America is facing a retirement crisis. Nearly half of US workers believe achieving retirement security will be a “miracle”, and they have never been more responsible for their own destiny. Pontera has proven retirement savers need more help, and they are happy to get it from their trusted financial advisor.
TL;DR
Shouldering the future: from pensions to personal savings
Baby boomers felt the office floor shift as Defined Benefit (DB) plans gave way to Defined Contribution plans in the late 1970s; in place of the reliable pension, workers were given 401(k)s and to manage themselves, and only half of baby boomers had the functional literacy to make investment decisions.
Next came Gen Xers who saw turbulence ahead: the depletion of the nation’s Social Security system. The next working generations saw an economic downturn, Covid-19 market volatility and inflation as financial literacy in America continues to fall. Social Security is expected to run out in the next 15 years, which means the 85 million workers with workplace retirement accounts are going to need them. And Pontera has proven they want more professional help.
For younger professionals, today’s 401(k) management options, such as Target Date Funds and Managed Accounts, are often sufficient. But as the individual adds more assets and liabilities to their personal balance sheet in marriage, buying a home, saving for education, and more, retirement planning becomes much, more complex.
For this reason, 37% of Americans have retained a financial advisor– a figure that jumps to 70% for households with over $1 million in assets. It’s a responsible decision: Studies show that a financial advisor can create an additional 4% in annual returns, net of fees, through coaching, portfolio risk management, and smart tax strategies.
It stands to reason that financial advisors can play a significant role in helping the millions of US workers with DC plan accounts get the most out of their earnings. In our last 11 years building Pontera, we have learned– It’s not that simple, but it should be.
Pontera’s early days
Pontera was founded in 2012 with the goal of empowering retirement savers to achieve a better retirement. We started with providing a data transparency platform that focused on fund options and fees in plan participants' workplace retirement accounts. During the years, we have come to the conclusion that retirement savers need more than just data. They want actual assistance with managing retirement accounts, and surprisingly, when they turn to their personal financial advisor, they are most often met with little to no assistance at all.
It’s not that the financial advisor hasn’t wanted to help. In fact, many have taken big strides and substantial risks: Either the advisor has provided fiduciary advice through annual statement review and instructions to the client with limited available fund information and visibility on implementation. Or, the advisor has stored the client’s financial account login credentials and taken extensive, costly cybersecurity and compliance measures. These approaches come with such risks and expenses that many advisors simply can’t afford to provide 401(k) advice at all.
The realities of a 401(k) managed outside of the household portfolio are bleak. Americans lose billions of dollars every year to missed opportunities sitting in idle account cash, tax-inefficient asset location, unbalanced portfolio risk, and excessive rollovers. As the White House recently published, US workers are losing an estimated $5 billion in excessive rollovers alone.
Put simply, 401(k) assets inside a managed portfolio can contribute to 4% additional returns per year, which can amount to double the 401(k) value in 20 years.
Bridging the gap to comprehensive retirement planning
In 2018, Pontera pivoted to provide the platform it had been building over years to financial advisors. Building on practices already in place for decades, Pontera introduced a secure and compliant path to professional 401(k) management as part of the worker’s full financial picture. (Our brand comes from the Latin word for bridge “Pont” as we aim to bridge people to a better retirement.)
As Jeremy Abfalter, an Arizona resident and client of Ironwood Wealth Management, recently told Pontera, "I would sign up for a 401(k) through my company… I just didn’t feel as comfortable trying to pick [plan] options by myself without having any knowledge or experience in doing it.”
Now receiving professional help by his advisor, facilitated via Pontera, he reports: “Having the peace of mind knowing that there are experts at Ironwood who are managing our 401(k) makes it a lot easier for me and stress free.”
Today, thousands of financial advisors are serving retirement savers across the US. We are incredibly grateful for our partners, notably including Carson Group, Dynasty Financial Partners, OneDigital Investment Advisors, SageView Advisory Group, Benjamin F. Edwards and Savant Wealth Management, as well as our technology partners, Orion Advisor Solutions, SS&C, Morningstar, Envestnet, Addepar, and more.
Ironwood Wealth Management CEO, Cean Kennefick-Rogers, and retirement saver, Jeff Cyr, share why they value professional 401(k) management through Pontera.
But the rewards of professional management of 401(k)s extend beyond financial gains. A larger nest egg offers workers and their families the confidence to know that they can lead comfortable lives post-retirement. Financial advisors benefit from growing their business with more assets under management and a wider addressable market of eligible clients. This in turn dramatically reduces the advisor’s need and incentive to roll over a client’s 401(k) out of their retirement plan into a managed IRA with their select custodian, which leads to huge benefits for both financial institutions and plan sponsors: better plan asset retention and stronger plan participation.
Accelerating ahead: A new $60 million investment
We are proud to announce today that we have a new partner to help us on our mission. Pontera has raised $60 million in a funding round led by ICONIQ Growth, along with additional participation from Blumberg Capital, Collaborative Fund, Hanaco Ventures, Lightspeed Venture Partners, and The Founders Kitchen. This brings our total investment to $160 million to date.
With the entirety of our last funding round in the bank, Pontera was not seeking a capital raise. Having persevered through rocky early years as a startup, we operate with extreme thought and prudence when it comes to capital deployment. According to our partners at ICONIQ, this execution style, combined with a product that benefits the entire retirement ecosystem, and a track record of quadrupled revenue since our last fundraise, made Pontera an attractive investment opportunity.
We were approached by many investors, but ICONIQ Growth stood out as a true believer in the problem we’re solving and our mission. The fund comes with a stellar network and a track record of portfolio companies, including Uber, Zoom, Airbnb, Datadog, DocuSign, 1Password, and Canva. We were pleased to close the round in November with a modest valuation increase from our last valuation.
The timing is especially near to my heart as a company founder. With a significant Research and Development office in Israel, a country at war, this investment signals even stronger support for the talented team we’ve built. (We have maintained fully operational status with robust business continuity and employee support programs.)
In the coming years, we will use these funds to invest in our product, team, and business growth. We anticipate that in the next 24 months, we will double in team size. If you are interested in helping US workers retire better, please visit Pontera Careers page and follow us on Linkedin.
This funding is not just an investment in Pontera; it's an investment in the future of every US worker aiming for a secure and fulfilling retirement.
Yoav Zurel
CEO, Pontera