
Apply HN: Financial plans as an employee benefit - wj
-- Overview --<p>In addition to health, vision, retirement, etc. benefits we aim to establish financial planning as a benefit that every company offers their employees.<p>Money is the main source of stress for Americans and it impacts an employer through missed days, increased illness, and distractions. And many people without a solid financial foundation put their retirement at risk by not making enough contributions to their retirement plans, by taking loans from their 401(k) when they have an emergency, and by carrying too much debt into retirement.<p>Our goal is to help Americans break the paycheck-to-paycheck cycle and start making progress towards their financial goals.<p>-- Business model --<p>In order to reach the most people our financial wellness platform will be an add-on service that 401(k) advisors offer to their plans. We believe it will help them distinguish themselves from their competitors as well as open up a new revenue stream for them.<p>They will pay us a monthly per employee fee which they can either pay themselves or pass on to the 401(k) plan.<p>For a business model comparison think Concur for the 401(k) industry.<p>-- Software --<p>Our web-based platform will ask each user a series of questions after which they will receive a simple financial plan that contains a budget, debt payment plan, retirement plan, insurance needs, and plans for their goals whether that be establish an emergency fund, buy a house, save for college, etc.<p>--<p>WorkPlay401(k)<p>http:&#x2F;&#x2F;www.workplay401k.com
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buss
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?

~~~
wj
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.

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charleyma
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?

~~~
wj
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](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.

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CaliforniaKarl
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?

~~~
wj
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/](http://finance.yahoo.com/calculator/retirement/ret02/))
or some newspaper sites ([http://www.nytimes.com/interactive/2014/upshot/buy-
rent-calc...](http://www.nytimes.com/interactive/2014/upshot/buy-rent-
calculator.html?_r=0)) 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!

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ismail
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

~~~
wj
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.

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petervandijck
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?

~~~
wj
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.

~~~
buss
> 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?

~~~
wj
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.

