Apply HN: Financial plans as an employee benefit

Seems like a good idea on the surface.

How well do you know the compliance requirements for this industry?

Will you make money from the companies giving this as a benefit, or by taking a cut from users, or some other way?

How will software serve me better here than talking to someone in person?

I have had my share of compliance battles over the years so I definitely understand the issues. However it is currently my understanding that the compliance onus will be on the advisory firm that use our software. Every compliance officer has their own interpretations of ERISA but I think we should be able to satisfy their requirements.

Fees will be charged to the advisors on a per-participant basis, or should a company want to provide it directly we would of course accommodate them.

I think you generally will be better served talking to someone in person however most advisors don't touch participant personal finances outside the retirement accounts. Also I do think people are increasingly comfortable not interacting with people for their financial services. I personally find going into a bank or calling a banker on the phone an inconvenience. My bank doesn't even have branches or ATMs in my state. Thank God for deposit by phone.

Sounds like something I would use!

Few questions that came to mind for me: - What's the incentive on the advisor to offer the add-on service? Is it to eventually increase AUM and encourage more 401k savings from the users? Would be curious to learn if there are any numbers around this or users taking loans out, etc

- What does the platform look like? White-labeled self-hosted? What does an integration look like for the advisor

- What would be the general distribution plan and target market for getting advisors on board?

Thanks for the questions, Charley!

The incentive for the advisor would be to gain new business (increase AUM) by being more competitive with their array of services in proposals (not to mention hopefully having some great metrics from WorkPlay401(k) to include) as well as maintaining current business by rolling out our financial wellness platform as a new service for existing clients. I think the latter is just as important as companies are constantly courted by advisors to switch their 401(k) provider.

Here is a very quick video that gives an overview:

https://www.youtube.com/watch?v=6C-FmUImG3U

Basically it is a series of questions (kind of modeled off of how TaxAct works) for the participant after which a financial plan is created for them. Then can continue to use it with any transactions or information they enter modifying their goal progress, outstanding to dos, financial plan, and budget. They also receive emails that let them know how much is left in their monthly budget, account balances, the next steps they need to take, and content based on their goals, age, and personal financial situation.

I'd like to get a little farther in my sales process before making a full decision on this but I'm thinking it will be more co-labled (ABC Advisor powered by WorkPlay401(k) than a complete white-label situation. No self-hosting as I cannot even imagine the support needed to roll out to everybody from banks down to one man RIA shops. I know some compliance managers would prefer self-hosted but I have found that they are changing their tunes as their advisors are demanding to use cloud-based software and their I.T. departments are starting to use cloud based Exchange and whatnot.

The advisor has a dashboard they can access and then we will tie in with the most commonly used service desk software that the larger or more technologically advanced ones use. For compliance purposes we can also set it up to BCC them on any email sent to their participants.

Right now I have a list of 1844 advisors (though lots of firms have multiple advisors under them) that I have imported into Close.io and have begun reaching out to. I'm getting some nibbles and am learning a lot about what message to use, the kind of materials they require, and the most common objections.

The target market to begin with are advisors that do provide some level of participant education rather than the advisors that only pick investments and hand everything else off to Fidelity.

If you have any other questions please ask them here or email me at will at the domain.

Hmmmmm, many questions! Also, I like the alliteration of your company name.

Sorry, I'm confused about one point: Is the Software simply acting as a conduit between the client (employee of Company X) and another human (the financial planner), or would the software actually be generating advice? In the latter case, would that advice be relayed to the client via the human financial planner, or would it be delivered directly to the client?

In the latter case (where software delivers advice directly to a client), how do you plan on convincing the SEC that the software (and, indeed, your company) is a qualified investment adviser?

I'm also curious, how much "client activity" is being assumed for each client? What I mean is, you might have clients (again, individual employees of Company X) coming back for financial planning again and again over a (relatively) short time, either because they are having lots of life events happening, or because they're unsure, or because they want to explore different paths, or whatever. Have you thought of a way to prevent clients like that from making the service too expensive to run?

The software would be generating a financial plan for the user (clients different from users in this case) but it is not generating specific investment advice--we'll leave that up to the RIA. You might compare our algorithms to some of the various calculators that you can find on any finance site (http://finance.yahoo.com/calculator/retirement/ret02/) or some newspaper sites (http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...) but more advanced as they feed off each other.

I'm not sure that our software will ever deliver advice along the lines of "Buy mutual fund X" and certainly would not even be able to do so before recordkeeper tie-in. An example of what it does now regarding investments is something along the lines of you and your wife have X dollars in retirement savings across three retirement accounts. You're making A, B, C in monthly contributions to each. Assuming age-based returns (your portfolio gets more conservative the closer you get to retirement) or account-based returns you will have Y dollars in monthly income in retirement which is Z short of your retirement income goal. (Often getting somebody to contribute enough is a larger challenge than asset allocation.)

Also, financial planners are not SEC registered.

I hope users come back over and over again! I'm hoping the budgeting tool, emails, and value we provide keeps them coming back. You realize the connection between life events and taking an interest in their financial plans and that indeed is when a lot of users will return to us.

Since everything is automated the only cost for heavy users would be server and bandwidth. And I truly do want to help people be financially ready for those life events so we will gladly accept those costs.

Thank you for the questions Karl!

Thanks for posting this up. Really enjoying Apply HN.

Few questions,more out of curiosity:

How is this different to something like mint.com?

Why are companies (sponsors) asking advisers to offer these services for less?

Why are fees shrinking in the industry?

Other companies are focused on 'employers' while yours is focused on the employee, which is great, how do you plan to sign up employers

I am also really enjoying this. Feels like virtual office hours.

I would say it is pretty similar to Mint.com but with a few differences. Our budget module is more like YNAB in philosophy. Our software is designed towards the 401(k) industry for use by advisors (and giving them a dashboard with metrics to provide to plan sponsors) and will have their name and logo on every interaction with the plan and participant. We will eventually tie-in with both the service desk software used by advisors as well as the recordkeeping software (thus proving a new/alternative front end for the participant to interact with their plan and make investment changes and process rollovers).

I think companies have started paying more attention to their employee benefits and making sure that their employees actually benefit from them. Plus, with the Department of Labor starting to give lip service to financial wellness the industry publications that plan sponsors read have started talking about it as well.

Fees have gone way down in my fourteen years in the industry. When I started out it seemed like most advisors were commissioned based but that really started to change about eight to ten years ago. Competition has increased. Mutual fund fees have gone down and low-cost index fund usage has gone up. And maybe most of all, much more attention is being paid to fees in the press so participants are looking at their statements and asking the questions they should be asking to their benefits managers.

I meant to mention this in the post but instead of competing with advisors, like the other startups are doing, we are partnering with the advisors so we can hopefully leverage their existing books of business. I anticipate that we will both be rolled out to existing clients as well as be a feature they list when doing proposals to prospects.

Sounds intriguing. Some questions:

- Who is the team behind this, and are you working on this full-time right now?

- How much work have you done on the software? (Planning, research, building?)

- Why this specific product? Why do you think this is a better idea than many other possible ideas? How did you come up with it?

Peter,

Thank you for your questions!

Team:

I'm a solo-founder that is working full-time on this and have been since September first.

(I have an advisor and have used a contractor for a small amount of help.)

Stage:

The first version of the software is built and I'm getting feedback from users. I've been having some discussions with advisors (and have a huge list to still reach out to) and hope to have the first paying client soon.

Why:

I've been in the 401(k) industry for fourteen years and there has not been a lot of technological innovation until very recently. And the startups that are tackling the space are doing so by becoming advisors which is a lot of compliance (SEC, ERISA, DOL) headaches in an industry where fees are shrinking.

And while I admire their dedication to providing a better employer experience, I think by focusing on the employee experience we will be able to make a larger difference.

I came up with the idea as I saw that 401(k) plan sponsors (companies) are asking advisors to provide more services (specifically financial wellness) for less. An advisor can't do that by adding more bodies, they're going to have to start leveraging technology. Also, my former firm needs this type of software and failed at creating it.

> Also, my former firm needs this type of software and failed at creating it.

Can you say more about this? Why did they fail? How will you avoid the same problems?

Many reasons tje failed but I would say the main ones are:

* Lack of a clear project leader (the project had been mandated from up high so many people wanted the feather in their cap. I was an observer at a few meetings and they were a mess.) and nobody attached had software development experience.

* No dedicated resources and the two programmers that were putting any time towards it didn't know the 401(k) industry and couldn't translate the feature requests into technical specifications.

* Management mandated building it on Salesforce before any of this happened even though no department used it at all. They spent hundreds of thousands on licenses before even making a list of features.

* There was no verbalized vision for the project and never a conversation about why a user would want to use it.

* Banks are, in general, not the best and consumer facing technology.

I wasn't part of that project but watching that happen was painful. I hope that my experience will help me avoid those issues.