Credit: Shutterstock photoFinancial planning requires a hard look at personal priorities, and priorities aren’t always logical.
Grant Easterbrook understands this, and he’s seen financial advisors struggle to balance the need to offer sound financial advice with the need to keep their clients happy, especially if their client wants to do something that the advisor feels isn’t in their best interest.
So he co-founded Dream Forward, a 401(k) supplier that offers, as its website says, “Emotional Advisor A.I. technology.” We caught up Easterbrook to discuss the technology and he aims to help people save for retirement.
The following interview has been edited for clarity and brevity.
Benzinga: What is Dream Forward’s main objective?
Easterbrook: The super high level of what we do is we’re selling 401(k) plans, fix all the obvious problems, lower the cost, make it easier to use, cause less headaches, no conflicts of interest, and then add conversational AI that employees can talk to about whatever they don’t understand, whatever the issues are.
Benzinga: Can you go into the mechanism behind that? What does it look like on the employer and user end?
Easterbrook: It looks like an online chat. It’s a chatbot. It’s designed to basically have 24/7 chat available to employees on whatever they don’t understand, whatever their issues are, whatever concerns they have. It talks to them in plain English in a way that we call it almost an emotional advisor instead of a robo-advisor.
Benzinga: What inspired you to start a company focused on 401(k)s specifically?
Easterbrook: Part of why I started this company is there are a lot of great robo-advisors out there using cool asset allocation technology. The opportunity or the problem I saw was you watch a lot of good financial advisors interact with clients, and a lot of what they are doing is not hard financial modeling, it’s more dealing with people’s emotions. “Why did you do this action? Why did you not? Let’s buy or clear this off. Why are you worried about this?”
So an example — if you lowered the amount you’re saving because you’re worried about sending two kids to college first, instead of hitting you with a bunch of advanced calculators, the AI will say back to you, “Think of it this way: Your child will always be able to get student loans. No one is ever going to give you a loan in retirement. The biggest burden you can leave a child as a parent trying to care for you for 20 or 30 years when you are an adult is you didn’t save for retirement. Retirement is actually a much higher priority than college if you stop and think about it, even when society tends to prioritize otherwise.”
The kind of emotional counseling that gets them to stop and think before they take a foolish or short-term action is what we try to build with our AI.
Benzinga: Do you have just a stock set of problems that you predict will be brought to you? How do you adjust when a consumer brings a more unique emotionally charged concern?
Easterbrook: It’s really not too hard to build this because, super high level, how you build AI, you usually try to build it off of a dataset. So if you wanted to create some kind of music recommendation engine using AI, there are all kinds of data sources you can use for musical tastes, musical preferences. So we had to ask if there was a data source that you can talk to about a 401(k), what would you say? There is no secret sauce to it beyond just a lot of testing for a long time to get it to work as well as we want to.
Benzinga: How exactly does enrollment work? Can independent clients access your resources or does it have to be through an employer?
Easterbrook: So a 401(k), it flows through companies. You can’t as an individual sign up to get a 401(k) . . . it’s complicated. You can do a solo “k” if you really want to. But traditionally 401(k)s are through your employer. So even though our customer is the employee, it is sold through the company. The client is the consumer, but who buys the contract is the company.
Benzinga: Did you have an AI background prior to Dream Forward?
Easterbrook: Before I started Dream Forward, I was one of the first robo-advisor analysts, so I started covering the space in 2011 before it was hot, when no one really cared about what a robo-advisor even was, come to know all the founders, the media. I was diligently involved in the space and then rode the wave with it as it became the phenomenon it is today. So my background is in that — from 2011 to 2015 in a robo-advisor analyst/consultant space, and started Dream Forward in 2015.
Benzinga: Who are some of your competitors, and what differentiates you?
Easterbrook: There is a lot of large 401(k) players, Fidelity is huge, right. So generally our competitors are American Funds, John Hancock, the large players who serve small plans. What other startups are doing in the 401(k) space, we don’t tend to compete with them for sales too much. So the big guys are our main competitors here.
Generally, how we differentiate ourselves is through lower cost. We don’t have any conflicts of interest when it comes to the fund lineups. We have the new AI technology to increase employee savings rates, and remove a lot of hassle and the burden of running the plan.
Benzinga: What do you think are some of the biggest hurdles to remaining competitive in the 401(k) space?
Easterbrook: I think we have a lot of trouble winning large plans, the Google- or GE-sized plans. It would be really hard to win large plans over the big guys. So just up front, it’ll take a long time to be able to compete with them on those types of plans. But for the smaller plan space we stack up pretty well. So it’s more about recognizing where we have strengths and weaknesses and not trying to chase after the big whale that you’re very unlikely to get.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
