What is up with ASPire?
What caused almost 100 defined contribution investment only executives to travel to Tampa in the middle of the summer on short notice and sit in a windowless room for half a day to hear what a relatively small and little known recordkeeper was up to?
ASPire (formerly 401kASP), an interactive web Application Service Provider agency for the retirement plan industry, has seemed to captured the attention of not only the DC industry but also the venture capital community with a $25 million investment from a smart and savvy technology focused firm.
They seem to be leveraging many of the industry trends especially around fee disclosure while trying to drive costs down in a deflationary pricing world using technology.
So is ASPire for real and will investment only professionals, third-party administrators and advisors drive significant business?
Or is this just a fade like the one we saw during the Dot Com era when GoldK, Emplanet and ExpertPlan taunted the establishment and claimed that they would take over the world with similar Internet-based tacks to taking care of 401(k) record-keeping?
Most interesting to me was the VC money.
In an industry that constantly complains that record-keeping is a low margin business and getting worse, why is someone betting that they will be able to get multiples of their investment? Do they see something about our industry that we are missing or do they see something unique about ASPire and their technology, team and business model?
With all due respect to what appears to be an impressive start for ASPire, none of the larger, small market unbundled record keepers are huddled in board rooms trying to figure out how they are going to respond. But neither did ASPire claim that they will take over the world or put their much larger, better funded and well healed brethren out of business like the previous generation of technology enabled record keepers claimed.
They think that their model will attract enough business for them to grow substantially-enough to make a VC firm happy, which is not always easy.
So what is their model and does it make sense?
First, they seem really focused on one business model-advisor driven, third-party administrator-enabled, open platform, small market plans. It's hard for even large providers to service multiple businesses with exceptions only testing the rule. Secondly, ASPire is riding the wave of fee disclosure and low cost with a gross to net (a hard dollar cost, i.e. $100 per participant), non-asset based charge and complete fee disclosure. Finally, they have created a passive platform focused on technology, not service, creating what seems to be a do-it-yourself technology enabled platform for advisors, administrators and investment-only executives.
So what are some of their hurdles?
In a market driven by brand and distribution, ASPire is lacking in both. Third-party administrators spoiled by unbelievable support from their recordkeepers will find it hard to shift internal processes and technology, and may find it difficult to breath when their life-line is unplugged.
Finally, 80% of advisors are predominately sales personalities, not engineers who like plan design or intellectuals who like portfolio construction. These advisors are hunters who like the chase and the kill but need a team to come in after them so they can hunt again.
The wild card is the DCIOs - they have brand and distribution as well as support services but they cannot afford to appear to compete with their recordkeeper partners.
Can they shore up what ASPire is lacking without pissing off their current provider partners who flow them tens of billions of assets each year?
Who knows but a lot of high powered executives braved the Florida heat to find out and one VC made a large bet that they will.
Fred Barstein is Founder and Executive Director of The Retirement Advisor University (TRAU) in collaboration with UCLA Anderson School of Management Executive Education. Prior to founding TRAU, Barstein was President, Chief Executive Officer and Founder of 401kExchange.