#WinnersOfWealthTech Ep 28: Aaron Schumm, Founder and CEO of Vestwell

This month’s Winners of Wealthtech interview is with Aaron Schumm, the Founder and CEO of Vestwell, an entirely new kind of digital retirement platform transforming the way plans are offered and administered — for the benefit of advisors, employers, and employees alike.

Prior to founding Vestwell, Aaron was a co-founder of FolioDynamix, a wealth management and advisory services company that powered $800 billion in assets for over 100,000 advisors. At FolioDynamix, which was sold to Envestnet in 2017, Aaron oversaw the strategy, revenue, marketing, customers and product. Aaron holds a B.S. degree in finance from the University of Illinois and an M.B.A. degree from Duke University, The Fuqua School of Business. He was named as one of 40-under-40 by InvestmentNews and WealthManagement.com’s “10 to Watch”.

Listen to the podcast here!

 

How Can I Offer My Employees a 401(k) Plan?

By:Denise Power

If you could create your own fantasy Board of Directors who would be on it? CO— connects you with thought leaders from across the business spectrum and asks them to help solve your biggest business challenges. In this edition, a CO— reader asks whether it is feasible for a small business to sponsor a 401(k) plan for employees.

Ben Thomason, executive vice president of revenue at Vestwell, answers…

Companies know it’s vitally important to have the right people on board to build the business, and a solid benefits package attracts the top talent they need. However, many small businesses assume they do not have the option to offer a 401(k) retirement savings plan.

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Study: Advisors’ Fear of Outsourcing Underscores Struggle with Scale

Identifying new opportunities and managing scale were cited by retirement plan advisors as the biggest issues they struggle with in growing their practice, but a new study suggests they are not taking steps to create additional efficiencies.

In “Evaluating Operational Challenges to Drive Scale and Efficiency,” 39% of advisors stated that identifying new opportunities is their biggest hurdle to growing their practice, followed by 33% who see managing scale as their biggest hurdle. Yet, an even smaller percentage are outsourcing their most basic functions, according to the study by digital platform firm Vestwell.

 

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4 Steps All Companies Should Take to Protect Themselves from Retirement Plan Litigation

By Allison Brecher, General Counsel, Vestwell

More than 100 lawsuits were filed in the last two years against plan sponsors and advisors, claiming that fees charged to them by their 401(k) plans were excessive. This litigation has resulted in hundreds of millions of dollars in settlements, significant reputational damage, and countless hours spent on defending litigation instead of servicing clients. Worse yet, when the stock market declines, we can expect more filings like these. In addition to litigation over failures to make reasonable decisions for plans, the Department of Labor restored over $1.6 billion to benefit plans to correct each plan sponsors’ failure to follow its own internal procedures.

Fortunately, many of these types of claims are preventable. With a little time and preparation, advisors, plan sponsors, and other fiduciaries can take steps to minimize their risk and even eliminate it almost completely.

  1.  Create internal policies and follow them.

Every plan sponsor and fiduciary should have a written guide – even if it’s just one page – that lists who the plan service providers are, what each one does, who makes decisions for the plan about investments and other plan features, and how often those get decisions reviewed. Courts have repeatedly dismissed claims where the plan sponsors provided evidence that their plan has internal procedures about plan-related decisions and that they were followed. There are many free online resources to help sponsors conduct fiduciary training, vet their service providers, and assess conflicts of interest that might impair their obligation to serve their participants’ best interests. Don’t wait for litigation to jump into action.

  1. Benchmark the plan’s costs to make sure they are reasonable.

One of the most often litigated claims against plan sponsors and advisors is that they permitted the plan to incur unreasonably high costs. The regulations are clear that the plan does not need to engage the least expensive provider and cost is not the only criteria to determine whether a provider’s or investment’s fees are “reasonable.” The plan sponsor or advisor should take stock of each service provider’s services, evaluate them, and document the review of them.

  1. Identify and disclose all actual or potential conflicts of interest.

Service providers should disclose their conflicts of interest to the plan sponsor so that the sponsor can make an informed decision that aligns with their participants’ best interests. Sadly, not all providers do. If the same company that serves as the plan’s recordkeeper is also providing the investment options available to plan sponsors or receiving other indirect compensation from the investments offered by the plan, there may be a conflict of interest. Conflicts can only be managed if they are disclosed.

  1. Give participants clear and complete information about the plan.

It is astonishing how many claims could have been avoided had plan fiduciaries been more transparent in giving plan participants information. This could be as simple as giving them materials about joining the plan and how to invest through an email blast or mailing. Tell participants in “plain English” what they need to know about the investment options, eligibility requirements, employer match, and other basic plan features.

Complacency about proper retirement plan management is a significant business risk, but there are easy ways to manage it. Advisors and plan fiduciaries can use these lessons of litigation to help plan sponsors ensure they are properly setting up their plans and keep them out of trouble.

 

 

NYC Startup Vestwell Raised $8M

$8M

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 Announces New Joint Offering with Riskalyze

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

joint offering

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

Vestwell Raises $8 Million in Series A

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


f-prime

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