Digital 401k platform Vestwell says it’s taking a leap forward in the technology it provides, “resetting the bar” across the retirement plan industry by shedding what it calls 30-year-old technology that currently oversees complex recordkeeping.
The capabilities are powered by an API-driven tech stack, resulting in a more efficient, flexible and cost-effective 401k offering, according to the company.
“So much of the way in which the industry does things was put in place pre-internet,” Aaron Schumm, Founder and CEO of Vestwell, said. “Things have come a long way over the past 20 and 30 years, but it’s just time to kind of rewrite how [retirement plan recordkeeping] works and bring it to a way in which we expect our financial lives to be treated. So that’s really what we’re focused on.”
From a user experience, logging in won’t feel much different “other than increased speeds and more real-time processing,” Schumm added, but the architecture and framework will allow for the input and interaction with other account types.
Comparing it to the way in which unified managed households and trust accounts work, products and services can exist side-by-side for a more complete picture of participant needs.
“As an employee, I can say, ‘Hey, I have a high-deductible insurance plan. Do I want an HSA? Yes. Boom, the account gets spun up next to my 401k,’” he explained. “Or I might have an IRA rollover. ‘Do I want to include that? Yes. Boom.’ So really pick any account type.”
While noting that they’re not there yet, Schumm says what’s he’s most excited about in the near future is the framework that’s in place for seamless tax-efficient investing.
“Because we have the payroll information, we understand where that next best dollar put into an investible account should be placed in the most tax-efficient way possible, or the best bucket, for that individual.”
Specific to the announcement, the following area will be affected:
Recordkeeping
Company and employee records are now fully centralized and maintained in-house on a modern tech stack that allows for full plan design and investment flexibility while eliminating reliance on legacy tech solutions. The solution can power financial services companies, payroll companies, and third-party administrators—all fully white-labeled.
3(16) Administration
Vestwell can also step in as a full 3(16) plan administrator, maintaining employee eligibility, loans and distributions, notices, and compliance testing on behalf of the plan sponsor—thus halving processing time and enabling faster issue spotting and resolution.
Custody
As part of a partnership with “a modern, API-driven custodian,” Vestwell has created an infrastructure that it says revolutionizes the cash movement and investing capabilities of individuals in and out of a workplace offering. Each next best dollar for an employee can be managed in the most appropriate way possible, under one seamless architecture.
“Vestwell’s platform will become the new norm across the retirement industry, bringing the worlds of the workplace and individual financial investing together. Furthermore, it enables advisors, payroll companies, and enterprise partners to focus on their most core competencies: providing value, while bringing their clients and relationships closer,” the company concluded.
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.
