|Clients||RIA’s, Independent Broker-Dealers, Asset Managers / DCIO’s and Back/Trust Custodians servicing 401(k) and 403(b) plan sponsors (companies) & participants (employees), and profit-sharing plans (but not plan participants)|
|Value proposition||Retirement plans used to be painful.
Now there’s Vestwell: 401(k) made easy
|Top Executives||Aaron Schumm, Founder & CEO
Jonathan Ferrara, Product & Operations
Dave Sheen, Finance
Antonio Gonzalez, Director of Engineering
Mark Shilshtut, Director of Engineering
Mike Shuckerow, Chief Compliance Officer
Allison Brecher, General Counsel
Elsa Chan, Business Development
Recently, Vestwell has been a buzzword in wealth management. Experts believe that the company that has reshaped retirement planning has many more aces up its sleeve.
I came to see Aaron and his team on a warm fall morning. Vestwell’s office is located in the bustling midtown of New York, walking distance from Times Square. There were plenty of people roaming around: both tourists who had come to explore The Big Apple and white collars pouring outside to take their lunch break at one of the numerous restaurants the city center has to offer. I must say that the whole dynamic of the area has a great entrepreneurial vibe and you can feel the spirit of the busy business life of this enormous city.
Being very open, unlike typical cubicle dwellers, the team at Vestwell has no boundaries and shares a large common area, with everyone having their own personal space and opportunities to communicate easily with fellow colleagues. Apart from this working area, there are a number of meeting rooms to accommodate group meet-ups and conference calls without disturbing others who’re not involved. The whole team at Vestwell is made up of top performers with years of experience in their field: everyone is occupied with the tasks involved in the working process.
Although the whole office space is comfortable and welcoming, there’s little to disrupt the productivity—no encouragement to play table tennis or soccer instead of taking a short coffee break to recharge!
Aaron Schumm, the company’s CEO, is a very pleasant executive who has a good sense of humor, despite being a big boss of a successful venture. I could sense that Aaron is very proud of and dedicated to the ideas he shares with brilliant like-minded people in his team.
How does the company capitalize on industry gaps and scale its business through offering transparent employee-offered retirement plans? This is what I tried to find out.
A Different Approach to Similar Problems
Vestwell continues to excel at making everyone happy. According to Aaron, the main idea behind the whole thing is to make advisors’ lives easier. To begin with, we can look at the creation of a proposal, for instance. The timeline for preparing an offer, before presenting it to a customer, usually takes about one or two weeks. Vestwell managed to reduce the prep time to just five minutes, after which the tool displays all associated fees to an advisor who is logged in to the platform. After the proposal is ready to be viewed by the plan sponsor, the necessary paperwork is completed right there on the system as well.
When it comes to the end user, Vestwell gives employees a clear picture of their retirement plan by equipping them with the necessary tools to be actively involved in the planning process if they so wish. With biweekly rebalancing, retirement plan benchmarking, and illustrations on proposals, Vestwell is a contemporary platform that has made retirement planning easy and affordable. Aaron says, “We auto-enroll everyone. We want people saving immediately.”
Technology as a Powerful Add-on to Financial Advice
Aaron believes that technology is unlikely to eliminate the need for human consultants. Instead, it is only going to enhance the daily work of RIAs and enable them to offer better, more transparent solutions to end customers. The company’s CEO emphasized,
“Vestwell offers an opportunity to have a clear, concise, and consumable product both at a company and an employee level.”
Aaron, along with Joe Mrak, are the people behind the well-known FolioDynamix solution.
Aaron said, “We drew the concept of FolioDynamix on a napkin over a beer.”
After a few years in FolioDynamix, the company’s management had to get their own 401(k) program for employees and were very disappointed with the third-party provider they joined forces with. This is when Aaron first thought that something had to change, from both quality and price perspectives. He put on his “product hat” and thought of a retirement platform that could be synced with FolioDynamix’s wealth-management solution, which was already up and running, but the investors were not ready to go ahead with the idea at that point in time. After FolioDynamix was acquired by Actua, Aaron remained eager to build the retirement solution, and was unable to wait any longer for the company’s management to sign off on the retirement part of the solution.
Aaron left FolioDynamix and went solo to create his flagship retirement platform, sure that he could translate the challenges he himself faced into an engine that would help advisors excel,
“I had an intention of changing the problems that I personally experienced when working with an advisor to establish the plan and manage it.”
According to Aaron, technological advancement enables cutting down on the high costs that are typical in financial advisory. On top of that, the company’s offering is a “turnkey unbundled solution” that can be easily handed directly to financial services firms that look for a variety of plan types and flexible investment options.
The 401(k) and 403(k) platform targets four main categories of users:
- registered advisors;
- bank trust custodians
- asset managers.
All these entities have very different approaches to the industry, but Vestwell manages to include them in a single platform that helps to sell, administer, and scale retirement businesses.
What’s Inside Vestwell’s Offering?
The company’s platform presents a combination of microservices. It is a SaaS that unites libraries and knowledge (all in one), while another part deals with securities. Moreover, communication is instrumental when it comes to financial advisory, so Vestwell has a notification component for that, too.
Apart from Aaron Schumm, I had a word with Mark Shilshtut, Director of Engineering, about the company at present and its milestones for the near future.
Mark is a technical expert with extensive experience working for reputable brokerage houses. He has comprehensive experience in support, software design, development, complex application lifecycles, and leading projects.
Before joining Vestwell, Mark worked as a senior software architect for several well-known firms. Mark holds a master’s degree in technology management from Columbia University in the City of New York.
Overall, the platform evolves by splitting the initial monolithic structure into a set of microservices. Mark is certain that Vestwell has managed to find a “middle ground” where changes to just one component do not dramatically affect the whole thing.
An “umbrella around concerns” is how Mark referred to Vestwell’s notification engine, which allows for tracking both internal and external communication, as needed.
From a technological standpoint, Scala and Akka are mostly there for the coding part, with a tiny bit of programming in Java on the back-end of the platform. To process large piles of data, Vestwell utilizes the power of reliable open source program PostgreSQL. On the front-end side, the technical team uses Node.js and React to build up user interfaces. Being a huge fan of Quovo, Aaron Schumm’s team relies on this data provider, as well as Morningstar, to pull financial insights for further processing.
A recent tech diligence review facilitated by one of the company’s investors, Fidelity, concluded that for a startup, Vestwell has a phenomenal level of security. The majority of the team, including Joe Pampel, the company’s security guru, have abundant experience in the wealth management sector and know that “security is a top concern and priority for everyone.”
Apart from external consultants, Vestwell’s engine is powered by 22 associates—with further plans for expansion: the management plans to have 31 people on board by the end of the year and then continue growing from there. The resources are currently grouped into three squads in total, with each of the full-stack teams having backend, frontend, and DevOps engineers. I got the impression that the whole team is ready to accept new challenges and take the product to the next level in order to cater to the needs of the large pool of clients Vestwell is surely to have before long.
Product Development Strategy
Vestwell connects its technical team with product owners to enable the whole company works in sync. This approach is not unique, but works best when it comes to staying on top of FinTech. Vestwell has brought on board engineers with years of experience building large-scale platforms in FinTech and implementing high-level system security.
Vestwell’s business analysis department is an exemplary blend of business acumen and tech expertise. The unit is run by Jonathan Ferrara, who has two more BAs in his team: Daniel Aronov and Joshua Forstater. Before joining the company, Daniel had different tech roles in data and business analysis, while Joshua was more versed in the business part of the equation, capitalizing on his passion for helping Americans save for retirement. At Vestwell, both Daniel and Joshua grew their expertise further and became true experts in the technical and business sides of the FinTech domain.
When it comes to product management, roundtable sessions with industry experts keep the company afloat and help Vestwell refine its product-management strategy. In its pursuit to bring only the most suitable solutions to the table, Vestwell holds quarterly meet-ups of industry experts who share their opinions on what’s going on and discuss the latest trends. Aaron Schumm stated,
“We bring in people who are retirement specialists, journalists, anomalous advisors, and asset managers. We’ve had them all around the room and talked about here’s what we’re seeing thematically in the industry.”
Aaron is sure that this kind of collaborative effort is the best way to see where the business is going and identify opportunities to reach new heights. This is an “invites-only” event at which Vestwell gathers subject-matter experts who have “unique opinions about the industry.” The approach of each expert differs greatly, so, based on this diversity of opinions, Vestwell has built a product that incorporates a variety of use cases and allows for scaling the practice. Vestwell’s founder believes that his venture has been a success due to its unique approach of processing insights from multiple stakeholders and making space for each scenario: “It’s because we are able to look across, build in these custom configurations that allow people to scale it out and run their own unique practice but with all these other practices running in parallel in their own unique viewpoint.”
What’s Coming Next?
Vestwell does not plan to stop there. Its strategy for the near future is to build more functionality around the existing platform to make every stakeholder aware of what’s going on and broaden the educational side of the offering. Aaron’s team plans to create tools to help employees make more informed decisions and prepare for retirement wisely. Aaron combines the philosophy of “investment and wellness” to help people face the challenges of planning for a secure retirement.
Having recently raised 8 million USD in Series A funding, Vestwell plans to add even more transparency to its engine. Bringing the company to the next level, one of the key things Vestwell’s management has in mind is to integrate HS sites into the offering and the HSA management, as well as tackling the challenge of managing the retirement savings of public school teachers and hospital personnel, for example. A non-ERISA 403(b) is yet another important milestone on Vestwell’s to-do list.
By teaming up with Riskalyze, both companies are looking forward to helping financial advisors progress and scale their offerings. Markets Insider is sure that advisors will be able to simply log into the Riskalyze platform to generate 401(k) proposals and onboard clients electronically. Overall, the partnership between the two firms is believed to:
- increase operational efficiency and scalability;
- enhance the customer experience;
- allow for holistic planning.
Vestwell has succeeded in creating a unique platform with the specific goal of changing conventional retirement planning, and has created a game-changing tool to enable RIAs to scale their offerings and clearly understand the customer journey. When Aaron Schumm faced problems associated with the 401(k) as an employee, he couldn’t see an easy and transparent solution that would be satisfying to him as a client. This is when he decided to tackle the challenge himself and start his own company. Aaron assembled a team of like-minded professionals and chose a winning approach that helped build a renowned platform to address the needs of potential clients based on their feedback and aspirations.
WealthTech Club’s Takeaway
Similar to the busy American megapolis of New York City, Aaron Schumm is full of energy and has a crystal clear vision of where he is going to take his company in the next few years. On the business side, his prior experience in WealthTech is an asset to his dynamic personality. I believe the company’s approach to conducting round-table sessions to gather opinions from industry subject experts is an excellent way of polishing and further developing its existing strategy. On the technical side, Vestwell’s technology heads possess a deep understanding of technology and how to apply it to WealthTech products to make them tick. Mark Shilshtut feels the heartbeat of the firm and, along with his tech team, creates product architecture based on the current business needs of the company.
Another pivotal aspect that makes Vestwell stand out from the crowd is its recruitment process, wherein the CEO places huge emphasis on hiring people to tap into each of the business horizontals, whether it’s marketing and sales or tech. The synthesis of several unique ideas gives the company a competitive edge, making it a leader in a very specific niche of retirement investment.
Vestwell is a great example of how the right balance between a skillful engineering team and FinTech domain expertise can eradicate inefficiencies in existing employer-offered retirement systems and result in an iconic product.