Is the so-called smart money backing low fee 401k providers with a fully-automated slant?
It would appear so, as news broke of Guideline’s latest venture capital funding (series c round), a $35 million infusion from new investor Tiger Global Management, as well as existing investors Felicis Ventures and Propel Ventures. Total financing is now at $59 million.
The tech-based platform claims low fees and flat-rates for participants and employers, fueling debates over the interest and efficacy of robo advisors, or providers of investment management and financial advice involving digitally-developed algorithms.
The brainchild of Guideline CEO Kevin Busque, his disillusionment with high 401k fees after he cofounded freelance job site TaskRabbit lead to his latest idea, according to Forbes.
“Today the 100-person startup offers 401k plans to small businesses for a $500 setup fee and $8 per employee per month,” it notes. “The monthly rate, paid by employers, is all-inclusive—companies don’t have to pay separate charges often levied by 401k providers for services like record-keeping and administration.”
And Silicon Valley Daily adds that Guideline “grew its new plan count by 129 percent in 2018, giving the company 10 percent market share of new 401(k) plans in the U.S. More than 5,500 small businesses have selected Guideline for the modern, affordable retirement plan it offers, growing assets under management to about $750 million (a 270 percent increase).”
The company has expanded from 42 to 98 employees, and has offices in San Mateo, Austin, Texas and Portland, Maine.
The company plans to use the new funds to expand product offerings and hire new employees.
“You pay a one-time plan setup fee and a low monthly flat fee per participant for 100 percent automated 401(k) plan administration,” according to the company. “And there’s no additional cost to transfer over an existing plan. Your employees can choose from Guideline-managed portfolios composed of select Vanguard funds. We don’t charge hidden assets under management (AUM) or wrap fees, which allows us to offer the lowest possible portfolio cost to your employees.”