What do most small businesses (and even bigger ones) want from their benefits and retirement plans? The answer is nothing — no cost, work or liability. A new online benefits company, Zenefits, is delivering nothing and collecting the hefty fee that a health care broker would otherwise collect.
Zenefits is a free, cloud-based app that allows businesses and their employees to connect with all benefit and payroll providers, including health care and retirement. Employers and workers can make changes without contacting multiple vendors — it’s a virtual full-service benefits broker that automates and integrates the entire process while keeping companies in compliance with complicated and changing laws and regulations.
The firm was founded in 2012 by Parker Conrad, who left Sigfig, a burgeoning robo-advisor, after he had differences with co-founder Mike Sha. Zenefits recently raised $66.5 million, valuing the company at $500 million. It is one of the fastest growing companies in Silicon Valley, with 220 employees in San Francisco, up from 15 last December, and expects to triple in a year. They became the number one broker for Anthem Blue Cross in California after just 12 months.
The conventional wisdom is that benefit plans, especially retirement plans, are sold, not bought, which provide job security for plan advisors. Robo-advisors offer a cheaper way to provide investment advice to a sector that is not served. But most people want to at least talk to a live person on the phone, if not meet with them.
But what if there were an online delivery mechanism for all benefits that streamlined the process, not only eliminating work but also eliminating the need for an HR person for small businesses? Do you think these companies would then buy their retirement plan outside the system? Would they really care enough if the DC solution within the integrated system were decent? And what effect would state-mandated auto-IRA plans have?
Unlike robo-advisors, fully integrated, one-step, cloud-based solutions pose a real threat to traditional advisors and brokers who struggle to offer their clients all types employee benefits — never mind a cloud-based, automated, one-step solution.
