Vestwell Raises $125M to Further Small Plan Push

Vestwell has raised $125 million in a Series D fundraising round led by Lightspeed Venture Partners, the digital recordkeeper announced Thursday.

Vestwell Holdings Inc. will use the funding to support small and emerging businesses that have benefited from regulatory tailwinds, such as the SECURE 2.0 Act of 2022, according to the announcement. The funding will also go toward expanding Vestwell’s work on state-savings-program initiatives while creating other savings programs for partners, employers and savers using Vestwell and for financial institutions using their recordkeeping services as a white label product, the firm noted. Last week, Vestwell announced it was backing Delaware’s state-sponsored auto-IRA program.

Along with Lightspeed, funding came from Fin Capital, Primary Venture Partners and FinTech Collective, as well as newcomers Blue Owl and HarbourVest, according to Vestwell.

As part of the funding round, Justin Overdorff, a Lightspeed partner with a background in business development, has joined Vestwell’s board of directors, and Logan Allin, managing partner and founder of Fin Cap, will remain a board director since co-leading Vestwell’s Series C funding round.

Room for Growth

According to a recent report from Evalueserve called “Changing Dynamics of US Small Plan Retirement Market,” the small employer segment remains underpenetrated, with a significant number of private sector workers being deprived of retirement benefits.

A significant number of private sector workers within these smaller enterprises find themselves without access to essential retirement benefits, according to the research firm, which offers research, analytics and data management services.

According to data from the U.S. Bureau of Labor Statistics, 49% of small private sector firms—those with fewer than 49 employees—lacked access to defined contribution plans as of March 2022. Furthermore, small plans make up just 8% of DC assets, per a U.S. Department of Labor publication released in October.

“These employers are still struggling to offer retirement plans to their employees, predominantly owing to affordability issues due to the high cost of retirement plan administration,” Evalueserve stated in the report. “In addition, a lack of awareness about the process of offering a retirement plan is a contributing factor.”

Partnering Up

Several major retirement providers are venturing into the small retirement plan market, the research firm noted, including recordkeepers, retirement plan consultants and DC managed account sponsors.

In May, JPMorgan Chase & Co. partnered with Vestwell to provide greater support for the Everyday 401(k), the financial firm’s small business retirement plan offering. In January, registered investment advisory Carson Group paired up with Vestwell to power a defined contribution retirement offering for advisers. The two firms partner on a program called Carson Complete 401(k), designed to help Carson-affiliated advisers add or scale small and medium retirement plan practices.

“We’re exhilarated to announce our Series D round—our growth has been truly exceptional, and we’re honored to be working with an array of such esteemed investors and partners,” Aaron Schumm, CEO and founder of Vestwell, said in a statement. “We’re also excited to have Justin and Logan on our board as we partner to bring savings to a new level.”