
Captain401 (YC S15) Wants to Make Creating a 401k Easier for Businesses - katm
http://techcrunch.com/2015/07/30/yc-backed-captain401-wants-to-make-creating-a-401k-easier-for-businesses/
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aresant
Having done this for a small biz (<20 employees) recently a couple of
comparison points:

a) We spent about $5000 to set up with an attorney.

b) It's a !@%!@ nightmare to deal with the guy, with the taxes, etc. I would
estimate 20 - 40 hours of set-up time for me, 1hr a month of ongoing paperwork
and administration.

c) It's at LEAST $2500/yr to administer with the variety of little fees.

d) It's not straightforward for employees.

So suffice to say at $90/mo + $4 per this is a compelling offer.

Don't see anything specific about a "switching" opportunity - get yourselves a
"switch to us" landing page and send me the link :)

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roger_lee
Oh wow! That sounds terrible. Would love to hear from you:
[https://captain401.com/join](https://captain401.com/join)

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danvoell
Just my 2 cents. The really exciting part about what you are doing is making
401Ks easier for businesses.

The really scary thing is this whole page -
[https://captain401.com/investment-
philosophy](https://captain401.com/investment-philosophy)

I for one don't want a startup investing my retirement fund. I just want to
see a list of names that I know (Vanguard, Goldman Sachs...) that I can choose
from. If you are providing regular funds as options I would make this
abundantly clear and I would push your own investment strategy to the
backburner. The core value-add that you are offering is making 401Ks easier
for businesses.

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joshpadnick
Totally agree. Setting up a 401(k) seems hard and I'd love help. Picking the
right investment fund might also be hard, but placing my savings under the
management of a relative stranger feels very uncomfortable.

In a world where Bernie Madoff existed, it'd be almost irresponsible to invest
retirement savings with a startup. That being said, WealthFront and Betterment
are basically startups, but they seem to be at a different level of maturity.

Of course, I'm not sure how objective my perception is. Would a more credible
looking website be all the difference?

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roger_lee
Just to clarify, all index funds are managed by Vanguard, and employees who
want to choose their own investment allocation are free to do so. However, for
the majority of employees that need help with their investing strategy, we use
the same investing principles as Wealthfront and Betterment to make sure
they're globally diversified and automatically rebalanced. Also, all funds are
held in an SIPC-insured secure trust account by one of the nation's largest
third party custodians that deals with billions of dollars -- we never touch
the money ourselves.

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danvoell
When I signed up for my most recent 401K, there was a really slimy Edward
Jones dude pushing some fund they called the "perfect retirement fund for a
mid 30 year old" or something to that effect. As soon as I asked about
management fees he bumbled around and started talking about the other funds
they offered. Its going to be really tough to differentiate yourself as the
"best investors". Differentiate yourselves on "best 401K platform" its much
lower hanging fruit is all I'm saying. Once people are in the platform use
historic performance to help them make the best decisions.

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zt
This is a much needed service! At Standard Treasury we set up a 401k (no
matching, we're a poor startup) through Zenefits, which ended up connecting
with [https://www.myubiquity.com/](https://www.myubiquity.com/) (formerly
theonline401k.com). Ubiquity has an unpleasant and unintuitive user interface,
poor support, etc. I'm really glad to see a YC company taking on this space,
it's worthy of attack.

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wdewind
> Some companies like Fidelity don’t work with small businesses.

This is true and something we set out to fix at Justworks. Because we are a
PEO we have tons of small customers that get access to 401k much earlier in
their life cycle as a business than they would otherwise. For instance, we
have some 2 person startups using Fidelity funds (as well as Vanguard etc.).
The space is definitely ready for some innovation, though, so it's nice to see
a YC company working on it.

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wj
When they were on HN a few weeks ago I did not know they were a YC company.

I see another poster mentioned myubiquity.com which I was just looking at
yesterday. One thing that stood out for me there is the questionnaire that a
startup plan can go through to setup a plan. Gives them things they need to
think about if they haven't already.

Best of luck Captain401! I like the use of the Vanguard index funds. We use
those a lot (and in Vanguard managed trusts) and think that is a great
decision to go with.

I just applied for the fellowship with an idea that leverages the 401(k) as a
distribution channel for automated financial planning. Basically a portal that
aims to deliver "financial wellness" to participants that combines budgeting,
calculators, savings goals, facilitation of insurance and wills, etc. The
portal would be offered to RIAs and plan sponsors as an add on service to
their existing 401(k) service.

I hope that by getting better advice to people that addresses their current
situation and their goals that we can help them form good financial habits.
Retirement is the end goal but getting the people that live paycheck-to-
paycheck a solid foundation right now will help them better be able to save
down the line.

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BradRuderman
Assuming a company doesn't match their employee's 401k, what is the cost for a
company to offer a 401k, traditionally, and what is the approx cost using
Captain401?

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wj
From my experience costs for a 401(k) can be all over the board and the larger
the plan the less the fees will be as a percentage of assets. I've seen as low
as 20 bps and as high as 100 bps. The fees usually involve an advisor fee, a
recordkeeper fee, and a custody and trust fee. A lot of providers provide all
three services and bundle that into one fee. Some advisors use third party
recordkeepers and a separate custodian and then all three parties bill
separately.

Some companies will hit participant assets for all fees for the plan and then
end up paying nothing themselves. I really dislike that practice as it kind of
takes a lot of the benefit out of the benefit. :)

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jhundal
Employee Fiduciary is at 8 bps: [http://www.employeefiduciary.com/401k-plan-
pricing/](http://www.employeefiduciary.com/401k-plan-pricing/)

Don't know if they would come out lower than Captain401 though (no mention of
any cut of the overall assets on the Captain401 page, if that's correct,
they're very likely lower priced).

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wj
That is definitely lower than I have seen (edit: for mid-sized plans at
least). Thank you for bringing that to my attention.

Is that advisory only? I don't see any mention of that including recordkeeping
and custodial services in that fee but do see them on another page.

~~~
jhundal
I don't have anything to do with the plan (just keeping my head up about how
the business runs :) ), but from the FAQ
([http://www.employeefiduciary.com/401k-faq/](http://www.employeefiduciary.com/401k-faq/))
it looks like they use a third party (MG Trust) for custodial services, paying
them out of the asset based fee they already charge. Nearly certain that the
recordkeeping is included (we're using it anyways), so the fees listed may in
fact cover everything.

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127001brewer
_The 401k is tied to a Vanguard fund, which Lee says ultimately leads to
higher performance than other funds. ..._

So there's only one (1) fund to available? I don't think that's necessarily a
bad thing, but, if that's the case, what's the reasoning behind this?

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roger_lee
Thanks for pointing that out -- we're hoping TechCrunch will fix this shortly.

Our 401k actually offers dozens of Vanguard funds, and companies can even
customize the investment options if they wish.

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myblake
Can individuals customize their investments as well or is it all set at the
company level?

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psawaya
Individuals are free to invest in any of the low-fee Vanguard index funds we
include in our plan as they wish.

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boulos
I don't see an explicit mention on taking on the fiduciary role or not
(there's a "taking care of compliance" mention as part of "Automated
Administration"). A company I've considered (forusall.com) explicitly calls
this out as "We take on the fiduciary role". If you're doing the same, it'd be
great to make it clear!

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boulos
What is the setup and/or recordation fee? The monthly fee is certainly
competitive (and IIUC, I like that unlike ForUsAll you're not charging some
sort of additional management fee), but I'd want to know what the upfront cost
is.

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DMac87
My understanding was that employers have fiduciary obligations to their
employees when they setup a 401k plan - does offloading 401k administration
remove those obligations or transfer them to Captain401?

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wj
I cannot speak for Captain401 but employers (the plan sponsor) can transfer
their fiduciary duty to their investment advisor by electing 3(38) services
rather than the standard 3(21) services. That doesn't remove all of the
obligations of a sponsor but does remove their fiduciary duty on investment
selection and monitoring. The advisor usually does charge an extra fee for
this but I think it is going to be a standard thing very soon as employers
prefer to offload that liability.

Finally a topic on HN that I can speak about!

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SandersAK
Was just looking for something like this. Will definitely hit you up!

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No1
"The 401k is tied to dozens of Vanguard index funds"

Would be great if someone would offer self-directed 401k plans. In theory,
they exist, but in practice, they're nowhere to be found.

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wj
A lot of plans (well, a growing number) are now offering a self-directed
brokerage account so that participants can opt out of the preselected
investment options and pick their own. You should ask your H.R. department
about adding that as an option.

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No1
As luck would have it, I have asked HR ;)

They have no clue what self-directed means, who to contact at the 401k
provider, and aren't really interested in making more work for themselves.
Simply getting some paperwork forwarded along to the provider took a couple of
months. Unless you're a C-level exec, it ain't gonna happen.

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wj
I think you are onto something there. I feel like it usually is the C-level
exec that feels he can out perform both the advisor's models and the market in
general.

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necubi
Congrats on launching!

