The Money Mustache Community
Learning, Sharing, and Teaching => Entrepreneurship => Topic started by: hgjjgkj on January 11, 2018, 09:35:26 PM
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How do businesses like guideline or Employee Fiduciary provide low cost 401ks to small businesses? Is it possible to replicate this model?
https://www.guideline.com/
https://www.employeefiduciary.com/
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Replicate this model?
What do you mean? As in you want to start a business offering 401k's with low cost?
Seems like they have a pretty good program already, hard to beat that.
I checked out the two companies you mentioned. Guideline is $8 per month, per employee, that is amazingly low.
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Exactly, I am wondering if it possible to offer this as a competitor. Seems interesting and I am very impressed with how low the fees are.
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Exactly, I am wondering if it possible to offer this as a competitor. Seems interesting and I am very impressed with how low the fees are.
That's not how most people go into business.
Most people see a high margin business, and then go in with a lower price point, or better quality/brand.
Its not typical to see a already crazy low price, and then want to go in.
Furthermore, because this is people's retirement money, there will be a lot of fiduciary responsibilities, and federal oversight. Not an easy business to startup or get involved in.
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I recently talked with someone at Guideline and asked them that same question: How can you offer a much lower cost than Vanguard, for example, for a small business 401K? The reps answer was that most of the investment companies, like Vanguard, use 3rd party services for many of the tasks that aren't directly related to managing the investment funds (what Vanguard does best), and the cost of those services from 3rd party companies is extremely high and gets passed on. With a company like Guideline, they do all that work in-house (record keeping, fiduciary responsibilities, etc). and leave the actual fund management to Vanguard (though Guideline does review the fund menu on regular basis).
I'm a newbie at all this so I don't understand the nuance of it all, but that explanation made sense to me.
Could you replicate it? Probably. But I would think that unless you're already an expert in this area it may be a tough hill to climb.