[koolba]

Wow those are some razor thin margins! If you can pull this off it's going to be both huge (from an AUM perspective) and a big win for the 1,000s of companies that want to setup 401(k) plans but are either scared off by the complexity or fee structure.

I do wonder if profitability can be sustained. With an average account size of $50K, you're looking at $50K x .03% + 9 x 12 = $123 per year of revenue per participant. I'm sure there's a scale factor to dilute the common expenses on your end, but a few hours of customer service (per participant) will eat through all of that.

Either way, best of luck, this looks awesome!

[busque]

Thanks for your support. I'm the founder of Guideline, Kevin. I just want to be clear. The .03 custodian fees is not paid to Guideline. That is a direct Custodian cost. We work everyday to lower all participant fees. This is our primary goal. Scale is reachable and the business economic are solid ;), thank you for the post!

[boulos]

Wait, really? Guideline's only revenue is the $500 setup (like the custodian cost is this mostly going directly to expenses?) and the $8/employee per month?

That seems like a dangerously small SAM to me. Any large employer will want to negotiate the $8/employee. And there are only so many small employees in the US. How does this work out?

[busque]

Yes really. In 2010 there were 27.9 million small businesses in the US. https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf 401(k) is just the first product we launched, not our last. We are a retirement company.

[boulos]

Interesting. That led me to ask my original question which is how many employees that represents, which led me to [1] which states:

> According to U.S. Census Bureau data, employer firms with fewer than 500 workers employed 48.4 percent of private sector payrolls in 2011, and employer firms with fewer than 100 workers employed 34.3 percent, and those with less than 20 workers employed 17.6 percent.

which is in line with my memory at the high end (the US is 50% small and 50% large) but fairly surprising at the low end (nearly 20% < 20 employees).

It seems like nearly any ~100 person company is totally addressable without conversation in terms of cost. At 500, it seems possible to go direct to Vanguard et al. (is that a misconception?). But what fraction of the 34%/~100 employee companies would provide a 401k?

The total population is approximately 50M employees, so that on its own seems sizable, I just don't know how to extrapolate that to "and would provide a 401k" (but I know you've thought about this a lot more!). Apparently, tons of employers do! 80% of all employees in the US and 90% of those at >500 firms [2].

Color me surprised. I had a vision of a vast mom and pop sea (~1 person per firm), dotted with retail / fast food chains all too resistant to offer 401k plans at all. As someone asked elsewhere: who's your competition / who are these folks using as providers? (It can't all just be Vanguard / Fidelity).

[1] http://sbecouncil.org/about-us/facts-and-data/

[2] http://www.americanbenefitscouncil.org/pub/e613e1b6-f57b-136...

[sharkmerry]

>>> In 2010 there were 27.9 million small businesses

Quite misleading no? The link you provided says 78.5 of those 27.9 Million are Nonemployer (business without employees).

So 21.9 million of these businesses are single person businesses (many of which could be side/lifestyle businesses) which I would presume only present $96/year in revenue if they do sign up.

[dragonwriter]

Nonemployer business aren't necessary single-person businesses. (They don't even necessarily have no non-owner workers, since a firm whose non-owner workers are all contractors can still be a nonemployer business.)

[sharkmerry]

Do you provide a 401k for a contractor though? Using contractors is normally a means of offloading costs from a company, that same company is going to provide a benefit that costs them money?

[ececconi]

I've had a 401k for 6 years and I've never once used customer service.

Also the older you are and the more you've worked the higher your account balance becomes. So once you have people with balances with $1M+ (which if you're actually saving for retirement you'll need), they'll be drawing much more per person.

[wj]

From my experience the most common customer service requests fall into the following:

* Enrollment

* Distribution

* Rollover

* Loan

* Panic due to market movements

* Asset allocation/rebalancing

The top three on that list are when you enter or exit a job so if you have been with the same company for those six years you likely would not have used customer service.

I do encourage you to sign up for a meeting with your 401(k) advisor if they come to your office and do those. It is good even as an excuse to look over where you stand.

[loeg]

I call my 401(k) biweekly to perform in-plan Roth conversions, but would be very happy to self-direct it online instead.

[SamBam]

Can you elaborate on why you do that? Is it that you assume taxes will only go up, so you want all your retirement to be post-tax?

[loeg]

I am converting after-tax, not pre-tax contributions. For more information on why that would be desirable, this is an easy read: http://www.madfientist.com/after-tax-contributions/

[boulos]

Which provider? Vanguard lets some folks do this online...

[loeg]

Fidelity does not :-).

[inthewoods]

Even harder when you consider the average account size is more like $10k.