The employer-sponsored retirement plans market grew from $4.4 trillion in 2014 to over $6 trillion by 2016. Yet, small businesses struggle to offer retirement plans because they are expensive and hard to administer. Of companies with fewer than 100 employees, only 45% had 401(k) plans in 2015.
Even when employers offer retirement plans, they can’t force employees to participate or guarantee they will. According to the Department of Labor, nearly one-third of eligible workers don’t participate in their employer’s sponsored plan. This may be because traditionally, it has been prohibitively expensive for employees to participate in employer-sponsored plans. Plans with fewer than 100 participants pay an average fee of 1.3% on assets under management, and those fees cost employees $17 billion a year in retirement savings.
The lack of offerings, combined with the high cost of plan participation, prevent many Americans from saving for retirement. In fact, the median near-retirement household has only $12,000 in retirement accounts.
Guideline is on a mission to help more people prepare for retirement. Guideline offers employers and employees a full-stack 401(k) plan that includes plan administration, recordkeeping, investment management, and integrated compliance. Unique in the industry, Guideline does not charge participants corrosive fees based on Assets Under Management (AUM). Guideline’s model is “participant-first,” charging employers a flat $8 per month per participating employee.
“Guideline reimagines retirement planning,” said Guideline CEO Kevin Busque. “Our structure, user experience, and pricing model reflect the needs of employers and employees in today’s economy. Employers and employees deserve a sleek, efficient, intuitive 401(k) plan with fair pricing. That’s Guideline.”
In a recent Medium post, Busque discussed why he started Guideline, spurred by his frustration with the widespread use of high AUM fees for retirement accounts while at TaskRabbit, as well as the financial industry’s lack of transparency and inferior technology.
“The fees charged for 401(k) management services are completely misaligned with customers’ retirement potential,” Busque wrote. “And therein lies our major opportunity.” Other startup retirement providers have lowered costs for employers, but they still charge employees high AUM fees, ranging between 0.68% and 2.66%. Guideline has eliminated these fees, and only charges participants the cost to administer the plan, which, at 0.13% of assets, is the lowest fund expense in the industry.
Guideline is able to keep costs low by building their own proprietary in-house administration and recordkeeping technology and avoiding third-party fees. Another benefit to being full-stack is the ability to facilitate efficient plan conversions. The company’s software-centric roadmap, easily comprehensible pricing model, and transparent approach makes Guideline uniquely adaptable to potential regulatory changes in the retirement industry.
Guideline recognizes the importance of a true employee benefit and offers participants a sleek interface to learn about investment options, customize their retirement plan, and monitor performance. Having launched in December, Guideline is already seeing early success, with an above average participation rate.
“Guideline has changed the ‘high-fee, low-growth’ game by focusing on 401(k) growth, without collecting fees based on the size of a participant’s retirement portfolio,” said Propel Venture Partners’ Ryan Gilbert. “We are excited about the way Guideline is rethinking and rebuilding small business retirement plans.”
Guideline and Propel are excited about the opportunity to rethink and rebuild small and medium business retirement plans.