Inside Capital One’s new retirement product for SMBs, Spark 401k

Small business owners have some deep-seated fears when it comes to implementing a 401(k) plans for their employees. These preconceptions translate into problematic retirement savings statistics for SMB employees. Only 45 percent of companies with fewer than 100 employees had 401(k)s in March 2016. "Misperceptions are huge," said Stuart Robertson, president of Capital One Advisors 401(k) services, Capital One's SEC registered investment advisor. "Small business owners think ‘I don't have enough employees,’ or ‘I can't match employee contributions.’" According to Robertson, these core beliefs of small business owners regarding 401(k)s haven’t changed in the nine years since Capital One began researching that group. What has changed over the past decade, however, is financial technology, and it’s shaking up the slumbering SMB 401(k) industry. Capital One's research shows what all other finance research is showing - namely, that mobile and app use is on the rise. The company rolled out Spark 401k, the evolved version of its online product for SMBs, ShareBuilder 401k, in August 2016. "We knew that ShareBuilder 401k was not a website that would be mobile-responsive for some time," explained Robertson. "We knew we needed to be there." Being “there” firstly meant more aggressively targeting SMB owners online. Capital One uses a mix of SEO and social to market Spark 401k, and also leverages its other Spark products, which are used by millions of small business owners, to drive awareness to Spark's 401k offering. Connecting the 401(k) experience with the business owner’s bigger financial picture is yet another way that fintech can help onboard existing SMB customers. "The SMB owner wants a holistic, easy way to manage all of their money concerns," said Robertson. Another apprehension small business owners have that’s being allayed by fintech is cost. "Technology has made 401(k)s a more viable option for small businesses," said Roger Lee, CEO and co-founder of Captain401, an automated 401(k) platform for startups and small businesses. "Any business owner can now offer retirement benefits to their employees, even if they don’t have a big budget or an HR department to handle the ongoing administrative work." 401(k) cost-effectiveness, however, isn’t just a tech product that’s cleaning up inefficient processes or unneeded personnel. It’s also a result of the type of investment model the 401(k) plan offers. That’s why Spark 401k went with all-ETF funds. With simplicity in mind, the product offers just five model investment portfolios for owners to choose from. Fintech is also making its mark on emerging regulations. The upcoming DOL fiduciary rule will have a major impact on how companies of all sizes interact with their financial advisors, and companies founded with this ruling in mind could have an edge over more traditional 401(k) providers. "The good news for SMBs is that [some] fintech players … have been built from the ground up to provide the level of fiduciary coverage that the DOL is mandating," said David Ramirez, chief information officer at ForUsAll, an online 401(k) platform for SMBs. "Contrast this with traditional 401(k) providers, who seem to be struggling to put their end clients' needs first." It’s not only upstarts, however, that are going for a customer-centric approach. Spark 401k has financial advisors do the heavy lifting for business owners by analyzing their investments regularly. Putting humans on the case is in keeping with the company’s (unofficial) motto of “digital first, with a great human touch”. Capital One found that, no matter how simple or intuitive its technology is, SMB owners still want to speak to a human before they buy. "The ways in which people interact with and manage their money is constantly evolving," said Robertson, "and in upcoming years, the bank will have to assess and reassess where that reassuring human touch will be needed."