America’s Best 401K is a direct-to-sponsor retirement plan provider proudly branding itself as an advisory and recordkeeping industry disruptor, boasting fast revenue growth and a 30-day average sales cycle.
The firm’s approach does not involve putting advisers on the ground in client office locations, instead relying on the wonders of personal computing technology to create a “21st Century Web-centric experience.” As Josh Robbins, lead strategy officer, likes to say, “Our model is built on the understanding that cafeteria-style meetings, glossy brochures and stale donuts are the least effective way for employees to engage with a retirement plan.”
Customers who desire a deeper connection can use the Web platform’s dedicated support lines—one for plan sponsors and one with live investment advisers for “participant guidance.” The firm takes on full 3(38) fiduciary investment manager status.
“By telling this story effectively we have had plans that have closed in two or three days,” says Robbins, clearly proud of the progress his young firm is making. It was founded in 2012. “Often we find the business owner may be a new reader of retirement industry publications and they are educated about all the important issues. When we come to them speaking in plain English and with a very clear side-by-side fee and service comparison, the pitch can be very effective.”
Robbins says clients “really like that the firm does all the heavy lifting on the front end.” Within six weeks, new clients are ready to do the first enrollments, taking advantage of the technology platform and its focus on customized video content to guide participants throughout.
These technology-based blessings also lead to something of a natural ceiling and a natural client type for the company. First, the company has done better selling to smaller employers where a lot of the decisionmaking and the responsibly for benefits is tied up in one individual owner, or perhaps in a very small group of partners who are empowered to make decisions. Robbins speculates there are a variety of causes for this, but one of them might be that the technology story plays particularly well for the most time- and staff-strapped small business owners.
“And it is a different situation when we come in to speak with a very large plan where perhaps procurement and other stakeholders are involved, each with their own perspective that may not be as focused on the participant or plan sponsor experience,” Robbins notes. “We would never turn away a large or even mega plan like this, but it is perhaps not a primary target at this juncture. We simply have to be nimble to maintain the volume we are producing.”
When asked to talk further about what he sees as his biggest strategic challenges, Robbins readily points to these “natural limitations in the model.”
“If somebody really, truly needs the on-the-ground service, it would be hard for us to serve that employer, potentially,” he says. “You could think of the example of a manufacturing firm where you have a lot of older folks working on the floor without any access to computers or even any company email address. In that case our technological capabilities may not line up with what the employer needs. We understand completely why that employer may not choose to come on board with us. They may be better served by a traditional adviser.”
There are also limitations as it relates to “keeping apprised of the exact specs of the business over time.” In other words, without having boots on the ground rubbing elbows and shaking hands, the firm is sometimes less able to leverage its reputation or find new clients through the important centers of influence present in any given local small business community.
“We don’t have the ear on the ground and so it can be harder to understand where the opportunity is at a given moment,” Robbins explains. “However, this is a hurdle we are overcoming because we are finding that many brokers out there who are controlling the small end of the 401(k) plan market have been very transactional about the way they run their businesses. So there is very little client loyalty, a lot of the time, when we come in to pitch our approach. We recently won a plan from a broker where the client told us they hadn’t seen this person in two years.”
There is also the problem of “plan sponsor apathy in the small business community.”
“We all know that small employers, many of them, are just crushed by their regular duties in the workplace, and to throw a retirement plan on top of that can seem daunting for many people who otherwise probably would want to offer a plan,” Robbins says. “Other advisers face this challenge as well, I’m sure, or they face the case where the plan sponsor doesn’t want to rock the boat, even though there are clear improvements that could be made.”
Robbins says America’s Best 401K wins over some of these folks by showing them how their technology platform and onboarding process can “do the heavy lifting.”
“But there is always that stubborn plan sponsor here or there who doesn’t want to listen,” Robbins admits. “Or you may run into the case where the broker is a college buddy of the business owner and they have that unshakable rapport. Again, we have all faced this challenge, and we owe it to these folks to remind them of their fiduciary responsibility and that they have to make the best decisions they can for the plan.”
Robbins emphasizes that “there are two different sets of advisers out there, one of which we are competing against and once of which we aren’t, necessarily.”
“We don’t really want to go up directly against the folks who are out there using low cost funds, open architecture platforms, and providing a streamlined low-cost core lineup—who are independent registered investment advisers in their own right willing to be a named fiduciary,” he concludes. “Instead, we are targeting the brokers who come in and want to peddle, say, a small regional insurance company’s pricey recordkeeping platform and its proprietary lineup of active funds.”