B
y Vasyl Soloshchuk, CEO and Co-Owner at INSART Our series of
WealthTech Cookbook
articles explores various wealth-management components, explaining the importance of each.Retirement planning and investment guidance is one of the most required aspects of wealth management. According to research by CB Insights, a massive demographic shift in this area can be expected. In 2016 there were 19 million retirees, which equates to 71 retirees per financial advisor. Assuming 10,000 new retirees per day, in 2025 there will be 51 million retirees, which is 163 retirees per financial advisor.
However, the beneficial 401(k) plan is underused. Only 550,000 plans hold 401(k) assets, meaning that just 41% of workers contribute to this retirement vehicle. And half of small & mid-sized businesses do not a plan at all.
To defuse the so-called “retirement crisis,” wealth-management technology companies are offering digital retirement advice. Lower fees and better user experience are inspiring more and more employees to invest in their retirement. Compared to 2007, the size of assets in 401(k) plans has grown from 2% to nearly 20% of total retirement savings.
In today’s article, we will provide an overview of offerings in the digital retirement advisory market in terms of services offered and pricing.
We consider the following companies:
- Business-to-Business (B2B) (direct to plan sponsor):
- ForUsAll
- Guideline
- Human Interest
- Ubiquity Retirement + Savings
- Business-to-Consumer (B2C) (direct to participant):
- Blooom
- FutureAdvisor
- Financial Engines
- FeeX
- Advisor-led (B2B2C):
- Vestwell
- B2B/B2C:
- Empower Retirement
Blooom
Blooom is a B2C robo-advisor that was founded by several financial advisors who wanted to use a narrow focus to help American citizens with workplace retirement accounts (e.g., 401(k) plans). Blooom offers a free analysis of the client’s current retirement plan, including hidden fees, investment optimization, and management of the plan.
Features
: Blooom offers the following services:- Investment selection. The company researches every fund in the retirement account and creates an optimal portfolio depending on the customer’s age and financial situation.
- Reducing hidden fees. The company examines hidden fees in the retirement plan and moves it to the lowest cost available. In addition, it eliminates excessive fees connected with conflicts of interest in financial institutions.
- Suspicious activity alerts. The company monitors the client’s account to prevent large withdrawals or suspicious activity. In case of such events, the customer is alerted via text message or email.
- Rebalancing. The company regularly rebalances the portfolio to offer the best mix of investments based on the funds available and current retirement goals.
- Market guidance and communication. The company enables clients to speak with financial advisors via live chat or email.
Basic pricing
: $10 per month for management and monitoring of a single retirement account; $7.50 per month for each additional retirement account.ForUsAll
ForUsAll is a B2B company that provides 401(k) advisory services for small and medium-sized businesses. The company takes on both investment and administration responsibilities.
Features
: ForUsAll offers the following services:- Retirement advisory. The company finds the right record keeper and investments, constructs a smart plan design, handles ERISA compliance and fiduciary responsibilities, and drives participant success with a technology-driven education and engagement strategy.
- Automatic administration. The company plugs its cloud-based software into the client’s existing HR software, connecting their payroll with their 401(k). As the client’s business grows, the software will scale the 401(k) safely.
- Managing investments. The company’s investment approach consists of three main principles: avoid unnecessary fees, avoid unnecessary risk, and conduct a thorough fiduciary review.
Basic pricing
: The advisory fee depends on the size of the plan, varying from 0.20% to 0.35%. If the plan’s assets are less than $250,000 there is an additional “employer’s fee” of $200 per month.FutureAdvisor
FutureAdvisor is a B2C investment advisory firm. It was founded in 2010 by two friends, Bo Lu, CEO, and Jon Xu, CTO, who realized that good financial advice is easy to apply at scale when powered by technology.
Features
: FutureAdvisor offers retirement planning and investment advising, which includes the following:- Investment planning. The company has created a powerful recommendations algorithm that creates an investment plan for all customer accounts that is tailored to their age, risk tolerance, portfolio size and holdings, time to retirement, etc.
- Managing and monitoring investments. The company serves as a portfolio manager, monitoring customers’ investments daily and taking strategic action when markets shift to help customers reach their long-term goals.
Basic pricing
: Retirement advice is provided free of charge, though asset management costs 0.5% annually.Guideline
Guideline is a B2B financial technology firm whose 401(k) platform automates plan administration and compliance. Its all-inclusive retirement plan is used by nearly 4,000 small businesses. Guideline is the first-ever robo-advisor serving the group retirement plan market to complete CEFEX’s independent certification process.
Features
: Guideline provides the following services:- For employers, the company offers a fully automated maintenance-free 401(k) plan that includes seamless integration with the payroll provider, along with administration, record keeping, reporting, investment management, and employee education.
- For employees, the company helps clients to easily enroll and understand their investment options, choose a recommended investment portfolio or create a custom portfolio, and access investment fund data and plan information.
Basic pricing
: Employers pay a one-time $500 setup fee and $8 per participating employee per month (with a $40 monthly minimum). Employees pay no fee, though Guideline portfolios have a blended expense ratio of 0.06% (6 bps).Vestwell
Vestwell is a B2B2C technology company that offers a 401(k) and 403(b) platform for financial advisors and businesses.