6 401(k) robo-advisers to know

Published
  • August 10 2016, 2:00am EDT
With a third of Americans lacking any retirement savings, startups and banks are beginning to target small- and medium-sized businesses to offer 401(k) management through robo-advisers. These plans traditionally offer a flat monthly rate for employers while employees pick up any fees associated with building a portfolio through low-cost indexed investments. These robo-advisers span from newcomers to mature businesses and all seek to improve the retirement climate.

Betterment for Business

Referenced most by other robo-advisers, Betterment for Business is considered the biggest competition in the 401(k) market. Betterment for Business offers its customers a brand new record-keeping system that incorporates all of its clients’ assets, from Social Security to previous 401(k) plans. The company has a partnership with the U.S. Social Security Administration that enables clients to download statements that offer actual projections.

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Betterment for Business

The New York City-based company, which currently has 200 plan sponsors, is particularly adept at conversion plans, says Cynthia Loh, general manager of Betterment for Business.

“In the first three months that we were in market, approximately 15% of the plans were conversions,” she says. “Over the past three months, almost 40% of our new plans have been conversions, with the largest being $15 million plus.”

Betterment for Business has flexible pricing that is dependent on the number of assets within the plan.

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blooom

For half the price of a Netflix subscription, financial tool blooom will manage its clients’ retirement funds without ever wiring money over. The Kansas-based company offers free analysis of a client’s 401(k) and will offer suggestions on how to improve. If a client likes those suggestions, says Greg Smith, president of blooom, they will take over rebalancing for a flat subscription fee.

“We do not compete with the plan,” says Smith. “We’re a tool that helps employees navigate the choices in the existing plan.”

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blooom

Smith describes blooom as a “custodian agnostic,” which acts as a fiduciary to combat the complex, predatory world of 401(k) plans.

“We’re not going after high net worth people,” he says. “We aim to add one to three years in retirement for regular people.”

In the 20 months blooom has been in operation, the company has acquired $300 million in assets under management and expressed interest in expanding from B2C to B2B.

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Captain401

Captain401’s robo-advising product is not only built around optimizing an employee’s investment portfolio but also automating all administrative duties for the employer. It particularly prides itself on making it easier for HR departments to offload the work involved in setting up and maintaining a 401(k) plan.

“Captain401 uses technology to create employee accounts, sync deductions with payroll, process 401(k) contributions each pay period and monitor compliance,” says CEO Roger Lee. “Captain401 is a comprehensive benefits partner, especially valuable for companies that might not have a dedicated 401(k) expert in-house or a large HR department.”

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Captain401

The company serves as a fiduciary and created a platform that gives employees an easy workflow, Lee says. Captain401 targets small businesses that would traditionally use a financial planner or have never offered a 401(k) plan.

The San-Francisco company charges employers a subscription rate of $120 a month and $4 a month per employee; it also has a $499 setup fee. Special pricing is available for employers with more than $5 million in plan assets.

Employees who use Captain401 are charged 0.5% in fees, excluding any fund fees that can accumulate. Although the company did not release its assets under management, it ranks at 83 on the Net Promoter Scale, a management tool used to gauge the loyalty of a firm's customer relationships.

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ForUsAll

A major goal for the employer-sponsored 401(k) company is to increase participation among employees and track their eligibility. So far, the 3(16) and 3(38) fiduciary is driving 80% participation.

“HR managers go crazy,” says Healy Jones, head of marketing. “They’re so excited to boost participation.”
ForUsAll has access to the payroll through the platform to change withholdings, an aspect of recordkeeping that could result in Department of Labor penalties if anything is inputted incorrectly — “a real pain point for small businesses,” says Jones.

“This is an intimidating thing for a small business owner to do,” he says. “We want to eliminate that barrier.”

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ForUsAll

Although the company focuses on medium-sized businesses, particularly retailers, manufacturers and coffee shops, most of the plans have $1 million to $5 million in assets.

ForUsAll offers a base price of $94 and a per-head cost of $3 with no setup costs to the employers, while employees pay 0.54% in annual fees.

“There are a lot of companies who don’t have a lot of high-income folks who are saving for retirement,” he says. “A lot of people are starting to focus on it, and I think it’s wonderful.”


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Guideline

Guideline Technologies Inc. was created as a retirement company despite entering the market with an automatically managed 401(k) offering, says CEO Kevin Busque. So when it came to determining a price structure for Guideline, Busque chose to only have the company profit on plans sponsored rather than on commissions or trades.

“We’re the only ones focused on the benefit to the participant as our primary goal and outcome,” he says. “There’s a lot of distrust in the industry.”

The Burlingame, Calif.-based company handles plan administration, payroll automation, payroll integration, recordkeeping, investment management and compliance for employers at $8 a month and 0.13% in fees for employees.

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Guideline

Despite starting in December 2015, Guideline is running on 65% of conversion plans. Busque says the pricing model is a major factor for employers who are looking for a new robo-adviser.

“It’s really about when the fees are super high to the participant,” he says, noting that the CEO and CFO are also participants in their company’s 401(k) plan.

Guideline Technologies Inc. will soon announce an IRA product to their company’s offerings. It mainly serves a wide variety of medium-sized businesses, ranging from foot doctors to a landscape company.

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SaveDay

New to the market, SaveDay focuses on small businesses and startups by offering plan set up, cost per employee and transfers costs for free. Aidan Yeaw, vice president of product development, says the San Francisco-based company decided on this payment model to eliminate objection from potential plan sponsors.

“If a plan sponsor is willing to pay for a 401(k) service and they look at our model, it gives them more flexibility to add an employer match,” Yeaw says.

Employees pay 0.45% in fees for SaveDay’s services, which offer ETFs at a “much lower cost for investment” than mutual funds, he says.

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SaveDay

Since launching in February, SaveDay has less than $1 million in assets under management, says Yeaw.

The San Francisco-based company also has about 20 employers using its platform, from a two-person law firm to a 1,000-person for-profit college.

“We’re hitting a mark for the problem space,” Yeaw says.