The business of retirement savings has been going through some major changes lately. Financial services companies are seeking to grow the pie aggressively by getting more employees to invest in 401(k) plans and similar savings accounts. At the same time, more people are living longer in retirement, which is good for, well, people, but does mean their retirement savings must stretch further. Meanwhile, the population is aging, which threatens to deplete public sector retirement programs like Social Security. But then the Trump administration is touting new savings accounts for kids.
So what does all of this mean for you and your employees, whether they are approaching retirement age or simply planning for the future? Jeff Schneble has been thinking about various scenarios quite a bit, in his role as CEO of Human Interest, a fast-growing digital 401(k) program administrator that serves primarily small and midsize companies. The San Francisco-based company positions itself as a kind of retirement program in a box, with greater automation and less administrative time required of participating companies.
Schneble recently sat down with Inc.’s Mike Hofman to talk through his vision for the future of retirement—and why he sees a huge opportunity ahead for Human Interest. This transcript was condensed and edited for length and clarity.
You first joined Human Interest as a board member, and then became CEO, correct?
Yes. I led the Series A here nine years ago when the company was probably like 5 to 10 people, maybe $200,000 in revenue. I joined the board, which was almost the same size as the company, maybe there were a couple extra employees beyond that.
It’s obviously pretty unusual to leave venture for a company, and it wasn’t because this was a breakout rocket ship growth story at the time. What attracted me was more that I really felt like there was an opportunity to build a big, important company here. It’s a product that everyone needs. Everyone gets old. Everyone’s got to save for retirement.
The average retirement span today is 20 years and climbing, so it’s becoming a quarter of people’s lives. And yet today 80% of people aren’t saving enough—so 80% of people are currently ending up financially insecure for a quarter of their lives.
But research shows that if you get money out of people’s paychecks, some 85% of our participants will save about 10% of their income. And so it just felt like there was an opportunity to flip the problem around and go from 80% of people not saving enough, to 85% of people saving enough—if we could do a good job of building an easier-to-use product.
Why did the founders of the company want to pass the reins to you?
The founders did a good job identifying an opportunity and getting it off the ground, but when it became clear that the company didn’t kind of go from zero to 100 mph—a handful of customers and a few hundred thousand in revenue versus hitting thousands of customers and billions of dollars in revenue—that just wasn’t part of the journey that they were ready to do, and so I wanted to come in and try to turn this thing into what I thought it could be.
Talk about the initial growth strategy from seven years ago, and how that strategy’s evolved over the past couple of years.
The first few years were really focused on digital marketing, and saying let’s build the functionality of the product and see if people actually want it, and the easiest way to test that is to throw up some Google ads to get people to buy it. So seven years ago, that was 100% of the growth—just people buying it online through digital advertising.
And it was focused on the small-business market?
Yeah, the core product is 401(k) for business. We’ve moved a little bit beyond that, where we have an IRA product, too. And we have a lot of multi-thousand-person companies among our customers today. And it turns out even bigger companies than our target are not happy with the 401(k) options out there.
But originally, we were very focused on the green field of companies with fewer than 100 employees. At the time, many of them didn’t have a 401(k) at all. So we originally focused on creating an offering that worked for these small companies, and then getting that to scale.
When I joined, we probably signed up 10 to 15 new customers a month, and today we’re at about 2,000 new customers a month. We’ve become the market leader. In fact, we estimate we sold 37% of the first-time 401(k) plans in the country last year.
Are you seeing very new businesses start retirement plans, or is it existing small businesses that are finally coming online?
It’s always been a mix, and I’m not sure it’s changed dramatically in the sense that it was never just tech startups or never just small businesses. It is a very horizontal thing, by region and industry. Our customer base is super spread out.
And this is interesting: Some 60% of our participants are in hourly positions. So it’s not just white collar. We see a lot of other job types that also benefit from an easier retirement plan.
Look, obviously, if you’re starting a business, benefits might be something you want to offer out of the gate. But a lot of businesses told us that the reason they hadn’t historically offered retirement savings was the legacy stuff. It was so hard to set up and so hard to use and so expensive that a lot of employers hit a brick wall and were like, hey, I want to do this, but I’m not going to do it if I have to spend 10 or 15 hours a month to manage the thing on top of paying $10,000 a year in fees.
I’m curious, for the companies that you sign up, do they typically have an HR department or are they smaller than that?
It runs the full gamut. Our smallest customers are one-person companies, and we have a lot of them. And among the biggest, we run the retirement program for Amazon delivery drivers in the U.S., and provide for like 100,000 drivers. So between 1 and 100,000 employees, there’s obviously a spectrum.
But for many clients, there’s no HR department. It’s usually the business owners trying to run payroll and benefits themselves, and they have to figure all this stuff out. And they don’t have bandwidth, which is part of the reason they were never going to do a legacy retirement plan that required 10 to 15 hours a month, because for a business owner, spending 10 to 15 hours a month on this is just untenable.
But we also have a lot of client companies—and we were a little bit surprised by this—who have multi-hundred or multi-thousand employees, and they also sometimes didn’t have an offering. Their small HR departments also struggled to manage 10 to 15 hours a month of admin work, and anytime they screwed up, they would get employees complaining about it. They know that’s probably not a great experience for the employees. So they sometimes avoided it until they found an offering that was easy to use and affordable.
One of the things that drives the retirement business is automatic paycheck deduction. And I imagine there are other trends like that. Looking at the growth strategy today, when you’re signing up many more customers, what are the things you see really driving the business in the short term and then maybe even longer term?
You’re exactly right that automatically taking savings out of people’s pay, that is what gets most people saving. We also really push the employer software match. We actually have a program where we do a match, even if the employer doesn’t want to. For certain employees who haven’t saved before, we offer a 3% incentive of what people save. We wanted to have an impact on people who have never saved beforehand, and so we’ve helped 10,000 people saving for the first time through that program.
That seems like a novel feature, and there’s obviously a marketing element to it that’s interesting.
Yes, but for us, we’re pretty mission-driven. So the marketing element’s great, but we want it to be a real thing. And it only became possible with legislation that passed a couple of years ago. We looked at it and said, actually, the way the law’s written, it means the employer could do it, but it also means the sponsor could do it.
And I don’t think any other sponsor or provider looked at it that way—it’s just not the orientation most folks in the industry have. They view themselves as, I don’t know, service providers to these companies. Whereas we say, how can we help people max their savings? And so if there’s this new tool, we’re trying to go build it. But to your point, we’re the only ones that have embraced it.
What other trends are you seeing in the retirement space? Are more people taking distributions early? Are more people trying to max out?
In my mind, the big exciting trend is, the old system was working for about 20% of the population, primarily high earners. And for those folks, I guess it’s fine, and the other 80% of Americans were basically just left out. And that wasn’t changing.
If you look at the past 20 years of data, total funds in 401(k) balances have been going up, but again, that’s just because top earners are saving more and more.
But in the past five years, with us and a couple other digital folks coming into the space, total participation is up by 5 or 6x. So you have a significant number of people coming into the system and saving for the first time, even as we are in a race against time, because depending on who is in office, the government would like to have retirement savings be privatized—Social Security 2.0—but you can’t leave a bunch of people financially insecure.
Are you seeing variation in terms of the types of investments within accounts? Crypto has been sort of a theme of late, right?
So we’re pretty, I guess conservative’s the right word, but I think our view is that, on average, not everyone can beat the market. There’s a ton of academic research that passive investing strategies just outperform everything else. And what you save in fees more than offsets any theoretical potential outperformance you might have gotten.
From day one, we think that’s best for participants. And so therefore, while we don’t offer financial advice to our participants, we generally recommend low-cost, passive investments. We will never push the envelope with alternatives or crypto or any of that stuff that we think is pretty unproven, and it’s not clear there’s a reason for it in people’s retirement accounts.
I personally don’t think, and the experts we have here don’t think, that crypto is the right answer. There is demand for it, and we don’t want to be too paternalistic, but I would always look at an asset class distribution that has proved to perform well versus really kind of gambling, even a few percent, on something new.
Our philosophy for most of our users is, especially if someone is coming into retirement savings for the first time, just make it dead simple. In a lot of ways, the ideal user experience for a first-time user is no user experience.
What role might AI play in retirement savings going forward?
AI is obviously the big new thing. I think for us from day one, simplicity really has been the core reason we exist. We think the legacy retirement products, both for companies and individuals, are just really complicated.
I’m sure you’ve been invited to participate in a 401(k), and you log in and there are like 20 funds and you don’t know what you’re supposed to do. And even if you do kind of know, it’s just a lot of work on you to go research all 20 funds and figure out what all of them are and what their costs are, and how to weigh them—it can feel way more complicated than it needs to be.
And we used technology to do all the work, so that companies and people don’t have to. And there’s more to do. As we expand into multiproduct savings—adding IRAs and so forth—I’m excited, because I think we can add a lot more value for somebody if they’re running three or four accounts with us; we can optimize all of that.
AI just kind of triple-charges all of that, because in terms of us taking on the administrative work, us taking on decision-making, AI lets us do a lot more of that.
And not only do people want advice on retirement, but a lot of times they also want it when they are trying to figure something out, even if it’s nominally outside of their retirement plan, like, “Hey, can I afford to buy a house?” These more open-ended questions that, historically, you wouldn’t have turned to a 401(k) provider for. But we are actually in a position to answer, given that we already have your money and know a lot about you and your life.
So, last question: Is it more fun to be an operator than an LP?
Oh, 100%. Obviously, it’s a personal thing. I loved being an investor, but as an operator I love the tangible sense that every day I’m working really hard for customers, and you can see the impact. Not that every day is awesome. I mean, we obviously have setbacks, things that don’t go well, but at least every day, every week, it feels like you’re moving the ball forward in a tangible way for people.
And like I said, we’re in a category where you can feel pretty good about what we’re doing. Nobody ever said they were saving too much for retirement. So it’s just like a pure positive. Whereas I felt like, as an investor, you’re kind of sitting on the sidelines watching other people play the game.
—By Mike Hofman
Correction: An earlier version of this article misstated the number of new Human Interest customers signing up per month. The company is adding roughly 2,000 new customers per month.
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This article originally appeared on Fast Company’s sister website, Inc.com.
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