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What’s Up with ASPire?

What caused almost 100 DCiO executives to travel to Tampa in the middle of the summer on short notice to sit in a windowless room for half a day listening to what a relatively small and little known record keeper was up to? ASPire, formerly 401kASP, seems to have captured the attention of not only the DC industry but also the VC community, with a $25 million investment from a smart and savvy technology-focused firm.

At ASPire they seem to be leveraging many of the industry trends — especially around fee disclosure — while trying to drive costs down in a deflationary pricing world using technology.

So is ASPire for real? Will IOs, TPAs and advisors drive significant business, or is this just a fade like the one we saw during the dot-com era when GoldK, Emplanet and ExpertPlan taunted the establishment and claimed that they would take over the world?

Most interesting to me was the VC money. In an industry that constantly complains that record keeping is a low-margin business and getting worse, why is someone betting that they will be able to get multiples on their investment? Do they see something about our industry that we are missing, or do they see something unique about ASPire and their technology, team and business model?

With all due respect to what appears to be an impressive start for ASPire, none of the larger, small market unbundled record keepers are huddled in board rooms trying to figure out how they are going to respond. But neither did ASPire claim that they will take over the world or put their much larger, better funded and well heeled brethren out of business — like the previous generation of technology-enabled record keepers claimed. They think that their model will attract enough business for them to grow substantially — enough to make a VC firm happy (which is not always easy).

So what is their model and does it make sense? First, they seem really focused on one business model — advisor driven, TPA enabled, open platform, small market. It’s hard for even large providers to service multiple businesses, with exceptions only proving the rule. Secondly, ASPire is riding the wave of fee disclosure and low cost with a gross-to-net, non-asset-based charge and complete fee disclosure. Finally, they’ve created a passive platform focused on technology, not service, creating what seems to be a do-it-yourself, technology-enabled platform for advisors, TPAs and IOs.

What hurdles lie ahead? For one thing, in a market driven by brand and distribution, ASPire is lacking in both. TPAs spoiled by unbelievable support from their record keepers will find it hard to shift internal processes and technology, and may find it difficult to breathe when their lifeline is unplugged. Also, 80% of advisors are predominately sales personalities, not engineers (who like plan design) or intellectuals (who like portfolio construction). These advisors are hunters who like the chase and the kill but need a team to come in after them so they can hunt again.

The wild card is the DCiOs. They have brand and distribution as well as support services, but they cannot afford to appear to compete with their record keeper partners. Can they shore up what ASPire is lacking without pissing off their current provider partners who flow them tens of billions of assets each year? Who knows — but a lot of high-powered executives braved the Florida heat to find out, and one VC made a large bet that they will.

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