"Humans solve human problems."
So says Steve Wilbourne, CEO of Questis, a financial wellness fintech provider. Mr. Wilbourne, a former adviser, realized that technology alone will not solve the financial problems of the 90 million defined-contribution retirement plan participants, which is why he chose to partner with advisers and providers.
The initial round of robo-advisers who went direct to consumers, offering little more that asset allocation models and clever interfaces, found that the cost to acquire the client was greater than the value of the miniscule account balances they acquired.
In fact, Vanguard Group and Charles Schwab have been the most successful robos, enjoying much larger account balances acquired at significantly lower costs than start-ups that don't have trust or preexisting clients.
So fintech providers like Vestwell, Questis and NextCapital are teaming up with advisers, while traditional providers are morphing their commoditized record-keeping businesses into a "financial wellness" platform.
Even Financial Engines, which built its business by going direct to consumers, started going after advisers with the purchase of the Mutual Fund Store and the integration with Edelman Financial Services. That integration was facilitated by their mutual private-equity owner, Hellman & Friedman, which also owns Hub International, a leading property-casualty and benefits brokerage firm that's aggressively buying DC advisory practices.
There's a societal and generational transformation happening. It was started by DC plans, which represented the first move by employers (and now government entities) to shift retirement funding liability to employees. The worksite, as a result, is becoming the place where employees are looking to solve all their financial issues, including retirement planning, debt management, savings, investing and benefits.
With technology at a tipping point, well-funded fintech providers are greedily eyeing DC plans but they are realizing that they must partner and integrate with record keepers, plan sponsors, advisers and payroll vendors while navigating complicated regulations.
So why shouldn't employers leverage their pooled resources on behalf of their employees, by negotiating preferred pricing while vetting the best providers, benefits and fintech solutions? Employees are more productive when they're not worried about finances or benefits, and an integrated retirement-benefits-financial worksite platform is a compelling recruiting and retention tool, especially at a time of historically low unemployment rates.
Record keepers stuck in a low-margin, commoditized business need to leverage their access to plan sponsors, participants and data to offer higher-margin products.
"Nobody cares about record keeping," quipped Aaron Schumm, CEO and founder of Vestwell. "They only care if their problems are solved."
Next up is how to solve the decumulation problem, which is more likely a service than a product like retirement income.
Asset managers are also getting religion, especially those without a record keeper, target-date or indexing franchise. Firms like Goldman Sachs, Allianz and Franklin Templeton led the latest round of funding for Vestwell, and NextCapital has raised $55 million, mostly from strategic investors. Even BlackRock, which has robust target-date and indexing businesses, is hedging its bets with investments in fintech as well as a partnership with Microsoft.
Traditional plan advisers have a unique opportunity to find the best technology and create the right worksite platform for their clients. What's holding many back is fear and uncertainty — the fear of moving from their bread and butter, since most advisers are less tech-savvy than their clients and are afraid to wade beyond discussions of fees, funds and fiduciary service.
Like robo-advisers, "Triple F" advisers are the walking dead, soon to be overtaken by the "digital adviser," who integrates retirement, debt management, savings and benefits, embracing technology on behalf of clients.
As Bob Dylan wrote, "He not busy being born is busy dying."