Reporter with Silicon Hills News
Signing up for a 401K or other retirement plan through a broker can feel like joining a religion: You’re trusting your future to a system you don’t entirely understand, managed by gatekeepers you’re giving money to but who aren’t always accessible, but you’ve decided to have faith that it’s all being done for your benefit. But there is another way, says serial entrepreneur Whurley (William Hurley). His new company, Honest Dollar, has created a low-rate, high transparency retirement plan app that small businesses—and eventually individuals—can sign on to right on their mobile devices, in minutes.
Honest Dollar, which launches at SXSW Interactive, will provide outsourced retirement plan services, enrolling them in index funds that will cost an average of .09 percent as compared to 0.50 percent up to more than 2 percent for traditional 401Ks. That may not sound like much of a difference, but with a $10,000 initial investment in the account and $1,000 added every year at 6 percent return, an account with a one percent expense ratio would cost nearly $27,000 over 30 years, whereas the one with a .09 expense ratio would cost less than $3,000. Honest Dollar will leverage six portfolios of varying levels of risk for its users. While there is an option for minimal risk (i.e. cash), there are options, which can hold up to 70% equity stakes.
Another benefit is that small businesses don’t have to handle administration of the funds, which means they have no fiduciary responsibility, and extremely limited legal liability. The cost for businesses would be $10 per employee per month. And when an employee leaves the company, the company is no longer responsible for paying even that $10 fee. The account goes with the employee.
The Finance Nerd and Tech Geek
Founded by Whurley and Henry Yoshida, who has worked in corporate retirement planning for more than a decade, Honest Dollar also has cool technological features. Employees, for example, need only to show the QR code on the back of their driver’s licenses to the app to begin their signup.
“If you’re a business owner and you’ve got to onboard 20 people it’s just like dink, dink, dink, then they have to enter the last couple of pieces of information,” said Adam Lipman, CEO of Thoughtleadr and former COO for Chaotic Moon Studios—Whurley’s last venture. Thoughtleadr is one of Honest Dollar’s beta customers.
“The interesting thing about Honest Dollar is you’ve got the combination of Whurley’s technology vision aspect and Henry’s super deep knowledge of the financial space. Financial service has this really stodgy, antiquated image and it has in large part earned that. There’s nothing particularly innovative about the technology. Whurley has a vision of disrupting that space.”
The partnership was a big inspiration for James Oury, founding partner of the legal and accounting firm Oury Clark in London, to invest.
“I was tasked a number of years ago by the International Bar Association to assist with the building of a mobile app that could act as an evidentiary tool for recording war crimes,” Oury said. “I reached out to Whurley as a highly respected systems architect on one of my many trips to Austin to visit businesses expanding into the UK and the EEA. At our core we both wanted to help people by using technology as an enabler and we also loved to skate board, so the human connection and bond was omnipresent from inception.”
“Whurley and Yoshida with their impeccable technical team are first class co-founders with deep domain complimentary expertises. Prudence and discipline in the commercial execution coupled with a market that is open to high levels of scalable disruption from an enabling platform technology also guide (my investment choices).”
Whurley and Yoshida met because their wives had been trying to get them together for a long time. But Whurley “didn’t want to hang out with the finance nerd” and Yoshida “didn’t want to hang out with the tech geek,” Whurley said. But when they finally talked, they discussed the fact that there were over five trillion dollars tied up in 401K plans and both lamented the fact that the system was antiquated, expensive, and—as Yoshida pointed out—designed for people who had a lot of money. Not for the average American.
A big part of Honest Dollar’s value proposition is transparency. Typically, companies that manage funds take out fees and either reduce them from gains or add them to losses before reporting quarterly earnings to account holders. Consequently most people don’t know what the management of their accounts is costing them. With Honest Dollar, all activities, including fees will be transparent and that transparency is required throughout, including from their partners who manage the funds. At any point, an account holder can log onto the site and find out what their portfolio is worth and what’s going on with it.
“Fintech is a great space, financial in conjunction with technology really has a chance to open up services that are typically available to a small minority of people to make more money to bring that down to everybody. And the current industry from the finance side isn’t structured that way,” Yoshida said. “It was an industry that was built on an infrastructure to serve the top five percent of America and then everyone else is just a person to receive a product or a service for which they have to pay a penalty.”
If you don’t have as much money, he said, you pay a higher interest rate for your automobile or mortgage insurance and the industry has always maintained that financial services are too complex to change that. But technology can serve to democratize financial services.
Whurley said the company plans to announce more technological breakthroughs in the spring and summer.
“On May 12 we’re going to be making an announcement at Finovate about an unbelievably huge technology surprise that’s coming, probably over the summer,” Whurley said. “We’re trying to revolutionize technology for what technology was meant for, to eliminate the complexity and cut through all the BS and get right to the point….” And the point, he said is “How much money at the end of the day will you have in retirement?”
His biggest endorsement of Honest Dollar, the founders are putting almost all their retirement savings (except some they couldn’t legally withdraw from existing accounts yet) into the Honest Dollar system.
“We’ve invested all our money right alongside you.”