Vestwell and BNY Mellon partner on 401(k) plans, auto-IRAs

The alliance will help both firms distribute a retirement product to employers

Dec 5, 2018 @ 6:58 am

By Greg Iacurci

Bank of New York Mellon Corp. and robo-adviser Vestwell Holdings Inc. have inked a deal to partner on workplace retirement programs such as 401(k) plans and auto-IRAs.

Under the partnership, Vestwell will serve as the technology backbone underpinning the BNY Mellon-branded retirement plan program that plan sponsors offer to their employees. BNY Mellon will custody the retirement assets.

BNY Mellon, one of world's largest asset custodians, doesn't currently have such a 401(k) product on the market, and would provide Vestwell with broader distribution. Vestwell, founded in 2016, is a digital platform that offers fiduciary investment management, plan administration and record keeping to clients. It's one of several tech upstarts looking to compete with traditional 401(k) providers.

The deal also aims to get both companies a foothold in the state and city automatic-enrollment, payroll-deduction individual retirement account — or, auto-IRA — markets cropping up in certain states, according to Aaron Schumm, founder and CEO of Vestwell.

Several states — including California, Connecticut, Illinois, Maryland and Oregon — have legislated the creation of auto-IRA programs in their states, with the aim of increasing the number of small businesses offering workplace retirement plans to their employees. Oregon launched its program last year and California recently began its pilot phase.

Mr. Schumm acknowledged that one company, Ascensus — a record keeper that has been selected to administer the California, Illinois and Oregon plans — has gotten a foothold in the market to date but he wants to be able to compete going forward.

"There's a clear opportunity within these states," Mr. Schumm said.

BNY Mellon will also distribute the product, which is open architecture, to sponsors of other types of defined-contribution plans — 403(b), 457 and 401(a) plans. It's planned to debut next year.

Vestwell in June inked a separate distribution deal with Allianz Life Insurance Co. of North America, which is helping the robo distribute through registered investment advisers and independent broker-dealers.


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