No matter what age you are, retirement planning is something that needs to be taking more seriously. With the future of Social Security uncertain and an economy with problems of its own, what have you done to invest in your retirement? Vestwell, is the platform that makes retirement saving understandable, transparent, and easy by offering a white label platform for financials advisors and employers to offer retirement plans.
AlleyWatch spoke with Aaron Schumm about the startup and how it is already guiding people to a pleasant retirement.
Tell us about the product or service.
Vestwell is a new investment platform that makes it easier for everyone to save more for retirement through 401(k) & defined contribution plans. Our mission is to provide financial advisors with a modern platform that reduces fees, increases transparency and ensures compliance in a quickly shifting regulatory landscape. We remove the barriers for small to mid-sized firms to offer a retirement program to their employees around fees and legal responsibilities, while giving financial advisors tools to help scale their business and service their clients more effectively.
How is it different?
Vestwell is the industry’s first fiduciary (to the extent allowable by ERISA Act regulations), white-labeled retirement platform.
That means, the platform belongs to the financial advisors, under their brand, yet, we do the heavy lifting for them. It allows them to grow their business faster, while ensuring their clients’ interests are always the top priority.
We’re also one of the first in the industry to blend a robo-advising tool with a human touch. We help people save more for retirement by making it easy for their advisors and employers to stay competitive (and compliant) given new oversight changes from the Department of Labor.
We believe in the value of relationships, and that clients of independent advisors feel the same. Advisors care about their clients and want to do what’s best. But with the changes in regulations and limited technologies and services delivered in a cost-effective manner, it’s has been difficult for the advisors to help their clients the way they want to. Vestwell gives the independent advisors the ability to do what’s best, while aligning the needs and regulatory requirements for advisors, companies and employees.
What market are you attacking and how big is it?
Vestwell is focused on improving the retirement services industry, a $25 trillion market, specifically the defined contribution space, which includes 401k’s, 403b’s, 457’s, and rollover IRA’s.
What is the business model?
Rather than sell to consumer or companies directly, Vestwell has a different go to market strategy. We work directly with investment advisors, who sit on the lion’s share of investment assets, and maintain the relationships with the companies.
Our white-labeled platform allows advisors to offer investing services to companies and their employees, while charging less than half the current industry average rates. By using Vestwell, advisors can serve their customers better while complying with the Department of Labor sanctions against commissions and excessive fees. They can offer their services at a cost less than the bigger banks, but with service and attention far better than other robo-advisors.
While existing retirement solutions can put advisors—and companies—at risk, Vestwell assumes 3(38) and 3(16) fiduciary responsibility which ultimately reduces both financial cost and legal liability of administering defined contribution plans.
We’re able to charge less by streamlining the legal, tax and fiduciary responsibility and allowing the advisor to focus on building their business and managing client relationships. We’re a win-win solution for our market.
What inspired the business?
I’ve spent my career, building platforms and investment services for advisors, having more than 100K, and $800B in assets on the platform of the last company I co-founded. Through that process, in services in independent RIA’s and offering our own 401k to our company employees, I saw how painfully broken the process was. With the deep knowledge, relationships and understanding of the advisory space, I decided to help fix it, bettering the future of companies, employees, and the advisors that help them.
Why did you opt to focus your product on advisors rather than to consumers directly?
We strongly believe in the value of relationships. People are important. And people need guidance. I love what the automated advice providers are doing. I think it’s great and there is a market for that. But, there is also a massive market that heavily relies on the professional insight of advisors, especially once you leave the large metropolitan areas in the United States. There are construction companies, manufacturers, doctors, lawyers, and service providers that don’t look to pure technology-only providers first as their solution. They rely on other professionals to help them. Ten or twenty years from now, that may change, but people will still play important roles.
Additionally, the traditional ways of the broker-dealers and wire-houses like Merrill Lynch/BofA, or Morgan Stanley need to change. They are being sued for high fees and commissions. Advisors are leaving and moving to being independent RIA’s, trying to do what’s right by their clients, rather than being forced to sell products and services they may not believe in. But to be independent, and provide your own platforms as an advisor can be tough to pull together. We’re here to help them because we believe in their value. And by helping them, we are helping their clients, and employees save the most money for retirement in the manner they should be.
Lastly, most people feel like they don’t know enough about 401(k)s to feel enabled to take thoughtful action toward having more money available for retirement (whether they actually know enough or not.)
By leveraging a community of people trained to care – advisors – and now mandated to care by the Department of Labor (in a manner of speaking), we get to help more people take the right steps toward saving more money at the right time. They already trust their advisors, all we have to do is make it easy for their advisors to trust and use us.
What are the milestones that you plan to achieve within six months?
The responses from the advisor community have been overwhelming, but we are taking a patient, thoughtful approach. We’re working with a few RIA’s now, which includes several hundred financial advisors. We’re going to focus on delivering our technology and services to them first, as we continue to expand and enhance our offering.
What is the one piece of startup advice that you never got?
I feel like it should be common sense, but I see very smart people building things that will fail ultimately, all the time. My advice: build a real, viable business that adds value. Build your company to be self-sustaining and profitable as fast as possible. Just because you have raised a bunch of money from VC’s doesn’t mean you’ve “won”. Raising money for something that can’t turn into a profitable business quickly and doesn’t create long term value for everyone is wasteful, in my opinion. Create value for your clients. Do it right. Do it well. Do it at scale…. and then you can say you did the right thing, while being successful.
If you could be put in touch with anyone in the New York community who would it be and why?
We are here to help advisors who work with business owners and need retirement plans for their employees. So, we’d be happy to be in touch with any independent advisor that wants to help their clients and their employees save for retirement through 401k’s, IRA’s, 403b’s and other defined contribution methods. Part of that would be working with voices in the community like the head of the small business association New York district office who provide services to startups. And working with the Department of Labor and SEC to know we are behind them in supporting their efforts.
Why did you launch in New York?
I grew up in Chicago, but have lived in NYC the last 14 years of my life. I love this city. There is no other place in the world that compares. During that time, I’ve been lucky to build great relationships with friends, colleagues and industry peers…and it’s of course where I met my amazing wife. New York is the perfect city to build Vestwell because it sits at the intersection of both the old and the new; the intersection of the financial services market and the wave of new technology, specifically in the FinTech space. There is phenominal talent in other cities, like Silicon Valley, etc., but there are so many nuances and reliance on relationships in the financial services space that get missed when you’re too far removed from the heartbeat. Being in New York let’s us keep a close pulse on things.
What’s your favorite restaurant in the city?
Wow…that’s nearly impossible to answer. As with NYC in general, it changes…and we are so incredibly lucky to have some of the best restaurants in the world at our doorstep. I used to keep a running list of about 30 restaurants that I’d send to friends, clients and colleagues in town visiting. Last year, my wife and I moved from the Village to Harlem. So, when we aren’t working around the clock or cooking at home, we get to explore a bit. Lately, the go-to’s have been Lido, Row House and LoLo’s Seafood Shack in Harlem.
