Growth Rate (y/y)
Human Interest charges businesses on a subscription basis for access to their 401(k) plan management—between $120/mo (Essentials plan) and $180/mo (Concierge plan), plus a $4 to $8 fee per eligible employee on the plan.
They also get roughly 15% of their revenue from their 0.5% take rate on AUM, of which they have about $2B—that fee is charged to the employee’s account, while the SaaS fee above is charged to the business’s account.
Human Interest’s customer acquisition funnel relies on two sources—partnerships with 400+ payroll providers and outbound sales.
Human Interest has a large team (700+ people) and a large sales team with a focus on calling SMBs to get them to signup for or roll over a 401(k) plan.
Human Interest’s product is a mix of SaaS in the front and services on the back-end.
A SaaS dashboard allows employees to check their balance, see their YTD and overall rate of return, modify their contribution, and initiate rollovers or withdrawals.
On the back-end, people manually manage the process of transferring funds or rolling them over, using 401(k) services from Matrix Trust Company.
Human Interest syncs all 401(k) contributions and information to the company’s payroll processor, they process contributions, and handle all compliance testing and paperwork to the IRS.
Human Interest operates in a competitive landscape of retirement plan providers that includes traditional financial services companies like Fidelity and Vanguard, as well as other SaaS/services businesses like Guideline.
Human Interest differentiates itself from more legacy competitors with a focus on ease of access for employees (via their SaaS portal) as well as the different pricing structure. While legacy providers charge employers 1% to 2% of their AUM per year, Human Interest charges a flat monthly fee, a $4-8 per-employee fee, and 0.5% of AUM per year.
Where companies like Fidelity and Vanguard have the upper hand today is at IPO—because 401(k) assets are declared on the S-1, companies will often ‘graduate’ to a Fidelity or Vanguard as they move to go public.
There is some overlap between Human Interest’s business and wealth management fintechs like Betterment and Wealthfront. These fintechs offer broader investment services for individual investors, including tax-efficient portfolio management, goal-based planning, and access to alternative investments—they also have IRA products. However, so far they are mostly differentiated because these services don’t have their own 401(k) programs.
A few key TAM expansion opportunities from our research:
Human Interest has line of sight into all kinds of tax-advantaged retirement savings vehicles that do not require a mandated middleman—like the IRA, SEP, and HSA markets.
There are various markets where the government’s involvement in regulating it—like the market for 529 college savings plans—means that the economics are unfavorable for a company like Human Interest to get involved. If Human Interest were to get into the 529 market, for example, they would have to pay each state 25-50 basis points for nothing.
Catching up to Fidelity & Vanguard
Zooming out from where we are today, Human Interest’s opportunity is still well over 1,000x from where they are today.
Human Interest serves about 400,000 plan participants and 14,000 SMBs. Fidelity’s 401(k) serves 22,000 employers representing 32M+ individual employees—aka Human Interest serves about 1% as many people as Fidelity.
On AUM, Human Interest’s $2B under management is only .02% of the overall $7.3 trillion market for 401(k) assets in the United States.
Reliance on payroll providers: Human Interest relies heavily on partnerships with payroll providers for customer acquisition because Human Interest needs the kind of clean data that comes from a pay stub in order to do the data-intensive work of managing a 401(k) plan.
If those payroll providers were to their offer 401(k) plans, it might put payroll providers at odds with 401(k) providers like Human Interest and shut that distribution channel down.
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