Human Interest: Access is half the battle

Today, NewView is proud to announce our participation in Human Interest's $105M Series C financing to help close the retirement savings gap in America. We are passionate about backing companies that enable financial access through technology and supporting teams through the growth-stage. The problem Human Interest is solving could not be more pressing or important for our country, and we believe in their ability to create meaningful change.

As Americans live longer, they face new financial challenges. With a longer lifespan comes the dual burden of saving for more years of retirement and increased medical expenses. A shocking 80% of American families are at risk of economic insecurity as they age. 

Most of the research on the retirement gap focuses on this financial vulnerability. And while you might have heard of the issue before, the true inequity of this crisis is often buried in statistics. 

But consider this: The market is up 45%+ over the last two years, yet 45%+ Americans have no exposure to stocks, either directly or indirectly as part of a fund. As the market appreciates over the long-term, half the country will benefit and the other half simply will not. 

Employers play a key role in helping employees build retirement savings. However, nearly half of all working Americans don’t have access to a retirement plan, and two-thirds do not participate even if they are eligible. 

1. Most employers don’t offer a 401(k) plan. In fact, only 14% of companies do, and the vast majority of these are larger organizations. Traditional 401(k) providers like Vanguard and Fidelity designed and priced their plans for large businesses. The administrative burden and high fees make it unaffordable for small business owners.  In fact, only 10% of small to mid-sized businesses (SMBs) offer 401(k) plans to their workforce, despite employing one-third of the working population.

2. Most employees don’t participate in 401(k) plans, even when they have access. Roughly only a third of workers eligible for a 401(k) enroll and contribute to their plan. Retirement plans can be difficult to navigate, a challenge that is compounded by consumer apathy. One of the most famous papers on behavioral economics studied consumer savings behavior, examining 401(k) enrollment and contribution rates at a large U.S. company. The researchers found that participation and contribution increases from 37% to 86% when employees are automatically enrolled in 401(k) plans. The difference is staggering and a great reminder of the power of defaults. The link is here, in case you are interested in reading further. 

Many of the issues underlying the retirement savings gap are structural (financial literacy, wages, medical insurance, etc.).  However, democratizing access to retirement accounts and a gentle nudge by employers can be hugely impactful to improving financial security for many of the 42 million Americans working at small and medium-sized businesses. 

Human Interest brings simple, affordable 401(k) plans to the 90% of small businesses that do not offer retirement plans today. So far, they’ve helped 80,000 employees at 3,000+ companies save for their retirement. 

As we spent time with Jeff Schneble, the CEO of Human Interest, he distilled their ambitious plans to two factors that drive strategy across the company. “We have to make it easier for small and medium-sized businesses to offer retirement savings plans, and we have to make saving automatic for employees.” 

Unlike Fidelity and Vanguard, Human Interest sees the SMB market as a massive opportunity. Supported by a full-stack, end-to-end retirement management platform, Human Interest is able to automate plan design and provisioning, participant experience, and investment advising. 

They guide plan administrators toward automatic enrollment and offer a 3-click sign-up process for employees that self-enroll, resulting in participation rates of 70 to 90% compared to the industry average of just 34%. All this to say, Human Interest is uniquely positioned to serve U.S. small businesses and their employees with affordable, easy-to-use retirement savings. 

“Access to an employer-sponsored retirement plan is the number one reason why SMB employees start saving for retirement,” said Kristina Wallender, Human Interest’s Customer VP. “By making retirement plans affordable, easy-to-administer, and easy-to-participate, Human Interest will make it possible for millions of employees to build a path to a more secure financial future.”

We’re excited to be partnering with the Human Interest team as they tackle one of the hardest problems society faces today and work to help all Americans achieve financial independence.

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