By Lisa Shidler, RIABiz
After four years in business, Vestwell is gearing up to become a turnkey 401(k) program on behalf of RIAs — a software change that could be like swapping a Model T for a Tesla — with some heated industry debate about whether that really makes a competitive difference.
The New York-based startup that Aaron Schumm founded in 2016 plans to deliver more “digital” data that helps RIAs — most of whom currently specialize in 401(k) or non-401(k) assets — create an investor experience that unifies those spheres.
The goal of Vestwell’s data harmonization is to get more retail RIAs to tackle plan sponsors and plan participants.
By Kate Stalter, U.S. News & World Report, via Yahoo News
The COVID-19 crisis is shining a spotlight on employer-sponsored retirement accounts such as 401(k)s. Long-standing rules have been relaxed, and investors have new options for making withdrawals.
These changes were put into law last month as part of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act.
Financial advisors are also being more proactive in helping clients with these employer-sponsored vehicles, which are usually held outside the investment accounts an advisor manages.
For starters, 401(k) account owners can now access up to $100,000 penalty free if they, a spouse or dependent suffer adverse consequences — either health or economic — due to the virus.
Also, 401(k) loan limits have been raised. “Before this crisis, loans were limited to the lesser of $50,000 or half of the vested balance in the participant’s account,” says Allison Brecher, general counsel at Vestwell, a New York-based retirement plan administrator.
“The CARES Act increased that to the lesser of $100,000 or the full present value of the participant’s vested account balance. Loans, even from a participant’s own retirement plan account, do need to be repaid, but the repayments (on outstanding loans) can be delayed by up to one year,” she says.
By Oisin Breen, RIABiz
But pushing a narrative is a lot easier than proving it, especially when it comes to the long-tail influences of technology, says Aaron Schumm, CEO of NYC retirement-robo, Vestwell, in an email.
“Wirehouses can sell a great story, and they may have a lot of offerings on the shelf. But the back-end architecture is glued together with fragility at best,” he explains. “Slapping a front end user experience onto an old mainframe doesn’t make it modern.”
By Emile Hallez, InvestmentNews
Some advisers have indeed been busy, said Aaron Schumm, CEO of Vestwell, which provides digital record-keeping services to about 5,000 plans.
Because of remote work and a standstill in new plan sales, “advisers are probably more accessible than ever right now,” Schumm said. “We’re seeing a high volume of advisers wanting to create proposals for existing clients.”
By Vasyl Soloshchuk, WealthTech Club
We are all frightened by the uncertainty and global health and economic crisis. Fintech helps people to manage their finance during the crisis and avoid ruining decisions. That’s why financial advice and technology tools they use in their work are now raised in importance. It’s time to ask ourselves, in what the most impactful and non-obvious ways COVID-19 will change financial services?
In this selection, WealthTech and FinTech experts share their outlook and words of support with their business fellows, co-workers, and publicity. Find the motivation to keep trying hard and disrupt the world with wealth technology by reading them.
Aaron Schumm, CEO, Vestwell:
Fast-forward to 2020, we have all enjoyed a bull market exceeding a decade. A downturn was inevitable, but I don’t think anyone predicted the catalyst being a pandemic. The globe has and will continue to be impacted. Things will slow. Balance sheets will be strained, and unemployment will skyrocket in the industries most directly impacted, such as food & beverage, travel, etc.
On the positive side, this recession is not caused by a systemic financial flaw. In 2008, the financial industry was at fault. In 2020, the financial industry is being turned to as part of the solution. Fintech companies are at the forefront and best positioned to be bringing creative solutions to the world. With that, we’ll see immediate movement to a sustained cloud-based world, and focus on digital solutions. The companies that held back on moving to a modern era will now likely turn to those that have been at the forefront of change. This will apply to all businesses, including traditional financial services companies turning to fintech companies for solutions.
By Rebecca Moore, PLANSPONSOR
During this time of painful market volatility, sparked by the outbreak of the coronavirus that causes COVID-19, investors are feeling anxious.
The continued message to long-term investors, such as retirement plan participants, is to stay put in their investment selections in order to benefit from the gains when the market recovers. Aaron Schumm, CEO and founder of Vestwell, a digital retirement platform for 401(k) and 403(b) plans, who is based in New York City, says his firm has seen an increased volume of retirement plan participants reaching out about what to do, and his firm is putting more information into participants’ hands.
He says it is a good time to re-educate participants about defined contribution (DC) plans’ use of dollar-cost averaging. Younger participants may especially need this education as some of them have not yet experienced a down market.
By Lee Barney, PLANADVISER
Industry experts agree more retirement plans are selecting “3(38) fiduciary investment management” services from their advisers over “3(21) fiduciary advice services,” and they suggest this trend is not only more beneficial for sponsors and advisers, but for participants as well.
“Originally, the more limited 3(21) fiduciary services were the norm, primarily because the companies advisers were affiliated with didn’t want them to make the final, discretionary decisions as to what a client’s investment lineup should be,” explains Aaron Schumm, chief executive officer of Vestwell. “So, advisers would basically provide sponsors with a list of investment options that they and the sponsor could agree upon—but the sponsors and participants were ultimately left to make their own elections.”
Today, however, the world has moved toward 3(38)-level service, Schumm says, wherein the adviser actually makes discretionary choices about a client’s investments.
Forbes partnered with market research company Statista to identify the up-and-coming companies liked best by their employees in their inaugural ranking of America’s best startup employers. The list was compiled by evaluating 2,500 American businesses with at least 50 employees on three criteria: employer reputation, employee satisfaction and growth.
By John Sullivan, Editor-In-Chief, 401K Specialist
Digital 401k platform Vestwell says it’s taking a leap forward in the technology it provides, “resetting the bar” across the retirement plan industry by shedding what it calls 30-year-old technology that currently oversees complex recordkeeping.
The capabilities are powered by an API-driven tech stack, resulting in a more efficient, flexible and cost-effective 401k offering, according to the company.
“So much of the way in which the industry does things was put in place pre-internet,” Aaron Schumm, Founder and CEO of Vestwell, said. “Things have come a long way over the past 20 and 30 years, but it’s just time to kind of rewrite how [retirement plan recordkeeping] works and bring it to a way in which we expect our financial lives to be treated. So that’s really what we’re focused on.”