Captain401 (YC S15) Wants to Make Creating a 401k Easier for Businesses

http://techcrunch.com/2015/07/30/yc-backed-captain401-wants-to-make-creating-a-401k-easier-for-businesses/

by katm • 11 years ago

73 31 11 years ago

zt• 11 years ago

This is a much needed service! At Standard Treasury we set up a 401k (no matching, we're a poor startup) through Zenefits, which ended up connecting with https://www.myubiquity.com/ (formerly theonline401k.com). Ubiquity has an unpleasant and unintuitive user interface, poor support, etc. I'm really glad to see a YC company taking on this space, it's worthy of attack.

127001brewer• 11 years ago

The 401k is tied to a Vanguard fund, which Lee says ultimately leads to higher performance than other funds. ...

So there's only one (1) fund to available? I don't think that's necessarily a bad thing, but, if that's the case, what's the reasoning behind this?

roger_lee3• 11 years ago

Thanks for pointing that out -- we're hoping TechCrunch will fix this shortly.

Our 401k actually offers dozens of Vanguard funds, and companies can even customize the investment options if they wish.

myblake• 11 years ago

Can individuals customize their investments as well or is it all set at the company level?

clamprecht• 11 years ago

I wonder if they mean 1 fund, or that it's just tied to Vanguard, and offers a set of Vanguard funds. Either way, good that it's Vanguard. Some other providers' fees are highway robbery.

erichurkman• 11 years ago

Fee rate for my IRA funds in Vanguard funds? Around 0.18% or something close.

Fee rate for company 401k? 1.56%.

Fee rate for previous company's 401k? 1.8% plus monthly account fees plus rebalancing fees.

wdewind• 11 years ago

Some companies like Fidelity don’t work with small businesses.

This is true and something we set out to fix at Justworks. Because we are a PEO we have tons of small customers that get access to 401k much earlier in their life cycle as a business than they would otherwise. For instance, we have some 2 person startups using Fidelity funds (as well as Vanguard etc.). The space is definitely ready for some innovation, though, so it's nice to see a YC company working on it.

BradRuderman• 11 years ago

Assuming a company doesn't match their employee's 401k, what is the cost for a company to offer a 401k, traditionally, and what is the approx cost using Captain401?

wj6• 11 years ago

From my experience costs for a 401(k) can be all over the board and the larger the plan the less the fees will be as a percentage of assets. I've seen as low as 20 bps and as high as 100 bps. The fees usually involve an advisor fee, a recordkeeper fee, and a custody and trust fee. A lot of providers provide all three services and bundle that into one fee. Some advisors use third party recordkeepers and a separate custodian and then all three parties bill separately.

Some companies will hit participant assets for all fees for the plan and then end up paying nothing themselves. I really dislike that practice as it kind of takes a lot of the benefit out of the benefit. :)

jhundal2• 11 years ago

Employee Fiduciary is at 8 bps: http://www.employeefiduciary.com/401k-plan-pricing/

Don't know if they would come out lower than Captain401 though (no mention of any cut of the overall assets on the Captain401 page, if that's correct, they're very likely lower priced).

necubi• 11 years ago

Congrats on launching!

wj6• 11 years ago

When they were on HN a few weeks ago I did not know they were a YC company.

I see another poster mentioned myubiquity.com which I was just looking at yesterday. One thing that stood out for me there is the questionnaire that a startup plan can go through to setup a plan. Gives them things they need to think about if they haven't already.

Best of luck Captain401! I like the use of the Vanguard index funds. We use those a lot (and in Vanguard managed trusts) and think that is a great decision to go with.

I just applied for the fellowship with an idea that leverages the 401(k) as a distribution channel for automated financial planning. Basically a portal that aims to deliver "financial wellness" to participants that combines budgeting, calculators, savings goals, facilitation of insurance and wills, etc. The portal would be offered to RIAs and plan sponsors as an add on service to their existing 401(k) service.

I hope that by getting better advice to people that addresses their current situation and their goals that we can help them form good financial habits. Retirement is the end goal but getting the people that live paycheck-to-paycheck a solid foundation right now will help them better be able to save down the line.

SandersAK• 11 years ago

Was just looking for something like this. Will definitely hit you up!

aresant• 11 years ago

Having done this for a small biz (<20 employees) recently a couple of comparison points:

a) We spent about $5000 to set up with an attorney.

b) It's a !@%!@ nightmare to deal with the guy, with the taxes, etc. I would estimate 20 - 40 hours of set-up time for me, 1hr a month of ongoing paperwork and administration.

c) It's at LEAST $2500/yr to administer with the variety of little fees.

d) It's not straightforward for employees.

So suffice to say at $90/mo + $4 per this is a compelling offer.

Don't see anything specific about a "switching" opportunity - get yourselves a "switch to us" landing page and send me the link :)

roger_lee3• 11 years ago

Oh wow! That sounds terrible. Would love to hear from you: https://captain401.com/join

DMac87• 11 years ago

My understanding was that employers have fiduciary obligations to their employees when they setup a 401k plan - does offloading 401k administration remove those obligations or transfer them to Captain401?

wj6• 11 years ago

I cannot speak for Captain401 but employers (the plan sponsor) can transfer their fiduciary duty to their investment advisor by electing 3(38) services rather than the standard 3(21) services. That doesn't remove all of the obligations of a sponsor but does remove their fiduciary duty on investment selection and monitoring. The advisor usually does charge an extra fee for this but I think it is going to be a standard thing very soon as employers prefer to offload that liability.

Finally a topic on HN that I can speak about!

No12• 11 years ago

"The 401k is tied to dozens of Vanguard index funds"

Would be great if someone would offer self-directed 401k plans. In theory, they exist, but in practice, they're nowhere to be found.

wj6• 11 years ago

A lot of plans (well, a growing number) are now offering a self-directed brokerage account so that participants can opt out of the preselected investment options and pick their own. You should ask your H.R. department about adding that as an option.

No12• 11 years ago

As luck would have it, I have asked HR ;)

They have no clue what self-directed means, who to contact at the 401k provider, and aren't really interested in making more work for themselves. Simply getting some paperwork forwarded along to the provider took a couple of months. Unless you're a C-level exec, it ain't gonna happen.

boulos2• 11 years ago

I don't see an explicit mention on taking on the fiduciary role or not (there's a "taking care of compliance" mention as part of "Automated Administration"). A company I've considered (forusall.com) explicitly calls this out as "We take on the fiduciary role". If you're doing the same, it'd be great to make it clear!

boulos2• 11 years ago

What is the setup and/or recordation fee? The monthly fee is certainly competitive (and IIUC, I like that unlike ForUsAll you're not charging some sort of additional management fee), but I'd want to know what the upfront cost is.

danvoell2• 11 years ago

Just my 2 cents. The really exciting part about what you are doing is making 401Ks easier for businesses.

The really scary thing is this whole page - https://captain401.com/investment-philosophy

I for one don't want a startup investing my retirement fund. I just want to see a list of names that I know (Vanguard, Goldman Sachs...) that I can choose from. If you are providing regular funds as options I would make this abundantly clear and I would push your own investment strategy to the backburner. The core value-add that you are offering is making 401Ks easier for businesses.

boomshucka• 11 years ago

"Modern Portfolio Theory, Efficient Market Theory, and Capital Asset Pricing Model espoused by the world's leading financial economists" is also a fantastic lie. Who are these world leading financial economists? The worlds best investors believe such theories are pure nonsense. The best minds in finance do not believe in MPT, EMT or CAPM. Pure garbage written by people with physics envy.

joshpadnick• 11 years ago

Totally agree. Setting up a 401(k) seems hard and I'd love help. Picking the right investment fund might also be hard, but placing my savings under the management of a relative stranger feels very uncomfortable.

In a world where Bernie Madoff existed, it'd be almost irresponsible to invest retirement savings with a startup. That being said, WealthFront and Betterment are basically startups, but they seem to be at a different level of maturity.

Of course, I'm not sure how objective my perception is. Would a more credible looking website be all the difference?

roger_lee3• 11 years ago

Just to clarify, all index funds are managed by Vanguard, and employees who want to choose their own investment allocation are free to do so. However, for the majority of employees that need help with their investing strategy, we use the same investing principles as Wealthfront and Betterment to make sure they're globally diversified and automatically rebalanced. Also, all funds are held in an SIPC-insured secure trust account by one of the nation's largest third party custodians that deals with billions of dollars -- we never touch the money ourselves.

Captain401 (YC S15) Wants to Make Creating a 401k Easier for Businesses

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