U.S. retirement and pension plans are nearly a $670 billion market with an average annual growth rate in the last five years of 6%, according to IBISWorld. It’s an enticing market, but one registered investment advisors , RIAs, have often shied away from out of fear of the archaic technology traditionally used to run it.

In addition to being one of the largest finance and insurance industries in the U.S., the retirement plan industry is also one of the oldest. This means a lot of the industry’s operations were put in place well before the dawn of the internet. In some respects, the industry has been slow to adapt.

It’s time to change that, according to digital retirement plan provider Vestwell. The company says it’s time the 21st century comes to the retirement plan industry, starting with a modernized, digital platform that allows advisors to more efficiently sell, manage and scale their retirement business.

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Read interview excerpts from our conversation with Vestwell’s founder and CEO, Aaron Schumm, on how his company is digitizing the retirement planning industry.

Tell us about the new cloud-based record-keeping technology you recently launched. How does it differ from your competitor’s offerings? What challenges were advisors facing that prompted you to create it?

Traditionally, any retirement plan provider in the small- to midsized plan offering space had to license a piece of record-keeping technology that is about 30 years old in order to offer a company-sponsored plan. This means inheriting inefficiencies from 30 years ago and trying to make them seem modern. Most of the functions of traditional record-keeping technology require manual “massaging” and all day and night to run. It works, but it isn’t pretty and it definitely isn’t cheap.

Vestwell developed a front-to-back, API-driven workplace investing architecture.

The result? Now anyone can offer their own white-labeled 401(k) & 403(b) workplace retirement plans without a license or reliance on legacy technology. Providers can make any size plan immediately profitable, companies can afford to have a 401(k) in place for their employees and the experience for everyone is what we have come to expect from modern financial institutions.

There are a handful of others who have also identified the challenges of legacy recordkeeping and tried to reinvent it with modern technology. However, most find themselves boxed into a “one size fits all” plan design and service model in an effort to achieve business scale faster. This works if everyone and every company were the same, had the same needs, never grew or shrunk and had the same employee makeup. Once a company grows up and, just like us in our personal lives, requires changes, the employer is legally responsible for accommodating those needs.

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How does the new platform bring value to advisors' practices?

The small plan market has been traditionally difficult for advisors to service well, priced affordably and in a profitable way. By giving advisors the ability to support more plans, at a lower cost, while leveraging their own brand, investments and core competencies, we’re making the small plan market more accessible for both advisors and their clients.

What future developments do you foresee with this new infrastructure? As we continue to enhance the platform, our existing architecture becomes the framework to bring both workplace financial management and individual financial management under a unified umbrella. We can help people allocate the next best dollar of their investable income directly from their payroll into the best account without the person having to be a financial expert or run around to disparate systems.

How much does your service cost?

We aim to keep our fee structure as simple and transparent as possible. Out of the box, for a starter plan that doesn’t require customization, we charge the plan sponsor a $500 setup fee, plus $100 per month and $6 per month to plan participants. No asset fee or “hidden” revenue sharing which is not only unique but critical for an industry where class-action suits are so common.

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Our fee includes a full suite of fiduciary and non-fiduciary services to design the plan, oversee the plan administration and recordkeeping of plan assets. Advisors charge a separate fee based on their investment management or fiduciary services and Vestwell will help them set up an investment lineup and bill on their behalf.

What installation is required? What technical and customer support do you provide for advisors? Our goal is to act as an extension of an advisor’s business. When an advisor begins working with Vestwell, we immediately set them up with a personal login to their customized portal, and they can begin servicing clients in real-time. We have dedicated human sales and customer success representatives to support advisors and their clients, as well as a digital help center to enable self-service.

We provide a great deal of ongoing education and assistance with everything from onboarding to payroll to year-end-testing and more, though our platform was built to be intuitive enough that our resources are just an additional layer of support.

What is the most important trend influencing your business right now?

This is a critical time for advisors – as well as large financial institutions and fellow record-keepers – to rethink their business models and the way they service their clients. What sponsors need in times like these is a flexible solution where they can easily amend plans to satisfy their short-term needs, a lower-cost provider where they know their company and participants aren’t overpaying and a modern technology that can account for changes in legislation without having to rework an entire business model, all while enabling plan sponsors to satisfy their fiduciary obligations.

By way of example, our technology was built to be flexible and configurable. That means that when the CARES Act passed and sponsors were given the opportunity to amend their plans to allow for loans and distributions, we were able to build a digital opt-in for sponsors and an online experience for participants in a matter of days. Many of our competitors, on the other hand, are being forced into paper processes and extra bodies because their technologies don’t afford them the ability to quickly adapt.

While we continue to view investments in company-sponsored retirement plans as a long-term strategy for businesses and individuals, the way that we handle their short-term needs can have an even longer-lasting impact. So we continue to provide resources to assist our clients through these challenging times, knowing that we were built to bring best-in-class to every provider in the industry and every company and employee in the country.

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