Administering 401(k) plans can be quite confusing for small and medium sized enterprises, which still use paper-based solutions. Online 401(k) providers integrate with digital payroll but fail to provide investment expertise. Companies then have to rely on additional third-party providers for investment management and record keeping. These providers often tack on additional fees that range from 0.30% to 1% of assets. High fees and increasing legislation and litigation over plan costs are some of the top reasons companies switch 401(k) providers.
OctaveWealth is a company that launched out of our Spring 2012 class that provides a transparent, full service 401(k) with no asset-based fees. Its technology provides third-party administration, record keeping, and investment management. Every 401(k) plan includes a series of investment portfolios that employees can invest in with a single click. Each portfolio is diversified across 50 global equities and fixed income markets, individually designed for an employee’s risk tolerance, and built using the same quantitative investment process as the world’s largest asset managers.
By giving employees a set of managed portfolios to invest in, OctaveWealth makes it easier for them to invest immediately upon enrollment. By complimenting this with a variety of risk profiles, this solution increases the likelihood of employee investment. Furthermore, advanced users can access custom portfolios and choose any funds or individual stocks. On average, each employee saves 75% of the total cost in the first 5 years alone, which can grow to more than 95% over time.
Dharmesh Malam and Rikin Shah, co-founders of OctaveWealth, met 13 years ago at Imperial College in London. The two previously founded BigCalc, a big data startup that helped algorithmic trading firms reduce risk by running trading simulations 100x faster. Before that, Malam worked on software at Blackrock and Fidelity while Shah worked on quantitative trading at UBS.
The company launched in private beta late last year and the number of employees on their platform has been growing 20% week over week.
Learn more about OctaveWealth here.