Vestwell Announces New Joint Offering with Riskalyze to Deliver an End-to-End Digital 401(k) Experience Built Around the Risk Number®

The partnership will bring two of the financial advice industry’s leading financial technology platforms together for an optimal retirement planning and risk assessment experience

NEW YORK, NY, October 5, 2017 — Vestwell and Riskalyze today announced a new joint offering called Riskalyze Retirement Solutions, allowing advisors to access a new version of Vestwell’s retirement planning portal on the Riskalyze platform. The deep partnership will put Vestwell, the industry’s first fiduciary-backed retirement platform for the financial advisor community, and Riskalyze, the industry’s leading risk alignment platform, in the hands of financial advisors to better service employers and investors everywhere.

Aaron Schumm, CEO at Vestwell, was featured today during the main keynote address at the Fearless Investing Summit, where both companies discussed how the partnership will help advisors scale their practice, while enhancing the client experience, with compliance and a fiduciary mindset at the core.

Advisors will be able to simply log into the Riskalyze platform to generate 401(k) proposals and onboard clients electronically. In addition, plan participants will have access to pinpoint their own Risk Number® to help them get matched with the right asset allocation.

In addition to Vestwell’s 3(38) investment management services, the new joint offering will include access to several of the asset managers in Riskalyze’s Autopilot Partner Store. This will give advisors, plan sponsors and plan participants access to additional investment strategies, while still allowing Vestwell to assume ERISA 3(16) fiduciary responsibility on behalf of advisors and plan sponsors.

Overall, the new joint offering will allow advisors to clearly document their alignment and compliance with the pending DOL Fiduciary Rule, and demonstrate that they are acting in the best interests of plan participants. Users of the joint offering can look forward to the following features:

  • Operational Efficiency: The integration will remove an advisor’s administrative burden to sell, implement, and service retirement plans while handling both the HR participant notification process and the 5500 tax filing on the advisor’s behalf.
  • Holistic Planning: Riskalyze’s risk alignment platform will now enable advisors to offer an end-to-end digital 401(k) experience built around the Risk Number, by integrating risk assessment, goal analysis and asset allocation into Vestwell’s innovative experiences for advisors, plan sponsors and plan participants.
  • Scalability: By offering flexible, bundled or unbundled investment and fiduciary services, the digital platform will enable advisors to scale their business without heavy operational cost or burden. The platform does this by leveraging administrative services and fiduciary services as needed.
  • Enhanced Client Experience: With a streamlined and simple digital portal, advisors will be able to control the delivery of their client experience. By allowing advisors to deliver a consistent experience through an open-architecture, multi-custodian, multi-record-keeper platform, the platform will equip advisors to seamlessly guide clients in choosing investing strategies based on their individual needs while automatically rebalancing portfolios.

“At Vestwell, our number one priority is providing financial advisors with retirement technology that removes the administrative burden of implementing and servicing retirement plans,” said Vestwell CEO Aaron Schumm. “We’re thrilled to reach more advisors through our partnership with Riskalyze, an industry leader whose mission of equipping advisors with outstanding risk assessment technologies mirrors our own core values.”

The offering will be available to Riskalyze users including Registered Independent Advisors, Independent Broker-Dealers, investment managers, plan sponsors, and employees.

“Vestwell’s mission to make retirement plans affordable and accessible for all investors is reflective of our own hope: to empower fearless investing by providing investors with their true risk tolerance, and helping advisors align portfolios in the best interests of their clients,” said Aaron Klein, CEO of Riskalyze. “These shared values are what prompted us to choose Vestwell as our partner in delivering an end-to-end digital 401(k) experience built around the Risk Number.”

The integration will be available later this year. To introduce the offering to the advisor community, Riskalyze and Vestwell will be hosting joint webinars to help educate and train advisors using the platform. To learn more about Vestwell’s retirement planning platform, visit www.vestwell.com. For more information about Riskalyze, visit www.riskalyze.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 can assume 3(38) or 3(21) 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.

 

About Riskalyze

Riskalyze is the company that invented the Risk Number®, which powers the world’s first Risk Alignment Platform, empowers advisors to automate client accounts with Autopilot, and enables compliance teams to spot issues, develop real-time visibility and navigate changing fiduciary rules with Compliance Cloud. Advisors, broker-dealers, RIAs, asset managers, custodians and clearing firms use Riskalyze to empower the world to invest fearlessly. To learn more, visit www.riskalyze.com.

 

Media Contacts:
Jessica Torchia
917-636-4804
Jessica.Torchia@ficommpartners.com

Who’s the Fiduciary?

While the DOL’s fiduciary rules for financial advisors are new, fiduciary standards among 401(k) plan sponsors are not.

Even before the new DOL rules, plan sponsors were targets of lawsuits regarding the 401(k) plans offered to their employees. To avoid such ugly situations, it’s more important than ever for retirement plan sponsor to understand the responsibilities involved in being a fiduciary.

What is a fiduciary?

According to the Department of Labor, someone is a fiduciary if they perform certain functions with regard to the 401(k) plan. These include discretion over a plan’s administration as well as the selection of the plan’s assets. The focus is on the functions performed with regard to the plan.

Plan fiduciaries must:

  • Act solely in the best interest of all plan participants
  • Execute their duties prudently
  • Follow the specifications of the plan’s documents
  • Diversify the plan’s investments
  • Pay only reasonable plan expenses

Delegating fiduciary responsibilities

Plan sponsors can hire outside service providers to share in their fiduciary responsibility, however, they cannot abdicate this responsibility.

Here are a few types of fiduciary roles these service providers can assume.

A 3(38) fiduciary has the full discretion to make all plan decisions, including the those regarding the investments offered.

In this capacity, advisors are the decision maker for the plan’s investments; they are not merely offering suggestions. The plan sponsor’s fiduciary obligations are more limited here than for other arrangements, but it does have the responsibility to select the investment manager and to ensure that the chosen manager is properly executing the plan’s fiduciary duties.

A 3(21) fiduciary typically recommends investments to the plan sponsors, monitors those investments, and makes recommendations when investments need to be replaced. The final decision, however, lies with the plan sponsor. 3(21) advisors provide counsel and guidance to the plan sponsor, but they do not exercise discretion over the plan investments as a 3(38) does.

A 3(16) fiduciary must ensure that the plan is created and managed according to the ERISA rules. This is typically a role filled by a third-party administrator, either in an unbundled setting or as part of a bundled plan. If there is no outside administrator, then this role must be filled by the plan sponsor.

Using outside service providers

Typical service providers include an investment advisor and a third-party administrator.

VestWell can help you offer a top-notch plan even to your smallest plan sponsor clients. We can act as a 3(38) fiduciary via our arrangement with Palladiem. We can serve as a 3(21) advisor in partnership with you via our relationship with Morningstar. We can also support you as the 3(21) advisor with our cutting-edge administrative capabilities.

Additionally, we can help you offer your clients plan design options including new comparability plans, 403(b) plans and even a cash-balance pension option.

It makes sense to partner with experts in this area to enable sponsors to meet their fiduciary obligations. You can help plan sponsors offer a plan that meets their goals of attracting and retaining employees while helping their employees meet their retirement goals. Hiring the right partners allows the sponsor to focus on what they do best: growing their business while mitigating their fiduciary liability. And it makes you look really good as their advisor!

Day of Reckoning with the DOL

By Aaron Schumm, Vestwell’s CEO and Founder

It.  Is.  Here.  Department of Labor Secretary Alexander Acosta has made a wave in the political landscape by not further delaying the applicability date of the DOL Fiduciary Rule.  Many suspected the can would be kicked down the road, with another delay.  Without taking a political stance, this is a prime example of a highly publicized regulation not being “pared back” by the new administration by way of an executive order.

Forward-thinking shops have already moved to spiritually fulfil their fiduciary obligations – (Link).  But, as we all know, there are procrastinators.  The “wait & see” camp have been left scrambling for solutions.  The anecdote by John Castelly of Personal Capital perfectly captured the state of procrastinators, “This turnaround with a June 9 deadline is just like when we were back in school, thinking we would have a substitute teacher, so we didn’t do our homework, but the real teacher showed up instead and we are now not prepared.”

So, what does it mean for you?  Still, there remains a void that will be filled by the fiduciary rule becoming regulation on June 9.  In the simplest terms, the rule is about transparency of fees, suitability of financial products, and alignment of interests between advisor and consumer.  As it pertains to the 401(k) industry, there are a few key areas we will highlight.

Fee transparency. There can be no “hidden” fees, such as 12b-1’s, sub-transfer agent fees, etc.  Of interest to you, whether a company or an employee, might be the 408(b)2 and 404(a)5 fee schedules to understand who is being paid and how much.

Reasonable Fees. Expanding on point 1, the advisor and plan sponsor’s fiduciary responsibilities now include selecting providers and investments with a reasonable fee.  What’s a reasonable fee?  While that is debatable depending upon a number of factors, a strong argument can be made that with advent of low-cost investment products like index ETF’s and efficient technology platforms to help operationally scale, the total fees (including advisory, admin and investments)  can be totaled at well below 2%, and may be closer to 1% in practice (depending on the investments and service).

Fiduciary roles – There are 4 main areas in defined contribution plans:

    1. Named Fiduciary – This is typically borne by the plan sponsor but can also be aided by the platform provider.
    2. Named Investment Manager – If you’re picking the fund lineup for the employees, you’re picking up that responsibility.  But, investment managers, MF/ETF strategists, DCIO’s, financial advisors, and platform providers can step in to take on this role for you.  This is usually done under the SEC 3(38) and/or 3(21) construct.
    3. Named Administrator – This role is responsible for the final administrator processes on behalf of the company & employees.  Typically, the plan administrator named in the agreement is the plan sponsor.  However, it can be outsourced to a third-party administrator (TPA) and/or ERISA 3(16) provider.
    4. Named Trustee – This is the party acting as the trustee on behalf of the plan. Again, this is typically carried by the plan sponsor, but can be outsourced to a trust company or other third parties.

As the industry thankfully moves towards simplistic, fee-based, low-cost, and transparent environment, understanding the moving parts of retirement plans will become far less confusing for those less adept to 401k and 403b plans.

In every change, there is opportunity; the DOL rule may change the industry, in our eyes for the better.

If you have any questions around how the DOL rule impacts you as an advisor, company or employee, feel free to contact us here at Vestwell.  We are happy to help.

DOL Fiduciary Role Players

In response to: InvestmentNews’ Fidelity’s approach to DOL fiduciary rule rankles some 401(k) advisers

With the DOL fiduciary mandates effectively going into action, with a formal government action, financial service providers have begun to solidify their stances.

The question a provider asks themselves – Do I want to be a fiduciary to the plan sponsor and/or the participants?  Now, if you’re a provider that works with financial advisors and their clients, the answer is not black or white.

401(k) plans have been around nearly 40 years. During that time, they have been sliced one thousand ways, centering around different value propositions of the respective firms.  And for those of us that have spent a career working with financial advisors, we all know each advisor is unique in how they want to service their clients.

However, in lieu of the impending DOL fiduciary rule, some of the largest providers in the space have taken it upon themselves to push past their financial advisory network and strong-arm plan sponsor into a fiduciary offering that may not align with the advisor of record on the plan, nor the plan sponsor’s preference.  Firms have gone as far as sending 60-day negative consent letters to plan sponsors, whereby the they will be the named fiduciary for the plan sponsor as well as their employee participants.

Now, it can be applauded that firms taking this approach are looking out for their plan sponsor and participant clients.  But, where does that leave the advisors who want to help facilitate these important roles in the relationship?

There is still a lack of clarity about how far the “implemented” DOL fiduciary standards will go, but it is clear that the best interest of all parties will be front and center.  Many advisory firms have built their practices around this, dating back long before the DOL stepped in, simply to be pushed aside by their “partner” record-keeping and custodial providers, who want to play that role instead.  This will leave many advisors displeased, scrambling to articulate where they stand in their plan sponsor client relationships.

We believe that advisors should be enabled to play the roles in their client relationships where they feel they add the most value to their clients.  If s/he feels value is driven by the fiduciary services provided, and s/he wants to provide that service, that should be encouraged.  If the value prop is around investment selection, education, or advice, then they should provide that.  As the rule solidifies, and advisors get more comfortable with the new regulations, we will see increasing numbers of advisors offering fiduciary services to their list of client value add.

To encourage growing and enabling advisors, providers need to remain flexible around their platform and service capabilities.  The DC/DB plans need to be configured to compliment the services and advisor wishes to provide.  When servicing advisors, plan sponsors, and participants, we emphasize to advisors to think of us as an extension of their firm.   They provide the services they want to provide, and we round out the rest, as fiduciary or otherwise, acting as their technology and business support.

Just as the industry is constantly evolving, so are advisors.  We, as technology and services providers need to be there to equip advisors for the future of their businesses.