Fintech upstart Vestwell is on the acquisition prowl–and it didn’t have to look far.
The New York-based recordkeeper announced its intent to acquire Sumday, a subsidiary of The Bank of New York Mellon Corporation (BNY Mellon), that manages and administers 529 college savings, 529A ABLE, and Secure Choice/Auto-IRA state-sponsored savings programs. The products will be added to Vestwell’s workplace savings infrastructure that already includes 401k and 403b retirement plans, as well as state program Oregon Saves.
Vestwell’s CEO and Founder Aaron Schumm says it’s part of the company’s forward-thinking strategy to increase participation by offering multiple saving options within a single workplace platform.
“We feel like we have a ‘first mover’ advantage with this acquisition and can become the de facto leader in helping close the savings gap in the U.S.”
Citing the “tradewinds” that are spurring financial advisors and institutions to increase workplace savings options, and all-in-one fintech solutions, the deal was a no-brainer to Schumm & Co.
“Research shows that there’s about a 50% participation uptick when people can opt into a savings program at their place of work,” said Schumm. “It was a natural extension to add education savings and related plans to our retirement options, all under one platform,” adding that health savings accounts and emergency savings are “on the short list” to join the cloud-based platform.
When the acquisition is through, Vestwell will have approximately 22,000 small business clients, says Schumm, which translates to more than 800,000 participants.
A deal among friends
Vestwell and BNY Mellon are familiar friends with Schumm calling the nation’s oldest bank “a supporter since our early days,” and one of the “most respected institutions in the world.” BNY Mellon currently has an estimated $45.3 trillion in assets under custody and/or administration, and $2.3 trillion in assets under management. BNY Mellon is already an investor in Vestwell and watched the company add to the coffers by raising $70 million in Series C funding earlier this year.
“Since we began our relationship with Vestwell…we have been consistently impressed with its focus and execution in the space. This deal helps Vestwell further scale the business,” said Roman Regelman, CEO of Asset Servicing and Head of Digital for BNY Mellon.
For now, BNY Mellon will continue as the preferred servicing agent for the state programs managed by Vestwell, providing custody, fund accounting, recordkeeping services, and where applicable, sub-advisory services through its affiliate Lockwood Advisors, Inc.
Once the deal closes (terms were not disclosed), Sumday will become a Vestwell subsidiary, rebranded Vestwell State Savings and will be led by Douglas Magnolia.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
