How Guideline is reinventing saving for retirement

Kevin Busque realized there was something wrong with retirement planning three years ago.

He was overseeing technology at TaskRabbit, the errand-outsourcing website he had founded with his wife, Leah Busque, in 2008. In typical startup style, he also wore another hat: setting up 401(k) plans for the company’s employees.

A Broken System For Small Businesses

Busque observed that much of the workforce wasn’t participating in the benefits the firm offered.

“It was so difficult for employees to understand the options. The plan itself was not great, and the technology surrounding it was pretty terrible,” Busque says.

Plus, it was tough for a small business to oversee the plans. “You want to offer all these great benefits, but you may not be an expert in finance. None of the plans out there allowed me to be hands-off in selecting experts who were going to educate participants and do all the ongoing maintenance,” he says.

Most importantly, it was expensive. The compliance and operational costs were steep for a lean operation. And the process was riddled with hidden fees and management costs that grew along with the money employees saved.

The Big Picture

Busque knew a technology problem when he saw one. And this one had big implications.

As of December 2015, Americans held $24 trillion in retirement assets, including $4.7 trillion in 401(k) accounts, according to data from the Investment Company Institute. Social Security funds will run out in 2034, unless lawmakers adopt new policies. Small businesses provide more than half of American jobs. If those employees don’t save for the long-term, the results could be disastrous.

“People have been ignoring the finance industry for so long, and it’s very important,” Busque says. “There’s an impending retirement crisis coming, and I want to solve that in the U.S.”

Building A Better 401(k) Platform

In August 2015, Busque and his cofounders, Mike Nelson and Jeremy Caballero, raised $2 million in seed capital from New Enterprise Associates, SV Angel and other investors. Four months later, a beta version of the platform went live.

The underlying technology was complex, but the experience was designed to be simple. Guideline’s automated system handles every aspect of plan administration, from enrolling and educating participants, to managing investments, to keeping up with compliance and reporting requirements.

That takes the burden off the small and medium-sized businesses, generally between two and 500 employees, who are the company’s main customers.

Guideline also removed onerous costs by using technology to cut out middlemen. Unlike most players in the industry, it refuses to charge a fee for assets under management (AUM). These fees, which represent a percentage of savings, are the largest chunk of costs associated with 401(k)s.

Instead, Guideline charges one flat price per participant. As a result, its expense ratio— the percentage of assets that goes toward fees—is just 0.14 percent, one of the lowest in the industry. For an employee with a $100,000 salary that puts 10 percent in a 401(k) per year, that means an extra $243,000 in the bank after 30 years.

“A lot of the financial industry hides how they’re compensated intentionally. We don’t — we’re 100% transparent,” Busque says.

Attracting New Business With Gigster

Guideline wasn’t actively marketing, but by the launch of its beta in December 2015, interest was growing thanks to referrals and press coverage. Busque knew the company needed a customer-facing website to capture new business—and fast. But his small team was tied up with the core product.

Busque brought his design to Gigster and asked for finished marketing website in two weeks. Right on schedule, and with minimal involvement from Busque, his Gigster team produced a professional, six-page site that was mobile-responsive.

“Knowing right away that Gigster had a timeline and they were going to stick to it was super beneficial for me,” he says.

With its website up and running, Guideline’s business has been exploding, with an average of one new company signing up each day. “The website has been super helpful for getting early customers in the door,” he says. “I don’t think you can strategically capture any sort of momentum if you’re not on the Internet in some way.”

What’s next? Guideline plans to add new strategic partners and release features that make it easier for participants to get a holistic view of their finances.

“This is really about long-term investing at the lowest fees possible — that’s where we can make the biggest impact,” Busque says.

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