Ask Daniel Beck a simple question about the TPA/recordkeeper he cofounded in 2019, and he’ll just GO.
“We’ve been fundraising like crazy, so it’s a story we tell time and time again,” the 401GO CEO said.
His idea came from experience. An entrepreneur and a small business owner, he tried to offer a 401(k) to his employees only to abandon the effort not once but twice.
“A lot of the smaller employers blindly go into a 401(k) without necessarily realizing the responsibility they’re taking on,” Beck explained. “Maybe because I’m too detail-oriented in some ways, I was afraid of what the process would entail and if it would be a distraction from running my business.”
His financial advisor friend new to 401(k)s shared his frustration, noting if a small business solution existed, he’d add 100 clients almost immediately. A lightbulb moment for Beck, he began to research why it was so hard and the impediments and barriers holding it back. The 401GO business model was born.
“Initially, our focus was to solve this pain point for small business owners,” he added. “Very few small businesses—somewhere around 80% to 85%–don’t offer anything. The primary reason is the complexity, and with that complexity comes cost.”
Technology is critically important to the business model, and he credited Guideline and Human Interest to a degree but believed advisors “from day one” are just as important to fostering positive participant outcomes, noting the higher level of confidence they instill in clients.
“We felt that [combination] would lead to higher participation and deferral rates, and we were right. From the very beginning, we knew we had to build technology, but we also knew that many advisors are afraid of technology because they think it’s going to replace them. Our focus was to use technology in a way that would not replace the advisor, but to extend what the advisor can do.”
A two-fold mission; solve this retirement plan access gap for the small business owner, and keep advisors involved to successfully impact participant outcomes.
“It leads to the third thing that makes us very different,” he said. “As I said, I wanted to solve the pain point for small business owners and the issues they discuss around the boardroom table. Now that we’ve dug into it more, everything we do focuses on the issues discussed at the kitchen table and the stuff happening at home. How do we increase participation rates of the lower quartile of wage earners and age of the workforce to get them involved in 401(k)s?”
“We felt that [combination] would lead to higher participation and deferral rates, and we were right.”
Dan Beck
The technology is what he calls a means to the end, not the solution, adding that 401GO is a 401(k) company first with robust technology rather than a tech company in the 401(k) space.
Targeting the micro plan market almost exclusively, they offer 3(38) fiduciary services which is where they engage the advisor.
“We find a lot of private wealth advisors are nervous about taking on the whole 3(38) fiduciary responsibilities. In that case, we have our own RIA where we have the 3(38) services, and that advisor essentially becomes the coach. We use Matrix Trust as our custodian, and then the advisor comes in to provide recommendations and work with participants.”
Set up and onboarding takes as little as 15 minutes with no human involvement whatsoever, and is how they service companies as small as only one employee. Now with 18 employees, the West Jordan, Utah-based company experienced a hockey stick-style upward trajectory this year, which he called a testament to what the firm built, but also demand that many advisors might not realize exists.
“Because we are so advisor friendly, a lot of them come to us because of their frustrations with other solutions,” Beck concluded. “It means they bring plans to us, and right now, we’re about half and half in terms of startups versus existing plans.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
Wow, I find this information really helpful in terms of helping small business startups in attempting to combine human resources and technology resources. The fear factor (people losing their positions or technology take over) sometimes can become a huge obstacle to forward movement. This article I think would help small business owners or even startups understand that this is necessary at this time thus alleviate some of these fears. .