“We have been running plans with all ETFs since October 2003, and continually enhancing our product—keeping costs down and automating almost everything,” Darwin K. Abrahamson, CEO and founder of Invest n Retire, LLC in Portland, Oregon, tells PLANADVISER.
Abrahamson explains that a patent for his firm’s technology was finally issued January 28 of this year. That is when a person from whom Abrahamson had secured a loan with the intellectual property as collateral gave him a 15-day notice to pay off the half-million dollar note. “I didn’t have the half million, so to protect the patent, our company and investors, we filed for Chapter 11 bankruptcy protection.”
Abrahamson says he had already started talking to firms about selling the intellectual property. It is a true software as a service (SaaS) recordkeeping product; users don’t need to invest in additional hardware or handle the installation, set-up and daily upkeep and maintenance. It is capable of recordkeeping for plans with mutual funds, not just ETFs. He notes there are clients on the books that never moved from offering mutual funds in their investment lineups to ETFs.
But, for those wanting to jump into the all-ETF 401(k) space, recently started by Schwab Retirement Plan Services (see “Schwab Introduces All-ETF 401(k) Platform”), “it is the holy grail of what’s needed for ETF plans; the buyer will have a fully automatic system requiring no workarounds, and our system is well-proven,” Abrahamson contends.
A pooled account owned by a third party, such as a bank or broker/dealer, does not need to be used with Invest n Retire’s service to enable trading of whole ETF shares when there are fractional shares. Trades are executed within seconds of after a price quote and posted within minutes. All trading activity is done automatically throughout the day, eliminating any manual processes.
Invest n Retire’s program is an unbundled offering; plan sponsors may choose their own investment manager, adviser, TPA (third-party administrator) or custodian.
“There’s a huge value now in what we’ve built, with the patent being issued, for tax-deferred retirement plans,” Abrahamson says. “We need to get this technology in the hands of a much larger firm that can take it to a larger market and enhance retirement plans for participants; that was my goal in creating this company.” Invest n Retire, LLC has been a big proponent of using ETFs in defined contribution (DC) plans, and has gathered the data to support its stance (see “Has the Time Come for ETFs in DC Plans?”).
So, instead of the bankruptcy being a bad thing, it’s turned out to be a good thing. Abrahamson says the list of firms interested in buying the technology is getting longer each day. There are large consulting and recordkeeping firms, as well as some ETF companies, interested. “This is just speeding up what we intended to do.”
The buyer will not only get the technology, but will benefit from Invest n Retire staff expertise. “We’ve agreed we’ll work for the new firm for a period of time to help with the transition and running the technology,” Abrahamson says.
Handing off its innovative recordkeeping product does not signal the end for Invest n Retire. Abrahamson says the firm is in the process of enhancing its software for managed and separate accounts. And, Abrahamson sponsors a multiple employer plan and will focus on marketing that. More about that is to come, he says.