Jack Sharry: Everyone, thanks for joining us on this edition of WealthTech on Deck. Each week I speak with industry leaders around the issues of wealth management, retirement financial advice and technology. It’s up to those who are leading the way as we seek to help advisors, clients, participants and firms enjoy better financial outcomes all around the confluence of digital and human advice. I especially enjoy conversations with disruptors. Today we have just such a conversation as they speak with Aaron Schumm. Aaron is the founder and CEO of Vestwell, I will let Aaron tell the basketball story, but he is the model of disruption not only invest well, but prior points in his career. So all very good stuff. So Aaron, welcome to WealthTech on Deck. I’ve been following your success for a while. I’m excited to hear the story firsthand.

Aaron Schumm: Thank you, Jack. It’s great to be here. I appreciate it. And I’ve enjoyed listening to your podcast as well.

Jack Sharry: Great. It’s good to hear. So Aaron, let’s start with you telling our audience about Vestwell. Who are you? What do you do? What’s going on everything I read and hear you guys are killing it. So tell the story.

Aaron Schumm: Yeah, I mean, at a high level, right? We’re a FinTech platform focused on powering small businesses and individual savers across the country. And we’re doing so starting within the workplace, and then helping carry individuals beyond the workplace to get properly saved for the future really centered around your, you know, potentially retirement, right if people still retired. And, you know, I think today’s era a lot of people don’t retire anymore, but they need to live comfortably. Sure, focus on saving for education, and then health. That’s really where we are, we’re kind of the engine behind the scenes helping engage, I’m really focused through it through a few channels that we can unpack later.

Jack Sharry: So a lot of our audience want to hear tell our wealth management side, not as steeped. In the end, you spent a lot of time in that side of of your career. We’ll get to that in a minute. But a lot of the folks out there listening aren’t as tuned in to all the intricacies of the DC business. Another big name that we read about hear about is in power. So maybe a compare and contrast. How are you different the same than saying the power which I’m pretty familiar with that story? No adverbs pretty well. But when he maybe just to help our audience understand the difference?

Aaron Schumm: Yeah. So Empower is a kind of a roll up of a bunch of firms. Right deal. JP Morgan, fast core, Great West, right. And all those things came together and the Fidelity crews and behind the scenes,

Jack Sharry: Fifth Third, Prudential they break all of them?

Aaron Schumm: Yes, yes, they buy business a day, I feel like so think of us is kind of the engine focused on powering small businesses, and those savers within those businesses and then beyond. And it’s a all, you know, proprietary new from scratch, API driven, cloud based platform that allows people you know, to engage that really elegant, seamless fashion, trying to remove the friction along the way, right, that’s really just played to save in the street and kept it stagnant for so long. Because it’s new technology. And we can get a lot of operational efficiencies out of the technology, we’re able to drive the cost down significantly. Yeah, we keep it very open architecture and flexible, and how we do it. It’s actually one platform that’s been created to do this. So it’s a different construct. But you know, I look at us that we don’t really compete with and empower, you could argue that Empower could even use us, right as part of their engine to go after, you know, the small businesses and the Savers across there. So, you know, we look at ourselves as kind of, we want to be the engine behind everyone, whoever it is, right? And we’re focused on three channels, right? We focus on financial services, channels, empowering those think advisor led initiatives, asset managers, RIas broker dealers, wirehouses banks, credit unions, insurance companies, and allowing them to engage with those small businesses and those savers. We focus on state sponsored programs, right. So if you think of the payroll deducted, IRAs that are out there, the Secure Choice or auto wire auto IRA, we focus on the 529 college savings, and then a 529 A, which are ABLE savings for individuals that have a disability or family member that has a disability that can save on a tax deferred basis or tax exempt basis. So and then I should mention, the third channel we engage with is on the payroll hrs side, right? We kind of sit at the intersection of all three of those and they all significantly overlap and how they help empower the savers.

Jack Sharry: Yeah. And again, as a way for our audience to understand where you fit given the familiarity with large firms like warehouse I know you’re in at Morgan Stanley, what do you maybe a description of how you work with Morgan Stanley as an example and power also works with Morgan Stanley. So talk to me a little bit about this.

Aaron Schumm: So we are the Morgan Stanley at work platform, right for small businesses. So Empower is their focus on large market but we’re what we’ve done is you know, typically what would happen is an advisor would go to a business owner, right they had a say they have a wealth client, right? They who runs a business, that business owner says hey, I need a 401k is for my employees. And the advisor then would go place that business somewhere, right and in, you know, offer that service, right sitting on top as the advisor. But over time, there’s a lot of assets that move away from that business, right? Because the individual employees leave and they roll out, and they go somewhere else, you know, fidelity or whatnot, takes the IRA rollover and disappears, it’s using using someone else’s asset management typically, right. So what we’ve done is kind of flip that, right and say, Hey, this can be yours, you can be in the 401 K space or that workplace. And you can have your own platform, open architecture, your own investments, your own advisors, and actually keep it in the complex and have zero overhead and doing so. Right. And we can help power that so allows people to get in the game and engage with these businesses, rather than try to, you know, effectively compete with for it over time, because someone else is trying to offer their own proprietary solution undertaken elsewhere. So that’s really this unconflicted way where we can allow people to engage in this really concise, easy, fluid manner, and not have the burden of you know, going and renting a legacy record keeping platform and trying to staff it with an army of people and build a business that hopefully scales over time. We basically get them in market tomorrow. And it’s immediately, you know, scalable and profitable for them.

Jack Sharry: One of the things I’ve been observing and empowers good example. And I think you guys are as well, this convergence of the DC side or 401k, or retirement side, and the wealth management side. And clearly Morgan Stanley’s a great example of that. And it’s fundamental to their strategy. Morgan Stanley’s work is getting a lot of attention, investment, what have you resources to pull that together? So maybe talk about that, that trend of that convergence between defined contribution, retirement and wealth management.

Aaron Schumm: It’s obviously a massive trend, right. And I think Morgan Stanley, you know, kudos to them, they recognize this early because there is a distinct first mover advantage for getting in this space, right. So at a high level, you have 32 million small businesses in this country, you have less than a million of them currently offer a workplace savings program, you have about, you know, give or take 100 million individuals that are underserved and underserved, looking for something to help in that solution. So, you know, typically, you know, as this industry is kind of evolved over time, the core technology behind it has not kept pace. So it’s been very difficult for people to actually engage at a cost effective, you know, really seamless manner that that they want to say, it’s not that, you know, they’re underserved, because no one wanted to help them. It’s just there wasn’t an easy way to do it. That made sense from a business perspective, but engaging in those businesses, right, everyone wants to be at work, they want to engage in those businesses. And then they want to, you know, look at the employees of those businesses as prospective clients, right? Because 75% of individuals, their first dollar they ever save is through the workplace. And you know, and then Who do you trust, typically, when you’re saving, right, and you’re doing something or you’re providing a solution, you trust your financial institution, hopefully, right. And you trust your employer, hopefully, right. And so when your employer is able to offer something to you, and get you to start saving, and there’s an advisor there to help hold your hand along the way when needed, but do so at scale. It’s really powerful, and helping close the savings gap.

Jack Sharry: Yeah. So this is something that you know, well, frankly, I spend my whole life thinking about talking about. And I’ll use Morgan Stanley, it’s a client in common, if you look at their strategy, what they’ve done is they have built in my well researched opinion, they are far and away the biggest, baddest, the best at the comprehensive wealth management platform. And they’re moving toward comprehensive advice platform, they have largely there. Now it’s not all fully connected, but it’s getting there. So as an example, the Ben hotkeys of the world who run that basically responsible that all products and platform wind up there. And the idea is to provide advice, ultimately, around what’s the next best thing to do for the client. Now, over at Morgan Stanley at work, which for now is a little bit more separate than they probably want it to be down the road. At some point, that’s all going to get connected. And I’m not sure how you play in that in that way. But the idea is that you’re right, people start with their 401k as the savings plan, and then as they accumulate wealth or company gets bought or sold, or, you know, they make more money and get a bonus here or there and they make some money in real estate, whatever it might be. They have more money. And they kind of the idea of certainly with Morgan Stanley, their ideas that this all comes together on our wealth management platform. So talk a little bit about that play that they’re not separate. They’re kind of set up largely because as you’ve talked about, so old legacy systems and old ways of thinking, but how’s it starting to come together?

Aaron Schumm: Yeah, I mean, you nailed it, though, right? As far as work goes. So if you start saving within the workplace, depends on the institution, right? What’s their core value? Right, where do they want to be? But Morgan Stanley is a good example. Right? So you have the advisors, you know, some one of the largest, you know, advisor forces out there. They’re engaging with those small businesses or businesses in general. Now, they the Savers are stepping in the employees are starting to say they see the dollars, and then you can start to plug in other components across the Morgan Stanley complex that make So that’s right, let’s call it self directed brokerage. Right? If you want to do that, and then you could look at private wealth, you could look at core banking solutions, you can look at asset management solutions, you can look at, you know, wellness solutions, right, and the wellness components a core factor of it, right, because if you have the wellness piece, then you can start to see where individuals actually sit on that horizon, right and on that spectrum, and start to step them through that process and say, okay, you know, this is how we think about invest while right, we have an individual saving, and let’s just say, we know, we can ask that they’re, you know, we have their beneficiary information, right, as an example. And we can identify who those beneficiaries are. And if those beneficiaries are younger, right, as they should probably have, you know, some sort of education savings program available to them, right? And then you can lose that as a leading indicator to say, hey, you should have a 529, right? Or do you want, right, and then you start to step them through, and then you had all the while you have the advisor sitting on top, knowing when they need to step in, right? Because they’re getting all the data surface backed up to them to say, hey, maybe we should have a conversation or, you know, so and so just left their organization, right. And you see the termination because we have all the payroll data that comes over, right? And the termination comes over. And so and so and then they say, Well, you know, this person actually has a balance that maybe we want to retain within the bank, right, or with a mortgage elite. So let’s engage with them and talk to him about that.

Jack Sharry: If I may I interrupt you, you’re basically making feeding all this information to the advisors so they can act on it.

Aaron Schumm: Great. Yeah, yeah. Well, one of the things that we’ve done, I think very differently than other platforms out there, right is no one wants to give data to anyone, right to their clients. So like, it’s our data, it’s our proprietary stuff, because they often have conflicting offerings, right, that are competing with their clients, we’re just tech, right, we want to help people, our whole motive is we want to help people save, right? And we want to start within the workplace and give people the ability to do that. And having the data is really powerful to start giving those leading indicators do it. Now, you know, truth be told, there’s a lot more we can do. And there’s a lot more we want to do that we’re just not there yet. Right? And we’ll get there, right? It’s we’re just, you know, chipping away at this stuff. But, you know, building these platforms, right, it never goes as fast as you want. But absolutely, it’s all there. And it’s all coming together. Now we have all these pieces there, you know around it, which is really exciting.

Jack Sharry: If I may, for our listening audience, what Aaron and I are talking about, he works in a different part of the ecosystem, pardon the expression, but that’s probably the best way to describe it, what we’re really talking about. At LifeYield, we work in a different part. Our part is we basically coordinate multiple accounts in a tax efficient way to get a better outcome and quantify the benefit, next best action, all that good stuff. What Aaron’s doing is he’s capturing information on these early savers, small businesses largely as the where their focus is, but they feed up that information. Ultimately, if you like the Morgan Stanley strategy, and I find it the most fascinating of all the firms out there, they have E-trade for the direct to consumer, they’ve got wealth management for the higher net worth, they’ve got the Morgan Stanley word to capture the whether it’s through Empower on the larger plans or Vestwell on the smaller plans. The idea is they’re looking to capture data on clients, and feed it all and have it reside ultimately on the wealth management platform that Morgan Stanley has available and where they can manage the whole house and consider things like risk and cost and tax and Social Security benefits and all the ways that you’re going to improve outcome. We’re speaking the same language, right?

Aaron Schumm: Yeah, yeah, exactly. They also have, you know, they have bought Solium, right, for a price cap table management, right?

Jack Sharry: Explain that, if you would, people who may not be familiar, Solium.

Aaron Schumm: Solium, is I put them as kind of a competitor to a degree but a little bit larger scale than like a Carta. Right. So as a private business, you know, like basketball, right? venture backed, we have cap table, all our investors, all our employees, they know that everyone has stock ownership in the business and option ownership. So it’s managing that cap table, right across that. And if there’s some event, you go public, you get acquired, whatever it is, right. There’s a capitalization that happens. So you know, and having that in house as part of a Morgan Stanley offering, right? They’re seeing real time what’s happening across these organizations as there is some capitalization happening. And then they can step in, and the advisor can step in and say, hey, you know, we’re noticing you just, you know, when public or you just got acquired or whatnot, your balance just went way up. Exactly, exactly. Right. It’s a powerful way to engage, right, and everyone wants to start early, right? The quicker you’re in there, right? the better off you’re going to be to establish that trusted relationship than trying to woo someone over, you know, after you’ve made all that money, you know, and trying to get a poem from another advisor. Yeah, yeah.

Jack Sharry: And just to complete that thought on Solium. So my interesting is they have specialized, it’s fully wound into Morgan Stanley work, but non-qualified deferred comp is part of what they do right for the higher net worth, or higher salaried or higher compensated employees at a business. Here’s an example. This is again, for our audience to understand how this stuff starts to relate. So one of the things that we’re having conversations with our friends at Morgan Stanley about is when you have non qualified deferred comp, there are some tax ramifications as you receive that money. And we can help do that in a tax smart way. In other words, across the portfolio, not only that, that money that might be coming into, to be considered but rather how You do? So a lot of texts are bases. So what I find fascinating, I’d love to hear your thoughts on this. Aaron, is how does this all coming together? In your view more going forward? How does this is specifically what about where you see basketball playing? In other words, you play a certain role. Now, you mentioned a moment ago that you see that expanding and doing more as you’re able, maybe you start to talk about where’s what’s the future? Where’s this leaving, at least for you said.

Aaron Schumm: Yeah, so everyone needs a safe, we know that right? You need to write, you often kick the can, right. And, you know, it’s really imperative, especially in today’s world, right? With expenses, rising, cost of living, rising, and not saving enough, right, and you need to start stepping in early, right. And there’s no better way to do that than starting in the workplace, and then carrying beyond even the states or getting involved in this, right. And you have, you know, Oregon, right in their, their auto IRA and their 529, they’re able program, and the Oregon saves program, the auto IRA, you know, they said, Listen, we have too many people that are just under saved, and we have to do something, and the private market isn’t able to engage at the pace we want right now. So we’re gonna start doing it because we can’t keep you know, paying the hospital bills for individuals that can’t afford it, or whatever it may be. Right. So they’re stepping in forcefully, which is actually it’s a very good thing as much as people you know, I think, you know, the, when the government steps in, in the financial realm, right, people, you know, tend to get a little apprehensive, but it’s actually a very good thing, because it catalyzes all these business owners to start doing something faster. And we’re seeing it where they’re actually growing the 401k business, because they’re like, Well, I’m gonna have to do something, I might as well just go do a 401k, right for my employees. So it’s actually really helping at its core, right, and they’re playing the long game, the states are as far as how to say this. Now, there is this convergence across the board, where it’s like, okay, we’re going to go start engaging, we’re going to start saving now. And we’re going to do so quickly. And where we see this going, right? It’s a little bit of, you know, the history repeating itself in many ways, right, where things used to all be bundled together, and then everything became, you know, separate and open architecture, whatnot. And now things are still they’re coming back together in many ways. And we’re looking at this saying, Okay, we have the information on the individuals, we know, they’re, you know, they have a 401k, we see their beneficiary, and maybe they want a 529, we can, you know, take it a step further, we know that our, you know, the rollover piece of the auto Ira payroll deducted, then you start thinking about, okay, maybe they have a high deductible insurance plan, should we offer them a health savings account, right, or, you know, what everyone should have an emergency savings account, because you don’t really want to take a loan out of your 401k. Right. And, you know, in the ABLE programs I mentioned, as well, for those individuals that you know, have a disability or a family member. And it’s really powerful to do that upfront. Because in today’s world, right, you know, we’re pulling a lot of these things together. And, as I mentioned, there’s still a lot of work to do around it. But you know, previously, what happened is you had to go seek all of these things out yourself, as an individual, you know, maybe your employer gave you a 401k. But if you want to do anything else, you have to go figure it out for yourself. And it’s hard for people to do that people don’t have time, people are busy. It’s confusing, right? So we’re in this perfect position, kind of sitting on this perch, where we can start to engage really quickly and efficiently with everyone and help them make the best decision without having to be an expert, and go seek this stuff out individually. So that’s where we see all this going. And you know, what we’re really excited about is kind of being there at the, you know, up front center and that conversation and helping people engage.

Jack Sharry: Yeah, let me see if I get this right. Because I hear the term financial wellness, I have to say I everyone seems to have a different definition of what it is. But essentially, I think what you’ve just described as your version of financial wellness, as I listened to it, and understand that, it’s essentially providing guidance around a myriad of decisions, particularly as you’re putting money aside, and you want to do so in a way that really serves your purpose along the way, and over time. So really, what we’re talking about in terms of financial wellness is, is helping because of technology, frankly, making better decisions, not unlike going on Amazon and just being told sort of you may like this also or whatever, you’re just being sort of guided toward a better path. Am I getting that? Right?

Aaron Schumm: Yeah, absolutely. This is kind of a philosophy that I always kind of just live by, in many ways, right is, you know, we shouldn’t be telling people what to do. Right, enforcing their hands, right? I don’t care if you turn left or you turn, right, right. But can I give you the right information in a consumable digestible way that you know which direction you need to go? Right. And that’s kind of how we want to do it and how we want to approach people and say, Hey, this is actually here, you can understand this. So you know, even we’re just we’ve been having this discussion, we did our exec off site, and we had a town hall the other day, and we’re talking about, hey, we just have to get rid of all of this confusing language and these acronyms that people just don’t understand and they get afraid of Alright, so we were making a very conscious decision to stop referring to 401k clients as plan sponsors, right? Stop referring to employees as part participants, right, their businesses and their savers. And you know, if you’re out of business, you’re a business owner or proprietor, and you’re a saver, right? And trying to just distill it that way and use that, you know, just really, you know, I don’t like saying dumb it down, but just make it where it’s not confusing to people anymore.

Jack Sharry: I couldn’t agree more. Well, one of things I wanted to get to, and I’ve been so fascinated with what we’ve been talking about, I haven’t gotten there. But here goes. So I had to get into this give us that, if you will, high level career story. How did this evolve, starting from way back when.

Aaron Schumm: Yeah, without boring people too much in history, but started my career in a large corporate trust side, large corporate ERISA, Northern Trust in Chicago, moved to New York with aspirations to get into asset management, get sucked into the tech world by accident when CheckFree now Investcloud hired me as a product manager to go build a wealth management solution, start building what we call multi strategy portfolios that now became a unified managed accounts and unified managed households. So I was a product manager building that stuff in its infancy. And then my old boss and I left in co founded a business called folio dynamics and built our wealth management platform. And we did that for seven years, eight years that got acquired, it’s actually owned by investment now out in Chicago, and kind of in the iteration of building that right. So we started that in 2007, stock market collapse, we’re raising our first round of capital and Oh, 08 tours. Oh, man, I just think like, Vestwell is a cakewalk compared to living really better, right?

Jack Sharry: He has been very good that you’ve executed well, but go ahead.

Aaron Schumm: Yeah, I mean, you learn a lot, right? You what to do, what not to do. That was not an easy, easy stress there. But through that, right, we’re three years in, we had about 30 employees, and our employees said, Hey, we want to flow. Okay. So one of my sales guys brought in an advisor who gave us a plan. And it was just horrible. And it was so confusing. And it was so expensive. And it was so clunky. And kind of putting my product hat on. I was like, we could fix this. I know how to build this stuff, right? I deal with large institutions all day, right? This is my career. Yeah. So that’s what SMA. So this is 2010. Our investors were like, Hey, that’s a great idea. But let’s say focused on wealth management. So we just built out the FinTech platform on wealth management. And then when we sold that business, I was like, I need to go fix this. I know how to do it. The markets perfectly right for this. And I’m just gonna go after, right. So that’s good. I got the blessing from my wife, right?

Jack Sharry: The boss?

Aaron Schumm: Yeah, I was like, just I have to she’s like, alright, she was like, fine, you know. So that was really what did it. So I went out raised. And really just the same idea. You know, it was several years later, right? That probably better times, because I couldn’t have built this back in 2010, to tech wasn’t there to the same level it is now and you couldn’t do a lot of the efficient things that we’re doing now. So it’s been great.

Jack Sharry: That’s terrific. That’s great. Well, our time goes nigh as the expression goes, just a few minutes left, I have two more questions for you. What are three key takeaways we’ve covered? You’ve covered a lot of ground, you guys are doing great work. But what are three key things you’d leave our audience with?

Aaron Schumm: Yeah, I think the key thing is, you know, especially in the adviser led world, right, there is this incredible opportunity at this moment to engage with those small businesses and make a real business out of it. Right. And I think it’s been overlooked for a lot of some of the reasons we discussed also, I think advisors like, Well, how do I make money doing this? And you know, we often say, Listen, you could sell 100, you know, startup or million dollar plans a heck of a lot faster than you’re ever going to sell one $100 million plan, right. And it’s a really great business is really impactful. So I think everyone should be engaged in providing workplace savings programs and Individual Savings Programs for that matter. And along that note, I think the second thing is, you know, the states are changing the landscape, right? The states are going to drive a lot of this growth too, right? Whether it goes into a state sponsored program, or someone says, Okay, I’m gonna go do something directly or on my own, there’s an opportunity for everyone to really start engaging in that level. And then I think the third thing is as a small business, right, and, arguably, you know, Vestwell is still, you know, small business, although we’ve been growing like crazy, you know, the small businesses, we’ve been at restaurants be, you know, whatever type of venture tech company, you know, marketing company, whatever it is, they need to offer something, because, you know, we have a tight labor market, people ask, and I look at it as a, you know, business owner, that it’s our responsibility to help. And that’s what we’re here to do. So, you know, I think people get a little scared about, you know, how can I afford this one out, and there’s really effective ways that you cost effective ways to do that in designing plans that are some sort of savings program that isn’t expensive, and there’s a lot of tax credits and whatnot. So I think it’s, you know, really a great responsibility for everyone just to start off making sure that they’re setting themselves up and their employees are a success in the future.

Jack Sharry: So Aaron, it’s been a real pleasure speaking with you. I’ve been a fan. So our first extended conversation. I’ve enjoyed it very much. And as we do each week as we go to close our podcast, can you tell something interesting or unique you do outside of work that people might not know Aren’t you are my fun? Interesting? Yeah.

Aaron Schumm: Well, first of all, it’s been great to be here. I really appreciate it fun chat, man. I don’t know, I feel like my life is I live life and fast forward these days with two small kids and a business. That’s one thing I was this is kind of I don’t know if it’s interesting or not. I have always wanted to learn piano. And I never have, I actually used to own a record label co owned a record label and write a lot of music. And it was prior life. I was like a side job that kind of, you know, little hobby, that became a job. And I still never knew how to play piano. So I would have people come play it for me. So I’ve been really adamant that I want to do this. So my wife and I, we just went and bought a piano. And I am going to teach myself and hopefully my kids learn so check back with me in a year and see if I actually held true to that.

Jack Sharry: Good for you. Good for you. That’s terrific. I love it once again. Thanks, Aaron. This has been a lot of fun, really enjoyed our conversation. I look forward to the next for our audience. If you’ve enjoyed our podcast, please rate review subscribe and or share what we’re doing here at WealthTech on Deck. We are available wherever you get your podcasts. Thanks again, Aaron. Appreciate it very much. Look forward to next time.

Aaron Schumm: Yeah, thank you. Great to be here again. I appreciate it.