Vestwell

As Co-Founder and Chief Customer Officer at wealth advisory startup FolioDynamix, Aaron Schumm wanted to do right by his employees and help set them up with retirement savings accounts. But he was underwhelmed by his options: fees were too high, service was terrible, and the technology powering it all did not work well. 

Later, after FolioDynamix was acquired by Envestnet, Aaron delved into the world of workplace savings, and started the journey focused on 401(k) plans for small and emerging businesses. At the time, 72 percent of workers at companies with less than 100 employees did not have access to a company-sponsored retirement plan. Meanwhile, the industry’s low margins and historically sticky products meant that recordkeepers were consistently underinvesting in technology. The average small-market 401(k) plan customer was losing more than two percent of their retirement savings in plan admin fees, fund and annuity fees, and advisory fees. Spotting an opportunity, Schumm founded Vestwell in 2016 to build a cloud-based recordkeeping platform that would form the underlying infrastructure for workplace savings programs — starting with the 401(k). 

The so-called “American savings crisis” goes further than retirement — for example, around 61 percent of Americans cannot afford to pay for a $1,000 emergency. The 401(k) landscape was indicative of the broader savings industry, operating on technology that has largely gone unchanged for 40 years. Retirement savings was just the beginning. 

Other players had spotted the same opportunity to focus on the 401(k) market. Vestwell was one of several startups that emerged between 2015 and 2017 to build a new support platform for businesses’ 401(k) plans, and some had already delivered products to market and raised sizable warchests from big-name investors. 

However, Aaron’s team possessed a unique insight: the majority of workplace savings programs, including retirement programs, were sold via financial advisors, and not directly to businesses. Vestwell built its platform incorporating the financial advisor as a core stakeholder, giving it the ability to offer far more flexibility in terms of funds, operational and reporting capabilities, and other retirement planning services. 

 

Industry Experience Goes A Long Way

Aside from his experience at FolioDynamix, Aaron had also led or worked on product teams at Citi and Fiserv before starting Vestwell. By the time F-Prime met Aaron, we had been involved in the fintech industry long enough to recognize his strength as an industry veteran who genuinely understood the market better than his competitors.

In the mid-2010s, financial advisors served more than 70 percent of small market 401(k) plans. By building relationships with home offices and trust with individual advisors, Vestwell could efficiently sell to a large number of 401(k) plans — and this was the only viable path to revolutionize the SMB 401(k) market. When Aaron set out to raise his first round of funding, we teamed up with like-minded investors at Primary Venture Partners, FinTech Collective, and Commerce Ventures to help him execute that vision. The following year, we doubled down to lead Vestwell’s Series A. 

“Vestwell was founded to provide advisors and employers with an affordable, compliant, and easy-to-use workplace savings platform to help close the savings gap in America, and F-Prime has supported that mission since our inception,” Aaron said at the time. 

History has proved Vestwell’s thesis correct. Aaron has successfully led the company to become an award-winning record keeping platform that is far more efficient than any traditional platform today. Vestwell has also gone beyond just 401(k)s, creating the only single platform architecture to power other tax-preferred savings vehicles in and out of the workplace, such as emergency savings, 529 Education Savings, student loan matching payments, and ABLE disability savings programs. 

Anticipating the value of public-private partnerships in driving innovation within the savings industry, Aaron has also established key partnerships with state governments. They have overwhelmingly turned to Vestwell for its ability to deliver a personalized savings experience on a state-of-the-art platform that spans all savings vehicle verticals. Vestwell now powers more than 80 percent of the live state auto-IRA savings program in the country. 

As the company has rapidly expanded into a leading savings and investment platform, it has over $30B in assets saved and well over a million users employed across 350,000 businesses. In December 2023, Lightspeed Venture Partners led Vestwell’s latest funding round: a $125 million Series D — one of the largest rounds of its type for the year.

 

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