Captain401 (YC S15) raises $3.5M to help more businesses offer a 401k | Hacker News Reader

Captain401 (YC S15) raises $3.5M to help more businesses offer a 401k

blogs.wsj.com

75 pointsgreattypo26 comments

I interviewed with these guys! I've spoken with one of the founders, Roger Lee, at length about their product and I have to say that they are amazing people with great vision. Even though I didn't get the gig, it's great to see them doing well! Good things happen to good people.

Roger is a real smart guy. I know because I went to summer camp with him years ago.

He's very smart, and a good dude. I'm happy to have had the opportunity to have him in my world for the brief time that we were talking. I could only imagine the camping shenanigans he got into!

We're a Captain401 user at Seneca Systems and it is fantastic.

We can offer a 401k program despite being a small company plus they integrate with Gusto so I have to do nothing to actively maintain it.

#TheDream

As a founder, this goes beyond just another benefit. Supporting your employees' long-term financial future is really important. Maybe early employees make a few hundred million, but far more likely your company will fail. In that case, they shouldn't have lost years of savings potential.

https://captain401.com/pricing

How do these financial services justify charging a percentage of the funds managed? Is there more work involved in handling an account with a larger balance?

They're competing with other 401k plans that do the same, but charge a much bigger percentage, and mutual/index funds do, in general, charge a percentage of the funds under management. Don't look a gift horse in the mouth.

However, you're right that costs are less-than-proportional to funds under management, so they usually offer to lower the percentage as you invest more, cf. Vanguard admiral-class shares: https://investor.vanguard.com/mutual-funds/admiral-shares

Our company used Ubiquity https://www.myubiquity.com/retirement/plans/expressk/ which doesn't have asset based fees

Vanguard average expense ratio: 0.18%

Jesus those fees are high. 50 basis points to just warehouse the money. Wealthfront charges half of that for some moderately sophisticated management.

Plus even more on the employer side! Wow.

And people say they are cheaper than other 401k providers? That's nuts.

EDIT: OK, it appears (https://captain401.com/investments) that they will optionally do some automatic rebalancing for you so they're a bit more than just a warehouse but still.

Hi Folks, Full disclosure, my company also provides small businesses with 401(k) plans.

Fees are extremely important in a 401(k) plan. Guideline never charges fees on AUM. Your money is free to grow. Guideline's average expense ratio is .14 and made up of the very same Vanguard funds. How can we do this? Look at the form ADV for your providers, it will dictate how administrators are compensated. You'll notice lots of hands in the cookie jar... We are full stack, owning every piece of the plan up to custody. We don't outsource. We charge $8/pp/m to the employer, nothing to the participant. You can learn more at https://www.guideline.com

This is 100% true. Mainstream 401k fees are out of control. I don't know how much is opportunism and how much is regulatory burden, but parity to wealthfront or anything else retail would be fucking miraculous.

To put up something concrete, my last large employer had a 401k plan where the cheapest fund we had access to (PLFMX) had an expense ratio of 0.72%. That's in addition to account-level management fees, which I think were ~0.8%.

It would be amazing if Congress eliminated 401ks, and brought over the employer contribution feature as well as the increased participant contribution limits to IRAs. The only reason asset managers get away with charging such outrageous fees is because you're a captive audience with your 401k.

Make them portable such that an IRA is and watch the fees fall.

You guys should check out OctaveWealth 401k (https://octavewealth.com/). They are also YC, have a flat fee 401k (no percent based fees!), and build their investments models in-house.

I was curious if YC had any issues with accepting/funding companies that are in the same space as other portfolio companies. I have heard that venture capitalists often don't. Zenefits and Zen Payroll/Gusto was what came to mind.

My startup is in the financial wellness space of the 401(k) industry (we are not advisors and just do participant education) and I'm going to be applying to to the next session so this bit of news is of interest to me. Thanks.

another option is Betterment for Business https://www.bettermentforbusiness.com/for-plan-sponsors/

Great that they're doing this! I especially like their philosophy here [1] about favoring index funds. Way, way too many employers give you a poor selection, loaded with actively-managed ones -- my last major employer did.

(Even better would be for the law to not limit employee 401k choices to ones selected by the employer, based on some misguided belief that they benefit from having the same choices as the "highly paid employees", as required by the 401 code, given that those very executives don't actually rely on 401ks for retirement and thus have little incentive to get the choices right ... but hey, you gotta work with what you have.)

[1] https://captain401.com/investments

Awesome team and product! Paul is a great guy. I was interviewing there, but sadly the position I was applying for was filled. :(

This is awesome. I've experienced first hand the hassle of setting up a 401k for employees (and now appreciate why so many companies don't offer it until they're bigger). In my mind, it would be a strictly better world where all companies could offer this benefit.

I wish the law was rewritten so that this sort of savings benefit wasn't tied into your employer having to set it up. Get rid of 401ks and just raise the damn IRA limit.

I regret having only one upvote. This is the way the problem gets fixed.

Unfortunately I think the chances of this happening in the foreseeable future are quite slim. Alas.

So much this

Great team, great product. Highly recommended.

Their pricing looks very good. But very small companies may also want to look into SIMPLE IRAs. They are less flexible in terms of employer contribution options (basically 3% match to a max of $12.5k or 2% unconditional to a max of $5,300) and have lower employee contribution limits ($12.5k) but involve far less paperwork and tend to have considerably lower fees.

Our company uses Captain401. It's great!

Reply on news.ycombinator.com