Welcome to The PLANADVISER Interview, an online series bringing you the most influential people in the industry discussing the trends and issues of the day—in their own words.

Aaron Schumm is a person dressed for all occasions. There’s the blazer with pocket square for the finance set. The open-collar shirt with sweater vest for the “business casual” dress code of middle America. Then there’s the stylish leather boots that, while passable in a tech-industry board room, seem more fit for an outdoor bar in San Francisco specializing in craft gin cocktails.

“I need to be ready for anything,” Schumm quips ahead of sitting down for his roughly 45-minute PLANADVISER interview. The intrepid approach makes sense. His firm, along with competitors like Ubiquity, Betterment and Human Interest, find themselves poised to provide 401(k) options to the growing list of states with retirement plan mandates, as well as small businesses being offered incentives from the SECURE 2.0 Act of 2022. Schumm discussed the opportunities, and the challenges, of getting both general financial advisers and small businesses to offer defined contribution retirement plans.

PLANADVISER: Why is it still a challenge to get small businesses to provide workplace retirement plans?

Schumm: It’s a multi-layered answer. … Some of it comes down to the nomenclature. A workplace savings plan, employers get. It makes sense. I think a lot of people know a 401(k). Thankfully—even though it took decades to get there—most people know that. But then they also think, “Ooph. That’s a headache. It’s going to be a headache to implement.”

We started thinking through that and thinking about what the right ways are to engage in a way that is consumable. Then we thought about who is actually delivering that messaging. For us, it’s predicated around three distinct voices.

Voice No. 1 is the financial services world. How is an advisory firm or an asset manager or whomever it may be engaging the employer? … The adviser typically wouldn’t have the expertise or feel they have the expertise to engage with these businesses and offer them something unless they are a retirement plan adviser. If they didn’t have the expertise, they would hand it off to someone else and basically disengage from the employer. Personally, I don’t think that’s the right approach. I think every adviser should be engaging with these businesses, including on the workplace side. We work really hard to change that mindset and to say, “No, you can engage with the workplace plan, and this is how you engage.”

The other side is the state-mandated programs, which we are powering. Those typically today are in the form of payroll-deducted IRAs—auto IRAs. That is a message that is being propagated first through a mandate. … But you also have to think about the messaging there and the reach there. We work a lot with the financial institutions, and with the states, in creating marketing communicating aspects so they can get out and have that reach in an approachable fashion.

The last area is the payroll side. There’s usually not an adviser in the mix, so how do you make sure that the payroll company has the ability to message what a workplace savings program is and what it means and how to engage? Usually that person selling payroll to the small business is probably not a 401(k) expert, or an IRA expert, or any savings program expert. … We spend a lot of time thinking about personas, and who is the voice, and how is that voice projected?

Using OreganSaves as an example on the state side, that was a big leap to go to market with that, and it has been very successful. So now they are working collaboratively with other states on how to roll out programs, and other states are jumping in, and that’s actually lifting the private sector, because the private sector is saying ‘well, if the states can do it we can do it, so how do we engage?’

All that being said, [the small workplace retirement plan] is still a largely untouched space. We’re barely scratching the surface of businesses that are out there.

PLANADVISER: You recently partnered with the Carson Group to provide their advisers with a 401(k)  setup. Is that a sign of things to come for your business strategy?

Schumm: Pre-Vestwell, any adviser-led firm had two options: No. 1 was to put a few [recordkeeping] players on the shelf and say to their adviser base, “You’re allowed to sell through one of these providers we’ve ordained to be acceptable.” But then it’s really pulled out of the adviser’s hands at that point, sitting somewhere else, outside of their purview in terms of however it is being designed and administered … and oftentimes in a conflicted way in terms of what the adviser is trying to do.

No. 2 was that the advisory license their own recordkeeper platform and do it themselves. But doing that, they’d have to go license or rent a legacy platform and equip it with a bunch of people, which takes a lot of costs to stand that up. … We’ve taken that model and changed it, and said, “Well, you don’t have to be an expert. We’ll teach you how to be an expert or we’ll give you the extension to be that expert and we can power it on your behalf with your brand, your advisers and your asset manager—or whatever asset manager you want to use.”

That has created a lot of interest, because now a Carson adviser can say, “I’ve got my workplace savings platform” to the end client, the employer, who is usually the private wealth client to the adviser. That client is then saying, ”You’re my adviser, I trust you, I know you, I’ll use your platform.” That way it all stays within the complex of Carson, and they are not worried about people pulling assets out the door.

PLANADVISER: Let’s talk about state mandates. Do you think there will be more coming? And how close do you stay to this conversation, considering these are policy decisions that, at least for you, essentially become business leads?

Schumm: We stay very close it. Actually, some of our team is down in D.C. right now—our program managers meeting with state treasurers. Different from the private sector, the state governments are highly collaborative with how they engage. They talk to one another, they look at each other’s mandates, they ask really pointed questions about what’s working, what’s not working, and how they can do things better. … They’re all trying to solve the same problem.

Given that we are powering now 75% of the state IRA programs, they then recommend us to other states.

PLANADVISER: How where you able to be an early mover versus the bigger legacy providers?

Schumm: Well, it’s nuanced enough where it’s difficult for certain players to create an offering.

BNY Mellon was an early investor in Vestwell. They first saw Vestwell when it was just a PowerPoint. … Fast-forward a couple years, and they said they had some state programs that they had fallen into. The states wanted to offer these savings programs. BNY Mellon started building platforms to do that, and then they looked at Vestwell and connected the dots and said, “Can you do this for us?” We said yes. It was right up our alley. … We were new and modern and had flexibility with how we architected the plan. So we were able to wire things together that made a lot of sense for the states. … Then, finally, we’re sitting on top of BNY from custody and asset servicing, so you get the best of both worlds between a legacy player and a newer, modern company.

PLANADVISER: What should we be looking for next in terms of these state mandates?

Schumm: There are currently 14 states that have enacted some sort of legislation around this, and almost all of the states have started some dialogue. These things take a lot to get approved, put into law, etc., so that’s going to continue to grow.

The earlier states to market, like Oregon, are looking to expand some of the savings opportunities they have. They’re looking at things like emergency savings, they’re looking at some 401(k) options. … Hopefully those get officially formed in legislative initiatives, but they are actively talking about it. We have several states that are coming in soon, actually, to sit with us in our office to say,  “What’s next, what should we be focused on?”

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