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Vestwell Continues to Redefine Retirement, Announcing a $30 million Series B to Fuel Growth

 

Series B

New York, NY – Tuesday, April 2 — Vestwell, a digital retirement platform, announced that it raised $30 million in Series B financing. Goldman Sachs Principal Strategic Investments (PSI) led the round, working closely with Goldman Sachs’ Consumer and Investment Management Division (CIMD), joined by Point72 Ventures and a host of other strategic retirement-focused financial services providers including the venture capital arm of Nationwide, Allianz Life Ventures, BNY Mellon, and Franklin Templeton. The round also included participation from Series A and Series Seed investors, F-Prime Capital, FinTech Collective, Primary Venture Partners, and Commerce Ventures.

Vestwell is the first digital retirement platform built for the financial advisor, helping scale plan sponsor and participant relationships to a new level. With its innovative technology, streamlined administration, fiduciary oversight, and modern interface, Vestwell has reimagined the 401(k) and 403(b) industry for the better. This new financing will propel Vestwell even further, while resetting the bar for how open-architecture in retirement plans can be provided to companies of any size in an affordable and modern way. This includes significant investments in technology and client service, two areas where Vestwell continues to pioneer.

“We were drawn to Vestwell because it has developed a modern and intuitive interface that empowers advisors to more efficiently manage customized retirement plans,” said Timothy J. O’Neill and Eric S. Lane, co-heads of Goldman Sachs’ CIMD.

In just these past 12-months, Vestwell’s client growth increased tenfold and the company has implemented strategic alliances with BNY Mellon, Allianz, Namely, Dimensional Fund Advisors, OnPay and Riskalyze, among others soon to be announced. Retirement-centric advisory companies and incumbents are quickly turning to Vestwell to be the engine behind their retirement books of business, valuing cutting edge technology such as Vestwell’s patent-pending real-time payroll engine and advanced employee eligibility calculator.

“I feel Vestwell’s momentum on a daily basis, so it’s incredibly humbling to have so many of the industry’s leading players see the value in what we’re building and share our vision of what lies ahead,” says Aaron Schumm, founder and CEO of Vestwell. “We’re elated to align ourselves with retirement industry experts who are not only investing capital into Vestwell, but who are also investing time and resources into ensuring our success.”

“The market impact we’ve seen from Vestwell in the two short years since leading the seed investment in them is remarkable,” says Brooks Gibbins, Co-Founder and Managing Partner of FinTech Collective. “Participants, employers, and channel partners have all validated Vestwell’s approach, and we’re thrilled to continue supporting industry change alongside them.”

ABOUT VESTWELL HOLDINGS, INC.

Vestwell is a digital platform that makes it easier to offer and administer retirement plans. Vestwell removes traditional friction points through flexible investment strategies, fiduciary oversight, and streamlined administration, all at competitive pricing. By acting as a single point of contact, Vestwell has modernized the retirement offering while keeping the advisor’s, employer’s, and plan participant’s best interests in mind. Learn more at Vestwell.com and on Twitter @Vestwell.

 

Media please contact:

Jessica Torchia

FiComm Partners

908-872-7319

Jessica.torchia@ficommpartners.com

Leveraging Technology to Scale Fiduciary Processes

People throw out a lot of buzz words (cloud computing, big data, etc.) in talking about financial technologies. We focused on pragmatic application of technology to financial advisor workflows; allowing them to serve more clients with the same resources.

Leveraging Technology to Scale Fiduciary Processes

technology

Participants Report Being Knowledgeable About Retirement Plans

participants

Nearly eight out of 10 participants, 76.7%, in 401(k) or 403(b) plans are saving more than 4%, according to a survey by Vestwell, summarized in its report, “The Retirement Advantage.”

Additionally, 59.5% say they are comfortable with their knowledge about their retirement plan, and 64.7% know they need to save 10% of their salary or more for a comfortable retirement. More than two-thirds, 67.3%, said they know where to find their retirement plan fees. Just over six out of 10, 61.6%, said they engage with their retirement plan. Only 33.5% said they wish they understood more about retirement planning.

However, only 25.7% of those between the ages of 25 and 34 are saving more than 10%, and 44.2% of those between the ages of 55 and 64 are saving this much.

Simple participant education ideas can make a great impact, according to Vestwell; after hearing one Investopedia statistic about the benefit of saving early, 21.7% of respondents said they plan to increase their retirement plan contribution. Another 26.4 said it made them rethink their deferral rate but could not afford to increase it.

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What Does Being a “Fiduciary” Mean, Exactly?

fiduciary insights
Any individual or organization that exercises discretion regarding their plan or any plan assets is a fiduciary, which is one of the highest standards in the law. So what does this mean in practice?

OVERSEEING SERVICE PROVIDERS

While plan sponsors can delegate many responsibilities of managing a retirement plan to service providers such as recordkeepers, investment advisors, and others, a plan sponsor cannot completely wash their hands of all fiduciary duty. A plan sponsor must carefully select and monitor their service providers, and is ultimately liable for ensuring the providers are doing right by their employees.

ACTING IN EMPLOYEES’ BEST INTERESTS

A fiduciary must exercise a duty of loyalty by operating the plan in the best interests of participants. After all, the plan sponsor is caring for their employees’ retirement assets. Proceed with caution when considering hiring plan providers that also do work for the company or individual owners. The plan sponsor should not receive any kind of compensation or anything of value from operating the plan. Consider the “smell test.”

SELECTING APPROPRIATE INVESTMENT OPTIONS

Plan sponsors should make sure that participants are offered a diversified set of investment options at reasonable cost, though that doesn’t mean they need to have the lowest fees. However, selecting  the initial plan lineup is not a “set it and forget it” exercise. Sponsors should continue to monitor the investment options available to participants to ensure they are offered investment options that will balance their risk and help meet their retirement goals.

FOLLOWING THE PLAN DOCUMENT

Plan sponsors must operate the plan in accordance with the terms of the plan document. Disconnects are common and usually arise in connection with administering loans, using the wrong definition of “compensation” for purposes of calculating benefits, and with submitting late remittances. Failure to comply can  become an issue, but fortunately, corrective actions are well spelled out by regulators and easy to fix.

MAINTAINING RECORDS

The best protection of all is for plan sponsors to know their plan documents, know what their service providers are doing to support the plan, and make careful decisions – and document them – about all activities relating to the plan. Have on hand all documents that show the plan sponsor’s decision-making process and actions  taken for the benefit of participants as well as how decisions are implemented consistent with terms of the plan. Keep all of those records permanently.

PROTECTING AGAINST LOSSES

Fiduciaries must have an ERISA bond and should consider obtaining fiduciary insurance to cover any losses to the plan caused by a fiduciary breach.

The rules are complicated and the waters are muddied. But there are many resources available to you for more education about your fiduciary duties. Vestwell and Goodwin Procter offer regular webinars on this topic, and we also recommend free programs offered by the Department of Labor.

The Retirement Advantage: How company sponsored retirement plans impact consumer behavior

 

retirement advantage

While it’s well documented that the majority of Americans aren’t saving enough for retirement, having access to a company sponsored 401(k) or 403(b) plan can greatly impact their retirement readiness.

According to our survey, employees are taking advantage of retirement plans when given the opportunity. 76.7% of those with a company sponsored plan are saving 4% or more of their salary each month (excluding any additional savings from a company match). Not only are those with access to a plan saving, but they also feel confident about decisions regarding their plan. In fact, 62.5% say they’re comfortable with their knowledge around their retirement plan, which means people are either educating themselves or receiving proper education from the plan administrator or sponsor. This highlights the critical role employers play in their employees’ financial future, since simply offering a retirement plan appears to have an immediate and real impact on both security and confidence.

In February 2019, Vestwell conducted a study of 672 employees who were eligible to participate in their company sponsored 401(k) or 403(b) plans, 499 of whom completed the survey in its entirety. The intent was to gauge perceptions of saving for retirement and better understand participant engagement with their plans.

Take a peek at Vestwell’s  2019 participant attitudes report to find out more about employee perceptions and how they engage with their plans.

Vestwell Finds New Small Business Payroll Partner

small business payroll

Vestwell is partnering with small business payroll software provider OnPay, the company announced. The partnership is designed to make providing small business benefits easier for CPAs, advisors, plan sponsors and participants by providing turnkey retirement offerings.

The integration will give “advisors a more expansive solution for their clients, [while] offering plan sponsors an easier way to administer plans,” said Aaron Schumm, founder and CEO of Vestwell. “Having an advisor that can step in alongside a CPA and create a custom retirement plan is a fantastic value-added service.”

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Vestwell Announces Partnership with OnPay Giving Advisors Access to Online Payroll Service

online payroll serviceNEW YORK, NY, February 20, 2019Vestwell, a digital retirement platform, today announced they have partnered with OnPay, the top-rated online payroll service serving small and medium-sized businesses. The complete integration between the two modern-day technologies means that plan sponsors now have access to a turnkey retirement offering with seamless data flow between their payroll and retirement plan providers.

Vestwell and OnPay both service plan sponsors through a co-branded experience that gives advisors and accounting firms the ability to support clients with a customized and cohesive experience. Through this new relationship, accounting firms who leverage OnPay’s technology now have a retirement plan offering that simplifies their client’s ability to offer tax advantaged plans. Vestwell advisors whose clients still use antiquated payroll solutions can migrate towards a modernized offering that syncs directly with their retirement platform.

“At Vestwell, we are committed to making retirement plans easier and more accessible for all involved,” said Aaron Schumm, founder and CEO of Vestwell. “Integrating OnPay into our platform does this by giving advisors a more expansive solution for their clients, offering plan sponsors an easier way to administer plans, and providing participants the peace of mind they deserve.”

Integration with payroll is a key pain point of traditional retirement plan offerings, and the Vestwell and OnPay relationship underscores a joint commitment to helping small businesses transfer funds and data without the complications of disparate systems. Working in tandem, the systems streamline administration across paychecks, taxes, and compliance, freeing up time to focus on competing priorities.

“We are continually looking for opportunities to help our clients eliminate manual processes and access all the information they need to make informed decisions,” said Mark McKee, President and COO of OnPay. “Our relationship with Vestwell expands the ways in which we can make business easier for them while painting a clearer financial picture. It also makes it much easier for small business owners and their advisors to offer the benefits their employees want the most.”

About Vestwell Holdings, Inc.

Vestwell is a digital platform that makes it easier to offer and administer retirement plans. Vestwell removes traditional friction points through flexible investment strategies, fiduciary oversight, and streamlined administration, all at competitive pricing. By acting as a single point of contact, Vestwell has modernized the retirement offering while keeping the plan sponsor’s and plan participant’s best interests in mind. Learn more at Vestwell.com and on Twitter @Vestwell.

About OnPay

 OnPay’s mission is to help every small business run by making payroll, HR and benefits easy, affordable and mistake-free. OnPay launched in 2009 as the subsidiary of a traditional payroll company. The team’s deep history with payroll helps OnPay deliver an approachable payroll solution that accommodates companies in every industry, as well as their accountants and bookkeepers. PC Magazine gave OnPay an “Excellent” rating, and the company has earned five out of five star ratings for its payroll solution on Capterra, earning awards for ease of use and best customer service. Learn more by visiting OnPay.com.

Media Contact:

Jessica Torchia

908-872-7319

Jessica.Torchia@ficommpartners.com

 

3 Steps to a Smoother Plan Audit

audit

By Allison Brecher, General Counsel, Vestwell 

If your plan has 100 or more participants, it’s time to prepare for an annual plan audit. A typical audit examines two things: compliance with various tax and regulatory requirements and the accuracy of financial reporting on the plan’s Form 5500. Whether your plan already has 100 participants or you anticipate growing to this size in the future, there are steps you can take now to make the audit process go more smoothly – and save you some headaches along the way.

1. Collect Important documents

Every audit is different, depending on the nature and complexity of your plan, but one thing is certain: the auditors will want to see documentation. These documents must substantiate the amounts selected for processing contributions, benefit payments, deferral changes, and all other employee and employer contributions. As a best practice, keep the following documents in an easily accessible place:

  • Adoption agreements and amendments
  • Payroll files
  • Benefit selection forms
  • Contracts with plan service providers
  • Meeting notes from plan sponsor’s benefit committees, if applicable
  • All other plan-related documentation

As a best practice, work with your recordkeeper to store and coordinate the delivery of these documents to the auditor.

 

2. Make sure your plan’s operations follow the plan document

Once you have collected relevant documents, ensure your plan’s operations are running as outlined. You can save considerable time by reviewing the plan documents for ambiguous provisions as well as by making sure the plan is being administered in a way that’s consistent with the your intentions. This includes looking at things such as the effective date of plan amendments and current loan policy statements. Make sure the plan’s service providers also have the current plan documents and confirm they are following them.

One particular area to focus on is defining what “compensation” is eligible for deferrals and employer matches. Some plans define compensation as “all compensation reported for W-2 purposes” which would include salary, tips, and bonuses and exclude moving expenses and deferred compensation. A mismatch can occur when the payroll system is set up without aligning with the plan’s definitions, resulting in overpayments to participants. This can be a time consuming and expensive issue to correct down the road.

 

3. Automate processes where possible

Manual procedures are prone to error, so evaluate areas where administration can be automated. For example, auto-enrollment and auto-escalation are effective ways to ensure that all eligible employees are aware of your retirement plan offering and have the opportunity to participate or opt-out. Another good automation is around payroll integration. Ask your recordkeeper if it can obtain payroll files and data fees directly from your payroll provider so that you don’t have to spend time following up with your employees. This will minimize the risk of denying eligible employees access to the plan.

Going through a plan audit can seem like a daunting task, but taking the time to prepare in advance will make  managing your fiduciary responsibilities much easier. Between collecting plan documents, ensuring you and service providers are aligned, and automating processes, you’ll establish habits that help keep your plan compliant this year and for years to come.

Saving For Retirement Is Important: What Happens Next?

Sound Strategies for Moving from Accumulating Assets to Withdrawing Them

retirement

A 401(k) plan has long been considered the entryway to investing for retirement. Over time, hard-earned money has been saved, compounded, and grown. But what happens when investors are nearing retirement age, and it’s time to take the money out?

At that point, doing the right thing for their nest egg is more crucial than ever. Unfortunately, for those plan participants who are approaching retirement, there’s no clear-cut “soft landing” for their 401(k) investments. The accumulation phase — the long road of disciplined savings — now seems like a walk in the park compared to new worries about turning that savings into income in retirement.

Wanted: A Post-401(k) Retirement Strategy

The marketplace needs better strategies and workplace systems when it comes to post-401(k) money management options. Unfortunately, many employers don’t have the tools or incentive to assist their employees with “nearing-retirement” stage strategies. For those employers who do understand the need to help employees at this stage, they may feel handcuffed as there are no clear-cut fiduciary safe harbor protections, similar to the kind offered during accumulation, to incentivize employers to start rethinking this near-retirement conundrum. Therefore, plan sponsors generally offer little, if any, help when it comes to managing balances around retirement time.

Introducing the Managed Outcome Plan

A “managed outcome” plan is one solution that could provide a sufficient lead-up to garnering income in one’s retirement years. Just like with managed investments such as Target Date Funds (TDFs) that are geared towards savings, a managed outcome plan option for those nearing or entering retirement could meet criteria based on a person’s age, years in retirement, and desired lifestyle. Managed outcome plans seek to achieve specific objectives, such as target returns, risk mitigation, protection of asset values while nearing retirement, and guaranteed levels of income while in retirement with the ability to customize by individual participant designed to meet their own needs.

Worthy Mention: The “Negative” Enrollment Option

Another possible solution could be to offer a “reverse” enrollment option for those nearing retirement. Under this option, some percentage of current funds and future contributions would be automatically invested in managed outcome plans geared towards protecting the accumulation that has been built while still offering the potential upside of market participation and the benefits this can provide to avoid sequence of returns risk. This is the risk to sustain a fixed standard of retirement income if the investment portfolio experiences large negative returns near retirement. And, plans could be tailored to include an auto-enroll function rather than wait on the participant to choose. Analysis Paralysis shows that when presented with a confusing option versus doing nothing at all, most will often do nothing; this behavior could jeopardize a participant’s retirement savings and future income.

Employers Can Get Onboard

One overriding solution is to provide employers with a level of fiduciary protection in providing these solutions. For example, fiduciary relief could be extended to sponsors if they offer auto- enrollment systems like the ones we find in the accumulation phase. Participants could elect for plan managers to oversee a certain percentage of their 401(k) balances via a managed outcome solution; plan sponsors may like this option, too, as it absolves them of certain fiduciary obligations. Plan sponsor protection, in addition to participant guidance, would focus on participants’ options based on their time until retirement and could help them make better choices when it comes to spending and earning during those years.

Congress Can Get Involved, Too

These solutions won’t be mandatory unless retirement plan providers, plan sponsors, record keepers, and investors demand more choices and opportunities to better manage their 401(k) funds in retirement. And what better way to enforce the solutions that are available to the majority of investors than by making it law? Back in 1978, Congress passed the Revenue Act, which created the ability for employees to avoid being taxed on deferred compensation. Since then, Congress also passed the Pension Protection Act in 2006 to ensure that employees receive their full pension payouts. Now, it’s time for Congress to enact rules that can assist individuals as they transition their 401(k) assets into retirement.

What’s Next

According to AARP, from now until 2030, an estimated 10,000 baby boomers will reach retirement age every day — that’s seven baby boomers hitting age 65 per minute. They must be prepared to make the critical transition from accumulating assets to withdrawing them. And those withdrawn funds may need to last for ten, 20, or even 30 or more years. As a result, our industry — including investment companies, insurance companies, financial professionals, plan sponsors, and regulators — must help create more sound withdrawal strategies to match our retirement strategies. Managed outcome plans and negative enrollment options can be simple, practical ways to help participants manage withdrawals and prepare for their lives beyond retirement.

This content is for general educational purposes only. It is not, however, intended to provide fiduciary, tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give fiduciary, tax or legal advice. Clients are encouraged to consult their tax advisor or attorney.

Guarantees are backed by the financial strength and claims-paying ability of the issuing company

Investments will fluctuate and when redeemed may be worth more or less than originally invested.