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Vestwell founder and CEO Aarom Schumm
Vestwell Founder and CEO Aaron Schumm

Can Vestwell Revolutionize How Advisors Sell Retirement Plans?

If Aaron Schumm's latest venture gets enough traction, some say it could radically change the wealth management industry.

When Josh Brown, the CEO of Ritholtz Wealth Management and author of the popular finance blog, “The Reformed Broker,” hosted the 2017 Benzinga fintech awards, he name-dropped Vestwell as a company with the potential to radically change the wealth management industry.

That’s right, Vestwell, a company looking to make it easier and more cost-effective for registered investment advisors to design, sell and administer 401(K) and 403(b) plans using digital automation. What exactly does Brown find so revolutionary?

“I get most excited about fintech when it solves a serious pain point for a practitioner like myself. It’s not like I’m saying they’re doing something that no one has ever done before,” Brown told He added that his firm got started in the retirement plan space a year ago, and is considering adopting Vestwell for some of their clients. But Brown thinks the user experience of Vestwell is such an upgrade over incumbent platforms that it could attract swaths of new advisors to the $6.8 trillion dollar defined contribution market currently dominated by large financial institutions.

“If [Vestwell] can take something that takes Vanguard two weeks and condenses it into a few minutes, it’s going to open up the accessibility for a whole host of firms that don’t have huge back offices and don’t have the resources to dedicate,” Brown said. “More advisors would be doing the retirement plan business if it wasn’t such a huge time eater and it wasn’t so cumbersome.”

And if Vestwell is able to lower that barrier to entry? “You have the potential to really blow this wide open for dedicated advisors,” Brown said.

The benefits for independent RIAs are obvious. Instead of growing assets by chasing several new high-net-worth clients, an advisor can sell a 401(K) to one small business with hundreds of thousands of dollars in retirement assets. The RIA’s home office retains visibility of those retirement assets, and the advisor gets direct knowledge of rollover opportunities. Vestwell also uses Quovo’s aggregation technology to let plan participants sync outside accounts, opening new opportunities for the advisor beyond retirement plans.

Vestwell founder and CEO Aaron Schumm said the idea for Vestwell came when going through the process of offering the employees of his last company — FolioDynamix, which Actua acquired for $199 million in 2014 — a retirement plan through John Hancock.

He boils down the problem with 401(K)s to three main friction points. To start, the process is confusing, difficult and many advisors just don’t feel comfortable creating and pitching a plan to an employer. It’s also expensive for advisors to create a plan (or go to a captive provider) for plan sponsors to offer and for employees to enroll. Finally, 401(K)s open advisors to number of legal liabilities.

Vestwell streamlines the proposal process by providing a digital portal to input data they receive from the plan sponsor, such as employee census information and the plan adoption agreement. The platform automatically generates a plan, shows a side-by-side fee comparison of the proposed plan verses the current plan and creates a proposal letter.

The whole thing is free for advisors and plan sponsors with at least $1 million in assets. Plan sponsors with less pay a one-time fee of $500. Fees range from 35 basis points to 65 basis points — which Schumm said can be paid by either the employer, the employees or a split — and there are investment management fees that get picked up on the back end.

“Still a fraction of what you would pay traditionally,” Schumm said, adding that Vestwell’s rule-of-thumb is to be half or third of the cost of the current plan.

As for the legal side of things, Vestwell curates the investment strategies (eight target date or risk-based strategies and three cash balance plans) and acts as the named fiduciary, named investment manager, named administer and named trustee, effectively eliminating risk to the advisor. If an RIA wants to offer a different investment strategy, the fiduciary responsibility would shift to them and the fees would vary, so Schumm said Vestwell urges firms to see retirement through their lens.

While Schumm believes his company has the potential to make an impact on the industry, he doesn’t necessarily plan to take down the biggest players in retirement. He says Vestwell works best at creating plans for small to midsized companies with less than $50 million in assets. Schumm has also talked about potentially partnering with incumbent retirement providers about using Vestwell to service this client segment.

“We’ve spoken with some of these firms, showed them [Vestwell] and they were blown away by it, especially the advisor-facing tools,” Schumm said. “Because of the way we’ve packaged it and who we’re partnering with, we’re more comfortable stepping in further to the equation than they are. We are an extension of the advisory firm, not just a vendor.”

If Vestwell gains enough traction, it could encourage existing providers to update their own technology platforms for advisors, which Brown said currently range from bad to terrible. Just accomplishing this would be enough to qualify Vestwell as revolutionary in his book.

“It’s not a comment on how much marketshare Vestwell will take, it’s a comment on if it could be game-changing with their approach,” Brown said. “They are asking the question, ‘why does this have to suck so much?’ That’s where the best fintech comes along. It answers that question.”

Schumm is hoping Vestwell answers that question and shows that for independent RIAs, selling 401(K) plans really doesn’t have to suck at all.

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