand by the notion that if you believe in what you are doing, you love it, and most importantly, you can add real value to this world and society, then it’s worth pursuing. One has to stay highly focused on how to add value a segment of the population with a more significant goal of sustainable benefit for all. If you can do that, while creating a clear path to a viable, sustainable business, you’ll find funding. In the meantime, ignore the fluff. Ignore the distractions. Stay focused.

Where do you see the company going now over the near term?

Generically, growing, scaling and providing value to advisors, companies, and employees. Specifically, I want to position ourselves to equip every financial services provider to create a more meaningful interaction with the American workforce through technology, while being a viable, scalable, profitable business.

Where is your favorite fall destination in the city?

These days, I feel my destinations only include our home, office, and an airport. But, my wife and I love taking our little 11-month old son to nearby Central Park or along Riverside, maximizing as much time together as we can, given our overly hectic schedules. People always say it, but it’s incredible how much joy and renewed perspective children give you.

Vestwell Raises $8 Million in Series A Funding led by F-Prime Capital Partners

As Vestwell’s Digital Retirement Platform Experiences Rapid Growth, Funding will be used for Market Expansion and Further Development of the Platform’s Technology


NEW YORK, Oct. 2, 2017 /PRNewswire/ —  Vestwell, the industry’s first and only fiduciary-backed retirement platform for the financial advisor community, today announced $8 million in Series A Funding led by F-Prime Capital Partners, the venture capital group associated with the parent company of Fidelity Investments, with participation from Primary Venture Partners, FinTech Collective, and Commerce Ventures. Launched in late 2016, Vestwell received $4.5 million in its initial Series Seed of financing in September 2016.

Vestwell has grown rapidly this year with an exceptional market reception. As advisors look to better engage with their clients, while scaling their practice, Vestwell’s platform can be leveraged to facilitate every aspect of the advisor, company and employee’s needs. The unbundled, turnkey 401(k) and 403(b) platform becomes an extension of the financial services firm, helping to reshape how plan sponsors and employees are serviced. The multi-recordkeeper, multi-custodial technology can also incorporate 3(21), 3(38) and 3(16) investment and administrative services.

So far this year, the company has signed over 50 registered investment advisor (RIAs) firms, as well as independent broker-dealers, asset managers, and bank/trust custodians, with plans to onboard several thousand advisors this year.  The funding will be used to grow the team while further enhancing the technology.

In conjunction with this funding news, Vestwell also announces Ben Malka as a member to the Board of Directors. Malka is a partner at F-Prime Capital and also serves as co-chairman of the Financial Services Venture Capital Association.

“We’re excited to increase our reach in the financial advice industry and continue to develop better technology for our clients,” said Aaron Schumm, Founder and CEO of Vestwell. “Vestwell was founded to provide advisors and plan sponsors with an affordable, compliant, and easy-to-use retirement planning solution to help close the retirement savings gap in America, and F-Prime has supported that mission since our inception. This announcement, combined with the outstanding leadership that Ben brings to the Board of Directors, is instrumental to Vestwell’s success.”

“Vestwell’s white-labeled platform provides financial advisors with the ease of compliance and automation while maintaining the human interaction that makes their businesses succeed,” said Malka. “By giving advisors and plan sponsors access to low-cost plan options, Vestwell is providing employees across the country with the tools and plans that can help them to retire happily.”

Vestwell is the industry’s first and only fiduciary-backed retirement platform for the financial advisor community. For more information about Vestwell or to inquire about how financial advisors can leverage the platform, please visit: http://www.vestwell.com/.

About Vestwell Holdings, Inc.

Vestwell Advisors, LLC is a SEC registered investment advisor, a wholly owned subsidiary of Vestwell Holdings, Inc., specializing in 401(k), 403(b) and other defined contribution and benefit retirement investment management services. Built by an experienced team led by CEO Aaron Schumm, Vestwell assumes 3(38) investment management and ERISA3(16) fiduciary responsibility on the behalf of advisors and their plan sponsor clients. Learn more at Vestwell.com and on Twitter @Vestwell.

This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Vestwell Advisors is not registered. An investor should consider investment objectives, risks and expenses before investing. More information is available within Vestwell Advisors’ ADV.  There are risks involved with investing. Investors should consider all of their assets, income and investments. Portfolios are subject to change. All opinions and results included in this publication constitute Vestwell Advisors’ judgment as of the date of this publication and are subject to change without notice.

Source: Vestwell Holdings, Inc.

Related Links

http://www.vestwell.com

Aaron Schumm interviewed on WealthManagement.com


Vestwell’s CEO, Aaron Schumm, was recently interviewed for an article about Vestwell at WealthManagement.com. Preview the article below or read the full story on their site.

“When Josh Brown, the CEO of Ritholtz Wealth Management and author of the popular finance blog, “The Reformed Broker,” hosted the 2017 Benzinga fintech awards, he name-dropped Vestwell as a company with the potential to radically change the wealth management industry.

That’s right, Vestwell, a company looking to make it easier and more cost-effective for registered investment advisors to design, sell and administer 401(k) and 403(b) plans using digital automation. What exactly does Brown find so revolutionary?

“I get most excited about fintech when it solves a serious pain point for a practitioner like myself. It’s not like I’m saying they’re doing something that no one has ever done before,” Brown told WealthManagement.com. He added that his firm got started in retirement plan space a year ago, and is considering adopting Vestwell for some of their clients. But Brown thinks the user experience of Vestwell is such an upgrade over incumbent platforms that it could attract swahs of new advisors to the $6.8 trillion dollar defined contribution market currently dominated by large financial institutions.”

Read More at WealthManagement.com