Ubiquity's Chad Parks: Disruption & Fee Transparency

[0:00] JD: All right, we're doing it. I think we're doing an informal intro because that's how we do things these days. [0:09] Justin: Drum roll. [0:10] JD: Inspirational music. Haha. Welcome to another episode of Retireholics. It's your lucky day, people. We do not have nerdy Chad. Chad Johansen on the show. He's been replaced by a far smarter, young, much better Josh It. So welcome to the show. Josh It. So as a host for today, Rogue Guy is also not here because who gives a shit about Rogue Guy? Nobody. Not me, that's for sure. So we thought, let's have some fun. Let's bring in Devin, who is. You guys haven't met Devin, really, but he's part of our sales team that's not on the show. So he's our internal sales consultant, soon to be an external sales consultant. And welcome to the show. Devin, it's good to have you filling in for Robey. So let's kick it off when we get the big guests. When we get the big guests. When we get the big guests. Like the guy we have today. I'm always fired up to do a song, so. Remember when I said it was your lucky day? Well, it's not, because I sing a song for you all. Let's find my lyrics here. Here we go. Let's find the music. Here we go. And a one and a two and a one, two, three. It's not the same Disruptors are the change every day the old arcades are wasting away for the legacy the leads are so cold the sales teams are bold Just sitting at home I'm a disruptor and on a Tesla I drive funded Series B has arrived Funded millions on mine. Sometimes we sell often hundreds in a day the sponsors we meet always give our tech praise Sometimes you want to pay by the payroll that you link and proposals Digital form well, no need for the ink I'm disruptor in the Tesla I drive I'm funded Series B has arrived Funded, funded Millions are mine. There we go. There we go. [3:53] Chad Parks: Awesome. [3:56] JD: Let's get into headlines. Headlines, Brandon, headlines. Have you. I will say, Jay, yes. Last week was a little bit more passionate. Oh, sorry. I think I had a few more beers before I start. Then I get a little more into it. I would think most rock stars hit the stage with at least four or five beers in them. Or some type of substance that alters them. You'd have to have. You've been living under a rock, people. If you have, let me update you. Remember that old secure 2.0 Roth ketchup thing for the $145,000 paid rich guys in the previous year they were gonna have to do their ketchup as raw. Well, you probably figured this out but that sucker's been pushed off to 2026. Thank God. God bless everyone that was involved. But just wanted to bring that up in case you again have missed that. Let's next do a little. They also addressed the catch ups. Not going away for 2024 too. Dude, were we ever really concerned about that? I just wanted to hear it, man. [5:14] Justin: I just wanted to hear it. [5:16] JD: I think that was aspa. I'll drink. [5:19] Justin: That's literally the most Justin has said any time I've ever been on. [5:24] JD: Because you talk 90% of the time, pal. I can't get any words. I think that that was. [5:30] Justin: I'm proud of you. [5:31] JD: They were overly nerding out on that one. We all knew that ketchups were not going to disappear. Come on, let's be real. Let's do a little quick headline on the. If you remember the. For us all and the whole crypto thing with the Department of Labor. So I think it was a lawsuit. I'll call it a spat. But if you remember, forasal was this record keeper. I think we can call them a record keeper. I don't know. That might be up for debate. We can talk about that. But. But they were coming to market with. Yes. Chet shakes his head no. I might agree with you. So we'll talk about this. They were coming to market with this. Hey, you can do crypto in your 401k and that's a big deal for them. Well then the government comes out with this. I forget what we called it but it was like this bulletin that was like, look, probably shouldn't do this. These are the reasons why. And I think they went so far as to say if you do, you know, we might come sniffing around your plans for a variety of reasons. For us all then cries and whimpers and shouts out to the world like no, you can't do that. It's not fair. You're hurting our business model. Therefore we sue you. Well, the news is the judge, the courts sided on the Department of Labor side and said for us all, stop whining. Stop being a little baby bitch. And so they didn't. That wasn't actually an excerpt from the court case, but I made that one up myself. [6:43] Justin: The best, the best part of that is they complained that the DoL basically destroyed their business because they had like prospects who were going to move their plans to them or Startup plans with them and then they, they went away. Which really speaks to the fact that their product must have really sucked outside of the crypto shtick. [7:04] JD: If. Well, I do know that you just penalized and I know that it says not drinking tonight. So I'm going to take the first one on his behalf. But then I'm going to need backup from Devin. Okay, all right, I'll take it. Chad, let me ask you. I, because of this news, I dove back into foresaw a little bit just to go kind of look at what they're up to. I gotta be honest, I was kind of confused for a moment like this. If you go to their website, they're advertising now that they are partnering with and, or snapping onto Voya, Empower, Hancock, Fidelity, and then using their own technology, I can only assume to sync with numerous payroll providers, track eligibility, streamline enrollment, do the compliance work, maybe a 316 fiduciary, offer up more investments through a brokerage window, maybe even still crypto. But this is different. This, they're not truly a record keeper, but they are. But they're partnering with these other ones. Have they pivoted their business model? How much do you even know about for us all and what they've done and where they're at today? [8:16] Chad Parks: Well, we do go way back, I guess is the right way to say it. Shin and David were the two guys who started the company. They came out of Financial Engines and they originally, I do believe, wanted to be a record keeper in TPA combo. And what their real difference of value proposition was that they had this layer of an enhanced enrollment process with a narration and a guide and tools and tutorials where they would be able to statistically show you that their system has brought more savers into the system and have higher savings rates. And that that was really how they pitched it to me. And I think what happened and you know, in tonight's episode, as we talk about any of our competition, I'm just going to caveat it right now to say, you know, I know what I know. What is the acronym you said third party administrator. [9:07] JD: But finish your thought, catch up on your panel feature. [9:10] Chad Parks: All right, all right, all right. I was, I was going for zero tonight anyway. So they, you know, I think what happened, what I was going to say is that anybody I talk about tonight, right is my own knowledge. It may be accurate, it may be inaccurate, you know, so please, anybody listening, don't take it for gospel, but what I know about me and you both, that they, I think they found A hard time trying to convince existing plans to leave their incumbent record keeper for their platform. Even though they might have liked a little bit of what they offered, they weren't ready to necessarily move the whole thing. And so my understanding is that what they did was they said well let's, let's forget about being a record keeper and let's put our layer on top of other record keeping platforms as a value add. And I think that's what you're reflect, that's what's being reflected there in that, in the website and what you just said. [10:04] JD: As an industry person I could kind of go to Itzel on this a little bit here in a second but that's really weird to me because, because I'm not used to seeing something like that or anything really similar to that. But I gotta applaud them for looking at something from a different perspective and trying something new and who am I to say what would take off or not take off. But definitely unique to say look we've got all this cool technology that will help with enrollment, plan design, setup, wellness, all these other things which and then snap on top of a record keeper like Voya. This will kind of go to a later discussion we're going to have tonight. But wouldn't Voya be like why the hell would we need your stuff on top of our stuff? And then there's the whole advisor community. It looks like they're also, they have this advisor plus solution where like what was my notes? Like it's like 20 to 40 basis points. They can from what I can tell become like broker of record or something. It's so have you sniffed around this thing at all and what are your thoughts? [11:12] Justin: I haven't, I mean I, you know I, I feel like you know it's been interesting and just in the small market and kudos to Chad and probably the you and employee fiduciary kind of the OGs kind of in this market. And then you got Aaron Investwell and I, I just think for us all got left behind like came out, tried to differentiate, saw how competitive the market was, kind of planted their flag around this crypto piece that goes away. I don't know how much they're funded or not but it's like okay, now we got to pivot plan B. What are we doing? We'll do this Advisor plus. I just think advisors don't like to change stuff and so I think they're going to have a really hard time. [11:58] JD: I, I, I think for us all had something to the tune like $50 million and some different series that were funded. Like Chad said earlier, I could have that wrong. So don't, don't hold me to my numbers. But something like that. So no, you know, it's not pennies, it's a decent amount. It's, it's not to the scale that guideline and invest well and human interests have done it, but they definitely had tens of millions of dollars behind them. And I think that was well said. And so I think they came out with something. And then to Chad Swain, they kind of had to pivot. And I tend to look at pivoting as like, haha, you fucked up. Like you had the wrong business model. But that's naive of me. Sometimes you pivot. I know this happens in the tech world all the time. They build something, it doesn't work the way they want it, so they kind of pivot off it a little bit to something different and they have a huge success with something. So I don't know, who knows? [12:45] Justin: I think you have to be iterate is, you know, really taking kind of like a build test, validate, right? Build something, launch it. I think advisors would learn a lot from this is you should try to test out ideas, theories, be like a scientist, have a hypothesis experiment, see if it works. If it does, lean into it. If it doesn't, it's okay to pivot. That's how you get better iteratively over time. [13:15] JD: I agree, I agree. So we'll see. You mentioned employee fiduciary. I want to talk about them in a bit. But before we do, Justin, is it all right to give our guests a formal introduction? So everyone out there, Go right ahead, pal. You're the intro guy. [13:31] Justin: Oh, I thought you were asking me [13:32] JD: if you could give an intro. Oh, so I was like, yeah, you did. [13:37] Justin: These other two guys, I had something [13:39] JD: ready to go, but anyways, [13:42] Justin: should I start? [13:43] JD: Yes, please. All right. He's a nationally recognized go to expert on retirement and also a documentary producer. [13:52] Justin: He's been quoted in publications included the [13:54] JD: New York Times, the Wall Street, Bloomberg Wealth Manager, and yes, he has made the COVID for anyone who remember last [14:01] Justin: time he was on the show. [14:01] JD: I completely fubar that one. We're not sure of what. But he has made covers. [14:05] Justin: Yes, he has made the COVID Only one that matters. [14:09] JD: He's the only guy I know that's still rocking a faux hawk. He's the El Jefe of ubiquity retirement savings. [14:14] Justin: Ladies and gentlemen, Chad Parks. [14:16] JD: Chad, welcome to the show. It is a phone. [14:20] Chad Parks: Thank you. Thank you, it's just the way this thing is. It's all right. It's more of a military. [14:27] JD: You put a little something, you shape it up in the morning. I know you do. I know you do. Yeah, yeah, yeah. [14:33] Chad Parks: There you go. That looks good. That was really good right there. [14:35] JD: Yeah. Okay. Have you, have you all seen the. Is it the national association of plant advisors? Their 20, 23 advisors choice? Top record keepers. Take a look at this if you can. And you can click on a link here and it'll show you the actual list of these. We did this last year. We looked at this. I'm gonna pull it up myself here and I wanted, if you guys had a chance to look at it and did you look in the, like the, like. I'll look in the micro plans for once here and what, how they. Let me explain how they do this. First of all, I think it's cool that instead of serving plan sponsors, they're serving advisors. I think Chad is nodding his head in agreement. I think it's cool to get an advisor's perspective. They're the ones that are in the weeds and kind of understand this stuff. Albeit valuable to get sponsors opinion. Sometimes I think a little more valuable to get into Pfizer's opinion. And then when you look at the rankings, you need to be crystal clear that these are not in order of 1 through 5. They simply give you the top five and then they, they line them up alphabetically so all you know is these are the top five. You don't know who's number one or who's number five. And then they put in different areas of services like participant tools, calculators, regulatory staff, the plan sponsor website, participant statements, educational materials, all these different areas. But what stood out to me, and I mentioned this last year, so sorry to be a broken record here, but I see names in the micro space which is 0 to 1 million of in power, Hancock, Voya. I see a Vestwell and I go, okay, that makes, that's cool. Makes sense to me. Aaron Shum's making some headway with some advisors. Okay. I see names like the Standard American Funds. But then there's. I said this last year. Then there's this 401 go again and it's in every fucking one of these things. And I'm tripping because I would think a lot of these answers would be companies that are at scale. And I reached out to 401 go last year. What's the dude's name there? Well, I'll find it for you in a Second, but I reached out to him, he said that they're coming close to a thousand plans, and then Jared Porter and that they were going to push past a thousand here soon. And some thinking, like, wow, they're still pretty small time. Like, how are they getting to the top of these, these rankings? Any thoughts? Chad, have you seen 401 go at all? [17:07] Chad Parks: Yeah, yeah, I came across them at one of the conferences here a couple years ago and, you know, spent some time talking with them, getting to know what their business is. And I think they took an approach that we all have taken, all of us who you're comparing to tonight in that, you know, we recognize there's a need, we need to do something better. Let's bring some new technology to the table, something fresh. And, you know, to my surprise, I learned that they have built a proprietary platform, which we all know is not easy to do. And, and that they have invested a lot in their UX and UI and have a pretty slick experience for the people. And that's why that, that's. They're showing very well in these. What, what was the acronym? [17:51] JD: Yeah, it was. [17:51] Chad Parks: I don't know what the word is. [17:52] JD: It was a user experiencer. [17:54] Chad Parks: Interface. [17:55] JD: Yeah, User interface. [17:55] Chad Parks: Oh, my gosh. All right. User experience. User. Okay, yes. You got me. Wow. Somebody's really, really paying attention. So, you know, and I have respect for them because they, you know, they, they are trying to make a difference, just like we all are, and I'm glad that they're here for it. [18:11] JD: Yeah, I, if anyone remembers, I think 401, Jake was involved with them back in the day. [18:18] Chad Parks: Right. [18:18] JD: I thought kind of on a higher level, but anyways, he parted ways with them at one point. And I remember Jake telling me their business model and then telling me their pricing, and I was kind of being an asshole. Go figure. And I was saying, like, how are you guys going to make any money on this? They charge $9 per month per head. So $108 per participant. It looks like they've got like 15,000 participants, if I had to guess at it. So if I kind of back in this math, I think Maybe they're making 1.6 million or so on that billing fee. And again, I'm taking some guesses here at some things. They also mentioned at 8 basis points in custodian fees. And Chad, I think this is your area of expertise. When you see a 401 go doing eight basis points for custodian, do you think that's a direct offset? Like the custodian the matrix, the Schwab or whatever is making all eight basis points. Or does 401 go get a sliver of that, like two or three or whatever? [19:22] Chad Parks: Again, for a minute there. Yeah, for a minute there I thought you were actually describing Guideline because that's, that was very much their pricing model as well, where they would quote it on a per employee or per participant basis and multiply it up and they too have an 8 basis points charge. And. Yeah, so decent. So here is saying in the chat, and he's right, you know, the, the custody ad matrix, you know, can range anywhere from 2 to 5 basis points. So yeah, I'm imagining that both guideline and four one Go are definitely just, you know, marking it up a bit, probably just to cover the administrative, you know, connection and everything that goes with it. [20:01] JD: And that's fine. So I was, I would. I estimate here that maybe. Shit, I was thinking maybe they get two or three basis points and I thought that might slide them an extra million bucks or something. So maybe 2.5 million is their revenue right now. I think they also had, they had like a 2 million seed funding. So I don't know, it's another one where I start to be a little bit of a hater where I'm like, okay, so you're, you're doing 2 million in revenue. Someone gave you 2 million to start the company a while ago. Like, you better get on a growth path somewhere here. Maybe they are to get to some point to start paying that money back and be profitable in some way. But jd, stop being such an. I started my company. I started my company in 1975. And we just have north of a thousand plans. So they're clearly moving at a faster pace than I am. So I guess I shouldn't be giving them too much. [21:00] Chad Parks: Well, you're so old economy, jd. That's why you're old. Don't forget it's a new economy. It's all the eyeballs. That's what we do. Yeah. [21:07] JD: How dare me. [21:08] Justin: Does anybody think the utility of those [21:10] Chad Parks: awards [21:13] Justin: is all that good? [21:14] JD: They look kind of. I mean, it's interesting. [21:16] Justin: If you talk to, if you talk to two advisors and you ask them about a record keeper, like, one's probably gonna love him and one's gonna hate him. [21:27] JD: Yeah, sure, you can get a message. [21:28] Justin: It really comes down to like, who do you have the best relationships with? [21:31] Chad Parks: Who do you get the most resources from? [21:32] Justin: So [21:35] JD: it can. But I think we live in it. I think you're being old school there. Its own A little bit. Oh, that's. If I say that that's a natural penalty, isn't it? I'm gonna call him Josh tonight. I think we're good, aren't we? I think you're being a little old school in that I think we're in a tech forward space right now or part of our evolution where there might be new inventions and new things and new efficiencies that advisors and sponsors find pleasing or good that we maybe we didn't have five years ago, 10 years ago. I don't know. I'm kind of making that up a little bit, but I'd hope to feel like we're kind of in that space. But I will tell you this. When you go to 401go's website, they have these rankings on their site, like these little stamps of approval. And if I was a consumer, I feel like, oh, wow there. It kind of makes me feel like they're doing something good there. [22:27] Justin: So will heck or. [22:29] Chad Parks: No, I did not. I was opening a beer. [22:32] Justin: What would be interesting is if in the survey, number one, they should, they should rank based on answers instead of just saying, hey, here are the. Here are the five, in my opinion. But the other thing would be trying [22:42] JD: to be politically correct. I feel like, like they can get, they can get pats on the back from all five of them instead of creating a war. [22:48] Chad Parks: But maybe it's alphabetical. Thing would be based on AAA. [22:52] Justin: 401k is having advisors say, hey, I like this, but how many plans do you have with it? Be interesting to. To com. You know, to compare that. [23:03] JD: By the way, is that so bad? Like the fact that they have a thousand or maybe they're beyond that. They got 1300 now. I mean, if they're doing a good job and like, like park said, if they built their own tech and it works efficiently and they don't need a lot of the overhead of the big companies. Like, it doesn't necessarily mean it's a bad thing that they're small and nimble or whatever. Let's talk about another small one. In another headline, it is Eric Drobilian. I've always known this guy's name. Employee fiduciary. He is employee fiduciary. And the limited liability company is calling out on the Department of Labor to improve 401k fee transparency. He's kind of gone to the press with all this. I don't know why I'm in such a bad mood picking on people today. But I've known this Eric guy, normal Every fucking thing he puts on the Internet is an attack on the industry and its fees. Like literally, you cannot find a post from this fucker that isn't like, oh God, look at Hancock, look at American funds, look at Principal, look at Voya, they're ripping you off. And if you come to my company, you know we're gonna give you a far better deal. If you go to his website, you literally can go and click on hundreds of PDFs that compare his fees to these legacy incumbent providers like the Hancocks and the Voyas. Oh, I read going up on. And basically what they're doing is, what he's doing is comparing his institutional shared class of vanguard to whatever shared class or stuff. And in there. And it's a bit of apples to bananas in the sense that his program's fees don't include advisors and their costs, where I'm sure the voyage and Hancock's, when you do their average does. So that's a chunk of those fees that aren't being compared to. You're also comparing actively managed funds to a list of passive, you know, institutional share class of funds. So that's a bit of an apple and a banana type of comparison. So I don't know. But this guy, this company is, I believe at about 5,000 plans with 5 billion in assets, 145,000 participants. So their average plan is about a million dollars, which makes sense to me. And they're right around 30 employees, which is kind of how they build their pricing model. They're this 1500 base. And so they might be doing 7, 5, $8 million in revenue. And it's kind of a similar model. What we talked about with 401, going away employee fiduciary. I'm going to go. You first. Izo, you said you're familiar with these guys. So they're chugging along 5,000 plans. [25:43] Chad Parks: I mean, they've got a good little business. [25:44] Justin: Eric's a good dude. He's passionate, he's a smart guy. When I literally, the very first plan I ever worked with was I put with employee fiduciary. [26:00] JD: God, you're such a little cheapskate. Why would you. [26:02] Justin: I mean, I, I was. And I could, you know, I could get. I think the key here though is like every business think about advisory firms. I mean, if we're using what you're talking about with 401k or 401 go in employee fiduciary, like there are a lot of advisory practices that have a million dollars in revenue, a million and a half $2 million in revenue that probably work with much with big companies. And so the argument could be made, well, you know, they're too small to be able to work with a company of that size. I mean, if you're delivering good service and you find your niche, like employee fiduciary, it's all fees with them. Find your niche and have at it, you can build a really good business. And if you keep your promises to clients, whether you're an advisor or record keeper, a tpa, whatever it is, build a really good profit. [26:53] JD: Chad, Chad, do you ever, you think it's good or bad when people are waving the flag and yelling through the megaphone that the industry is ripping them off and that they've come to save and that they've come to save the day? Because me personally, I get offended by that. But what's your take on this? Well, this is a common strategy. We're seeing it played over and over and over again. [27:23] Chad Parks: I mean, there's a lot to this. You know, my background was that I used to be a certified financial planner in addition to being a registered investment advisor before I started this company. And as a certified financial planner, we have ethics and we know the power of compounding. And when you see inside someone's retirement plan that this was remembered before fee disclosure was even a thing, right? These hidden fees of 250, 300 basis points, you know, to, of a wrapper in addition to the costs of the investments, you do that math and you compound that. And you might remember there was a while ago it was Teresa. What is her name? Teresa Ghirla Ducci. And a couple of those other folks in one of those things from the New School in New York did a study and said, hey, these fees are costing you a third of your account balance over your lifetime. And the industry went nuts. They're like, no way, that's not right. Will you put those numbers in a spreadsheet? It's true. You know, it's $160,000 of fees for a $500,000 balance at the end. So, you know, I, I'm a big, I've always been a big proponent of the lowest cost possible, especially when it comes to inside that savers account, which means push those basis points down. But, you know, you made a Good point earlier, J.D. which is, you know, you have to be sure to do an apples to apples comparison. You know, I having been been before I was a financial planner, I was a, you know, I was a stockbroker. And so I, you know, I had all My licenses was taught everything about investment analysis and, and you know, risk adjusted return and beta and alpha and all those things. So I'm almost too, and this is going to sound so egotistic, so you guys are going to hate me. I'm almost too smart when it comes to, there's the headline, park says he's too smart when it comes to knowing about investments. Right. And you have those, the, the, you have the Bogle heads who are all about the low cost plan, you know, the low cost investment. But I can tell you that just because something costs 10 basis points doesn't mean it's the best investment there is because it's risk adjusted return, you know, what are you getting in exchange? So I always used to say I'd gladly pay 100 basis points for a fund that's going to get me a 15% return with a beta of 0.7 versus pay 10 basis points for a fund that's going to give me 10% return with a beta one. You know, I mean, so it's not about the cost, but that's, that's me on a tangent. [29:45] JD: Well, you're right because it's complicated because we go to the investment side. Because when you talk about that I kind of feel like you can have the Boglehead argument, that's fine. But now we're just talking about do you want a passive fund versus an active fund? And then the next debate we have here is okay, are we going to use an institutional shared class or are we going to use a shared class that's got some revenue built on it? Or are we going to use an institutional share class and then build a wrapper on top of that? I could give a fuck which way you want to do it because it all washes out the same in the end. But when I look at Hancock, Nationwide, Principal Empower, Voya, and I look at the fee structures they have for startup plans and $50,000 plans and $100,000 plans and 250,000 plans and all the services and all the tech and all the support and all the enrollment and everything they give to them, I don't think it's expensive. I think they're losing their fucking shirt on those plans. And when you tend to run out those costs and you've run them out over 20 years or 30 years, we're forgetting the fact that that plan grows from 250 to 750 to $2 million and gets breaks in their pricing. Like they get repriced, they move to different products, they don't stay on that 1% wrapper for the entire life of the plan. So I don't know, I just, as someone who lives, breathes and sleep, sleeps in the micro market, you can't tell me that they're expensive. And when I actually compare them true apples to apples to the guidelines and the human interest, especially human interest, I don't really see that much of a gap between the two. Like when you really break it down, then we get down to the last argument I would agree with you on this is if we can drive down basis points and shift costs to an employer costs where they write a check, then that would be a great direction to go. But again I think most of these vendors allow for that. So it's really an advisor or client driven choice in that space. Like you can still in the micro market go to plan sponsors and say hey, would you like to pay for this? Instead of it being asset based fee born to your participants, that's an option. And I just think there's a lot of hate thrown at those legacy providers and I'm not so certain that it's, it's, it's, it's, it's fair. [31:57] Chad Parks: Sure. Well let's, I'm pick up on that theme there with the hard dollar cost to the employer and you know, for anybody who's practicing today and advisors especially what you have to make sure that we take the tax credits that are available into consideration now, especially in the first three years, you know, if you're that 20 person company, there's $5,500 on the table for you. So why wouldn't you put all the cost to the employer to you know, to get the billable tax credit and then the participants accounts have that much more chance to you know, to earn. So it's you know, fees, there's a, there's a fine line. This has been an argument forever in this industry. Right. What is a fair amount and what is an excessive amount? Right. And you know, and disclosure helped that because it showed, shined the light on, on pointing to people with four a B2 and the others. This is where your fees are, this is what you're paying. And you know, and I think there was a firm there, I won't name names a while ago who happened to come out and very publicly say hey, you know, anything under 100 basis points is fair. Well it just so happened that they were like at 96 basis points, you know, so of course it is. Right. And then we see advisor fees getting pushed down, you know, we see anywhere from 50 basis points to 25 basis points and there's some who do less. But it really, to your point, it's economies of scale. You got to start high to go low. And I would be an advocate for like a hybrid model which says that, you know, there's a balance between fixed costs, hard dollar costs and asset costs. And as those assets grow, yes, the asset fee should definitely drop and perhaps get balanced by the hard dollar, you know, so, and back to your point, the micro market, let's not forget what's zero times thank you. Anything is zero, you know, is like so it doesn't matter. [33:38] JD: And by the way, this is all happening in the micro market. Like this is where, this is where these companies are hunting. This is where this narrative is being shared. And so I'm glad you brought up that final point is look, 1% on a startup is zero. You know, there's no assets. And 1% on, on 50K is 500 bucks. You know, like this is not, this is not a lot of money and I think it always gets blown out of proportion. And mind you, I think what's funny, we've talked about this before, I'll move on. But is that a lot of the solutions are, the new ones are let's build the client, which again I think is good. But, but when you really, if you were to convert that fee into basis points, it's actually more expensive than a lot of the micro kind of legacy providers. It's, it's a, it's a shame. [34:31] Chad Parks: I mean, well, I mean that, and that's again the, the sort of misuse of this fear factor. You know, I, I really don't like when we're, we're, when people try to translate my fees into a percentage of assets because I'm off the charts. [34:48] JD: Yeah, that's not fair. [34:49] Chad Parks: I charge, I charge $6 a month per participant. Well, if that person has a thousand dollar balance, that's 7.2%, 720 basis points, your, your highway robbery. Like, but what they don't realize is that's a fixed fee that will never go up. It goes. Well, I shouldn't say that it might go up sometimes, but it is, you know, and if you multiply, if you multiply 72 a year by 30 years, what's that, 2300 bucks, something like that versus that basis points times 30 years, which just goes, goes, goes. Right. I've done these models, I've got spreadsheets out the wazoo. I can tell you that a flat fee model is about 10 times less expensive than an asset model if it's remains static. Right. So, you know, so I kind of agree with Eric. I mean I haven't kept up with him in a while in terms of his approach and what drummies beating. But you know, there it does need to continue to be part of the debate. [35:36] JD: Well, let's go to this, let's go to the big one then. Let's the, the big topic for tonight. If I, if I'm hating on this concept, I'm clearly wrong in that it works. At least that's what I'd like to propose to you guys tonight. Because when Guideline and we had Kevin on the show, he's actually was one of my favorite guests to have on the show. I thought he was really intelligent. I learned a lot from that night. But when you look at Guideline, Human Interest, who we've also had on the show, Veswell we've had on the show, we talked a bit about this for us all thing. There's this smart company, you know, that's from the United Kingdom that came over that's got a lot of money behind them. But when you look at Guideline and Human Interest and vest well specifically and, and even drill down further and just look at Guideline and Human Interest because they're the ones with like hundreds of millions of dollars in, in funding behind them. I think Chad, when you're on the show, last time you had mentioned like over a billion dollars has been. I think that's, it's way beyond that number at this point, especially if you [36:40] Chad Parks: count the census, you know, because they're about half of that, you know. [36:43] JD: So yeah, I, I thought that these companies were going to fall flat on their face. As I looked at their pricing models, as I looked at they're doing, I just didn't see success for them. And I kind of sat on the sidelines like waiting to like watch this all implode in some way. I think the jury's out and I think I've been proven wrong. We could still argue about their profitability and how they're going to pay back the 350 million that, you know, they owe because obviously they don't. We just want to pay back the 350 million. Right. They got, they got to pay back a lot more than that for that. It'd be worth those investors. But the numbers that they've done are staggering. I mean Guideline is pushing. I think they're north of 50,000 plans at this point. And that's happened overnight in My eyes. And Human Interest is on a great pace too. I mean, they're landing on the, the top 10 of record keepers in terms of new sales in a year, obviously behind ADP and Paychecks. But if both those companies are in plan sponsor magazines, top 10 record keepers in terms of new sales. JD you are fucking wrong. Like they are disrupting this industry. So I'm going to go straight to you, the original gangster of 401k disruption founding the online 401k which became ubiquity Is the jury out. Have guideline and Human Interest proven to the legacy providers incumbents that they're here to play and they're for real. [38:19] Chad Parks: Short answer? Yeah. You know, there's an addressable market. There wasn't infrastructure and systems and distribution that could cost effectively go after that addressable market. And they brought technology to the table. This was mentioned a little earlier and it made me think that, you know, the cost of technology continues to drop. You know, when I first started this, you know, I had, we had, you know, $2,000 scanner in the office. Where do you find a $2,000 scanner? Right. I mean, that's just an example. Right. But you know, when I started, we had to literally buy our servers from Dell and then we had to put them in a rack and we had to plug it into the Internet. Today you got Amazon Web Services, you can have unlimited hardware and unlimited bandwidth is pay as you go. So all those dynamics have come to play to really allow companies like mine and like Human Interest and Guideline and others to leverage the technology to be able to, in essence, create a better mousetrap that is able to scale, that's able to grow, and that's able to really do more with less. Because that's really the other key. You know, we, we've invested heavily into our own platform. We continue to invest into a lot of automation. This next wave of AI is very interesting, you know, in terms of what else you can continue to have computers do for you. You know, the days of having an army of people click buttons, that's not, that's why this is, this is why the end of the market's been ignored. You know, and so it's been when they came into the marketplace, you know, I think last time I might have said, and I've said this a lot in other places, you know, imitation is a sincere, sincerest form of flattery. So. Well, we are very flattered these days. Right. We are being imitated very well. [40:00] JD: Right. [40:02] Chad Parks: But also each of them has a unique angle to Their business model too, which I think is. Oh my gosh, what in the heck? [40:08] JD: You said artificial intelligence a while ago, but you can always keep going here. [40:12] Chad Parks: Yeah. Okay, so. So the, you know, each of them brings a little bit of a different business model too. So it's hard to say that they're like kind comparison to each other, myself included. [40:24] JD: But I have to oversimplify and think that a lot of their success was this flag waving in this megaphone that I just talked about. Both Guideline and Human interest did that in spades. Like they guideline had fucking signs up at bus stops and shit. In New York. [40:44] Chad Parks: Oh, yeah, no, I know. In San Francisco too. [40:47] JD: Yeah. Your 401k is ripping you off, you know, and that. And we've come here to save you with lower fees. I mean, they both beat that drum. And all I can say is I feel like it worked in the micro space. Well, we've talked about this before. We don't spend a lot of time. They obviously leverage their partners too, right? They, they leverage payroll providers better than we had as an industry. Like, they kind of knocked it out of the park with both of those. Chad, you're a, you're an entrepreneur. You've created a successful company. Ubiquiti is, you know what, you're north of 10,000 plans and north of 100 employees or something. I mean, is that close? Somewhere in that vicinity. Yeah. [41:23] Chad Parks: That's good round numbers. [41:25] JD: Yeah, that's no slouch work right there. That's good, good stuff. You must think about numbers. Can you peer into the, the guideline and you're from San Francisco area or you built your business there, like, help us, help us understand the venture capital perspective. I gave guideline 350 million. That's great that they're building up and getting market share. And maybe I'm encouraged by that. But at a certain point they got to turn like a solid profit and like get me my money back 10x20x30x or something. Right. I mean, how do you peer into those numbers? [42:02] Chad Parks: No, it's. No. And that. And that's an excellent question. I'm glad you set that up for me because this is really key for I think everybody to understand. And that is, you know, I kind of joked, jd that you're old school or old economy and we're in a new economy. Right. Because that was the buzzword in 2000, 2001. But to put the lens of professional investors, venture capitalist, private equity firms, you have to look at the business as, as something that is Creating shareholder value. You know, it is by growth, it is by top line revenue, it's by recurring revenue that is very predictable and evaluation. Yeah, yeah, valuations and eventually profit will come. You know, these companies, you know, mine included, you know, we in. I don't want to say too much without because I know there's a lot of people on this call who are actually some of my competitors. See the names, I see, I see you out there. But the game evaluation is what's being played. And if you don't believe it or you don't want to believe it, I will point to three or four companies which are fantastic examples of that it actually can be successful. And they're not in the case they were in the payroll space and in the HSA space. And the four companies that I always reference. [43:19] JD: Health Savings Account. [43:21] Chad Parks: Oh my gosh, you guys, come on. All right, I think what I had like 14 last time, so as long as I do better. [43:28] JD: So some companies succeeded for there. [43:31] Chad Parks: So the, the, so the, the Paylocity Pay Core, Paycom and Health Equity are four great examples. So go to Yahoo Finance, look them up, look at their tickers. They were all in that same boat, right? They're all about 20, 25 million of revenue. They had a tear where they grew up to $100 million of revenue over a three to five year period. They, that was enough to qualify them to basically jump through the window and go public and go look at the valuations that the public market is giving these companies. As long as they continue to grow. [43:58] JD: There's an out that makes sense to me. So the initial public offering, I get it. Even though that's not my world. Human Interest has talked about this being their game plan from the get go. I mean they, they originally were telling news media that it was going to happen sometime this year was their goal. And they laid it out like they wanted to get to a certain amount of revenue and then they were going to make it happen. And so I, and they are valuing their company I think at a billion dollars at some point, which again, I get into these, these multiples and I, and I'm trying to figure out like their fee structure is fairly low. I don't think they're running a huge profit. And you're so right, this is the dad and this is my father in me, right? It's like you gotta run a profitable business to me, worth something. And I know I've said this before, but you. We can't ignore the fact, right, that interest rates went from zero or Negative to where they are now. I mean the world in terms of venture capital has been turned upside down. Is it, is it possible that even with human interests growth that they go back to their investors to keep the lights on or get more money? And by the way, they are growing. I mean they just open an office in some other state I saw. Looks beautiful. But will, will the investors continue to funnel money their way even in this current environment? [45:21] Chad Parks: Well, [45:24] JD: and I'm not suggesting guideline or human interest doesn't turn. I think definitely going to be a down. [45:29] Justin: It's definitely going to be a down round. [45:31] Chad Parks: Well, yeah, and to be fair, this is the game the investors play, right? They set the valuation, they, they get your head full of, you know, unicorns and big dreams. You know, you, you're a billion dollar company, like, wow, I've got 30 million in revenue. I'm a billion dollar company. Sounds good to me. But then it's just to just like you said was to like so that then when they have to come back later, they're going to punish you. Right? And they're going to own more of the company. So it, that, that in itself, this whole thing is, is a game in itself. The vehicle they chosen in this time are small business retirement plans. Makes sense, you know, and, and because it's a viable market, it's a huge opportunity. 5 million small businesses, 50, 60 million [46:11] JD: people secure 2.0 state run mandates. Like yeah, yeah, we got all this [46:17] Chad Parks: positive behind us, all this positive wind behind our backs. And I, you know, I'm glad I was promised myself I would say this tonight. No one company can solve this problem, you know, so the more the merrier, right? The fidelities can't do it. Vanguard can't do it. Imagine what if we get a federal mandate? What if, you know, who, how in the world could we as an industry absorb 5 million small businesses? [46:41] JD: Brian Graff said that exact thing on stage. It's like we don't even have the people, you know, like we'd have to expand our industry to do it. [46:48] Chad Parks: Yeah, that's a great challenge to have. [46:51] JD: To me it's, and I'm sorry, I'm sorry to anyone out there that feels like, you know, this is a reoccurring subject to me, it's just the biggest thing happening in our industry. I, I think if I would have 10 years ago looked forward and been like there's going to be all these brand new companies playing right alongside Fidelity and Voya, I wouldn't have believed it. Josh. [47:08] Chad Parks: I think if You. [47:09] Justin: If you go back and what with what Chad said, which I agree with, I mean, if you think about disruptors, it's really. If the goal is to expand coverage, which I think we all agree, then I would say absolutely, the more. [47:25] JD: Josh, come on. I'm not. I'm not trying to be an antagonist. That's not their goal. Their goal is to make money. That's why their venture capital. [47:33] Justin: Everybody's goal is to make money. If your goal isn't to make money and that. That's the challenge with these firms that are venture backed is at some point, profit is the oxygen that makes your business breathe and survive. And when you're using artificial oxygen, I. E. Investment, at some point, when that's taken away, if you don't have profit, you're doomed. And I think that's. I think that's the real. And this goes back down to price unless you go. [48:09] JD: Unless you go public and you keep the narrative alive and people believe in your billion dollar value. [48:13] Justin: So. So look at the ri. Look at the performance of the RIAs. Who's like. Like a focus, like company art, like [48:20] JD: advice you want to drink for. Josh's registered investment advisor that have gone. [48:29] Justin: Is not a pretty thing with some of. There's been a couple RIAs in the past who've gone. Sorry, registered investment break up. [48:36] JD: Devin, [48:38] Justin: I just say it one more time, Devin. [48:40] Chad Parks: All right. [48:40] Justin: Just for you, one more time. [48:42] JD: Thank you. Yeah, yeah, keep it coming. [48:45] Justin: Like, is there really gonna be. Are the public markets going to be super interested in a record keeper as a gosh entity. [48:54] JD: Why, why wouldn't they? If the smart venture capital people believe this pitch, why wouldn't. The capital people are not permanent capital. [49:03] Justin: They just want. It's not. [49:05] JD: Let me finish. To walk into that investor room and tell them I'm jumping on their side now. The disruptors. To tell them in five or seven quick years that we're going to play right alongside Fidelity in. In the 401k space. Must have had everyone drooling in that room. I mean, imagine the possibilities that could happen. You can't do that. These Wall street companies are hundreds of years old. It's taken them decades upon decades to get where they are. And then here are these companies now. Let's make a real clear distinction between Guideline and Human Interest Success and Fidelity Guideline, Human Interest are still playing with tiny little fucking plans, right? I mean, they don't have the assets under management that these firms have, but [49:51] Justin: with a single product line. [49:53] JD: Right? Well, fair enough. [49:54] Justin: I mean, if you look at what, you know, stripe with Stripe, if you know Stripe. Stripe kind of runs the Internet of every startup. I mean, my app, like, our billing is done on top of stripe. [50:06] JD: Right. [50:06] Justin: Stripe was valued two years ago at like their last round at like $100 billion. If you guys listen to like the all in podcast they were just talking about. [50:14] JD: Yeah, I love that podcast. [50:15] Justin: It's a great. [50:15] JD: They, Those guys are awfully smug, though. But I love them. [50:18] Justin: They're super smug. But what they were saying is they think that down round for them to go to, to raise additional money is that they're going to. Their valuation is going to be 40% of what it was before. You talk about $60 billion of valuation gone. It's just a different time. I think if you looked at those VCs that invested at valuations in guideline years ago. [50:45] JD: I'll take that one. [50:46] Justin: I think if you, if you go back to them and you ask them and they would be honest with you around, like, are we glad we invested our capital at that valuation? I think they're gonna say, yep. Sorry, we didn't. [50:59] JD: If you look at Chad. Chad Parks. Yeah. Do you. [51:02] Chad Parks: Yeah. So I, I love. Let me, let me follow up on Josh saying. I love what he's saying there because I have one great example because this is where some of this might go. Everybody remembers the, the firm Zenefits. [51:12] JD: Yeah. [51:12] Chad Parks: Parker Conrad, remember, like, you know, wow, this whiz kid created this whole company who's going to modernize healthcare and, and streamline and automate all the processes for the businesses they work with. Andreessen Horowitz funded them with $500 million to start. So. Okay, and at what valuation? Obviously already unicorn, even out the gate. They went up, they went up, they went down, they went down, they imploded. And the last I heard, the remnants of the company was sold to TriNet for $250 million. Okay. So even that's a lot of money, but, you know, from these, you know, lofty valuations. Yeah. And so, you know, it's like I said, it's a game. And one other thing about what Josh said I think is really awesome. I love that the profit is oxygen. [51:57] JD: Right. [51:57] Chad Parks: And you know, at some point, yes, you're on artificial oxygen or you need to get to your own source of oxygen. And I think that that has been lost on a lot of them, you know, And I'll use this opportunity to say in my own case, that is a very important focus for us. We have been profitable in the past. We have deficits spent on purpose to build the software platform and we had outside capital to do so. But then the deal in exchange was now get back to profitability. Right? We need to see this pay off. You need to be the good old fashioned business as well. [52:27] JD: You've been running a real, you've been running a real business for 20 plus years. And I get it at times you're going to invest and put yourself one step back to take two steps forward. Like that's just good, smart business. Very different from this Silicon Valley venture capital world that, you know, the surfer in me is just not familiar with. I don't, I don't walk in there in their, you know, in their little genre. I don't understand it. And so, you know, it bothers me a little bit when you're coming in and you're with my industry and at the same time you don't have lungs that actually breathe your own air. You're on some type of device that helps you breathe. So Josh. And so you're kind of up the sand lot at the same time that you're, you're coming into play, you know, And I don't want you to it up and then leave us like Zenefits and you go under and you cause all this chaos in your wake. Oh yeah, that's where I get, that's where I get a little upset. And someone mentioned the chat bar earlier. You're driving down fees with your process too. So please, please don't drive down fees in our industry when you're not yet profitable and then you fail and don't work and you our whole industry by doing that seems a little crazy. I want to play a little game and we'll come back to this. I'm gonna call. It's not a game. I got some voicemails from some people. Chat bar. What? Your ears perk up here. Okay. Get your volume nice and loud so you can listen to this. I had three people call me. They left a message after the beep and I want to share it with you all today. So let me change my speaker here to this and let me change this. [54:08] Justin: Devin's like a mime. [54:10] JD: We see this. Jim is out of pocket. Let's try this and see if this works. I can't see you all when I go to this, so I apologize. I got to go. Go play it. Here we go. These are legit voicemails. What's that? These are legit too. Well, you guys listen in chat bar. Let me know if you guess in the Chat bar? Who these people are that. That called me. Okay, here we go. Hello, jd, this is Fred. I am sorry to have to call you like this, but I thought understanding when I had the restraining order, the. You promised to stop coming around our house and property. Well, it turns out that my wife saw you the other day picking through our garbage cans again, and she asked pictures to back up her claim. Look, I appreciate your excitement and passion for my career and personal brand, but this is my last warning. You need to stay away from our property and keep out of our trash cans. Oops. Okay, that's the first one. Let me play another one. We got. So I'm a fan of the show, apparently. [55:20] Justin: Hey, y'. [55:21] Chad Parks: All. [55:21] JD: I heard you the other day asking for some honest criticism of the show. [55:24] Chad Parks: Well, here it is. [55:26] JD: Does anyone know who this is? Let us know in the chat bar. [55:28] Chad Parks: You guys used to be great. You were educational, funny, and really tackled some valuable topics. [55:34] JD: But lately, I'm reckoning you all are like hog and mud that has forgotten [55:38] Chad Parks: where its pen is. [55:40] JD: I mean, Brandon has basically been phoning it in for months. Silent Justin isn't worth two skinny chickens and a pile of manure. JB has a serious drinking problem. [55:50] Chad Parks: And Rogue guy, well, my Lord, that [55:52] JD: man is just plain nuts. My advice would be more of the nerdy Chad guy. Or maybe you all should just close up shop. See ya. [55:59] Chad Parks: Hashtag 401k. [56:01] JD: Lady, we got one more. It's a quick one. One more. See, you can guess who this is. Why he may introduce himself. [56:08] Chad Parks: Hello, jd, it's Nevin. [56:10] JD: I need you to not tell Fred [56:11] Chad Parks: that it was me that gave you his home address. [56:14] JD: That would be [56:17] Chad Parks: between us. And can you stay out of his trash, you little weirdo? [56:22] JD: Can you stay out of his trash, you little weirdo? I couldn't see the chat bar through that whole thing. What does everyone think of these three calls? This is. This is artificial intelligence with a little help from my friend. We copied their voices. I wrote the text, and you just. Those were not them. They. We made that on. I'm probably gonna get sued for it, but we made that on the Internet. And then I wrote the. Isn't that funny? Isn't that weird? Isn't that cool? No way. Yes. [56:54] Justin: So you said I wasn't worth two [56:55] JD: chickens or I was a pile of. Or something like that. I wrote those. [56:58] Chad Parks: That's great. City chickens. [57:02] Justin: So, for advisors, listen, here's what you do. Your most hated competitor, you find out who their clients are. You do that, you leave a client and Tell their client they're fired. And then you come in, then you cut, you come in to like clean up. [57:21] JD: All right, I had some help. Tony Davis helped me do that. And Tony Davis actually did one of my own voice and I couldn't tell the difference. I literally thought I was listening to myself speak. So. So by the way, it's that technology. It's as bad as it is right now. It's just going to get better and better and better. So I think I can have a lot of fun with it for the show. I don't know how else it's legally used, but we could do some great stuff on the show with that. But Fred, Nevin, Jeannie, I didn't have time to ask you for your approval. I'm sure you're fine with that. We told everyone it wasn't you. Come on, relax. Don't sue me. Okay, let's, let's go to one last topic and we're gonna push past the hour but we won't have an after show. So we'll just go past it a little bit here. Someone wanted me to ask this of you, Chad. Proprietary record keeper technology being leased to other record keepers. And we talked about this on the last show. But like your deal with Principle simply vest Wells doing a deal with JP Morgan. I think we recently saw like Smart had come into the marketplace to like record keep, but now they're somehow kind of just like gonna use their technology with Transamerica on different things. So we're kind of in this weird world that again, this old fashioned third party administrator isn't used to. Chad Parks, will you do more of these types of deals that you did with principal and. Or do you see this as a, as a trend that will continue in our industry with others of your peers doing this type of stuff? [59:01] Chad Parks: Yeah. So I put it into a couple categories because we've definitely explored this at length. And the first way to think about it is business process outsourcing. I won't say the three letters, but you know what that stands for, right? No, I, which, okay, I'm not saying it so. And that means, you know, that let me do everything for you. And you know you can still participate in the process with your brand, with your messaging, your marketing, with your investments [59:36] JD: that's dependent upon that you created something that they did not create. And to create it would be to difficult either. [59:47] Chad Parks: Difficult, timely, expensive, frustrating. We've seen many organizations try. That's, that's the biggest argument we usually get like, well, why should I outsource it to you, I'll just build it myself. Well, we're still waiting to see all those who have built it themselves to see where they are with it. Right. It's just. Don't fool themselves. Right. It's job protection for those people who are saying no. And then the. The other version of this, which you were getting to a little bit here, would be the software as a service model, which is truly licensing the software to have somebody else run it in their own shop. And that's a whole different animal. You know, that requires different support infrastructure, that requires different documentation, that requires different training. And I. In my very simple metaphor here, it's either you are going to take an Uber, which is the business process outsource model, or you're going to rent a car. And that's the software as a service model. And so, yeah, you got to put [1:00:39] JD: the gas in it and drive. [1:00:41] Chad Parks: Exactly. Yeah. And you got to know how to use it. You know, you have the keys. [1:00:46] JD: I think where the outside kind of dumb world gets shocked by this, Chad, and I love your insights here, is like, we just kind of look back in and go, like, but wait a second, like, y' all are competitors. Like, this is one record keeper working with a. With another record keeper. That's why it's so shocking to all of us. And so if I close my eyes and imagine a world where all of a sudden all these competitors are, like, partnering on different things, my head starts spinning. Like, is this a world I might live in? [1:01:17] Chad Parks: Well, you know, I think David Patrick of Schwab, a long, long time ago coined the phrase coopetition. Right? So we are. We're. We're competition, but we're cooperating in the sense. Because again, what we said earlier, this addressable market is so huge, you know, you gotta kind of leverage everybody's resources to be able to take advantage of it. These legacy infrastructure that these other companies have can't be retooled. They can't find a way to profitably serve this end of the market. So if it means partnering in order to do so to fill a product gap that they might have, then they're willing to do it. And our value proposition to folks like that, like principal, they still get to put their investments in. It's their brand. It's, you know, private, labeled. They market and sell it. And then we, you know, do everything else. And so. And. And then, you know, they. And I. I'll say this generically, not specifically regarding principal, but generically, firms find themselves in this position usually are Losing money on these plans. There is a report that I can't name sources, but has been said that 80% of these large companies, even though they won't admit it, they admitted in private that they're losing money on these plans. So how do you take a loss and turn it into a profit? How do you give yourself room to grow? And you do it by parking it with someone like me who's got the better mousetrap and someone like Vespo, someone like guidelines. I'm like human interests. So. And then, I mean, it's not unheard of. [1:02:39] Justin: And then you focus on distribution. I mean, it's funny, jd, you were talking about it earlier in the, in the show around some of these record keepers where 100 basis points, the way they price it, you know, they've got cost. They're not generating revenue until, what, profit till five, seven years, whatever that is. [1:02:57] Chad Parks: Yeah. [1:02:57] Justin: What they can do is focus on distribution, essentially take that cost, right. To surf, serve off. And just what Chad said, you can take a loss. [1:03:08] JD: And Chad, for you, I guess this makes sense to me. You create something, you invent, you build something that's really cool and efficient, and then you have a choice, right? Either I use it all for myself and try to take ubiquity to new heights, or, yeah, I sell this shit to a bunch of people and, you know, and maybe the latter is the smarter businessman. [1:03:32] Chad Parks: All right, So I literally had that epiphany. I was in our engineer's office in Tucson, Arizona. This was probably about a year before we're going to launch, and we've been a couple of years in the development of it. And they're showing me where we're at. They're showing me the system they're talking through where we, you know, how everything's coming together. I literally. The thing had the new car smell. Okay. It was like, oh, this is going to be so fired up about it. [1:03:53] JD: Yeah. [1:03:54] Chad Parks: And I. And I was like, and I've spent tens of millions of dollars on this thing. And, yeah, I mean, like, where's the return for me? I got to sell a shitload of plans myself to pay for that. Or I can go and identify other institutions who probably have the same problem and would be willing to use it and pay me to use it. And so, yeah, that was exactly the decision. I remember I called up our guy and I said, you know, I think we've got a new business model here. [1:04:19] JD: So it's funny, David, Chad is your biggest. [1:04:22] Justin: Would you say your biggest challenge with where you Are. Is probably, is probably distribution always. [1:04:27] Chad Parks: That's for all of us. Right. I mean. [1:04:29] Justin: And that's what you get from. [1:04:31] Chad Parks: Is distribution proving your point. Very much so. [1:04:34] Justin: Right. Yeah. [1:04:35] Chad Parks: I have a very efficient system. I have great economies of scale. I know almost to a T what my, you know, where my incremental costs will be and I know how this thing can grow. Absolutely. You just bring more to me. And that's what my biggest challenge is. All of our biggest challenges. Right. It's a highly fragmented. Even though we talk big numbers, 5 million businesses. Oh, it's great. Yeah. Well, that's a lot of. I think somebody here in the, in the thing was saying it's all breadcrumbs, but it kind of is. You know, it's hard to go out and get them. It's hard to bring them together. It's hard to get their attention. There's so much inertia out there in terms of just complacency. And even with now huge tax incentives, even with mandates, these states have. Something has to give here that we have to get into the psyche of the small business owner and say these things are available to you. And not only are they available, they're not that complicated. And not only they're not that complicated, for God's sakes, they're almost basically free for three years now. So what are you waiting for? [1:05:27] JD: You know, and you just repeated the, the guideline human interest sales mantra right there. So yeah, you're on it. That's, that's, that's it. There's a, there's an honest question from David K. In the chat bar is. And this is the hater one. But, you know, why can Chad do. How can Chad do what a major record keeper can't through just more agile. I think I'd like to talk about the tech a little bit. I heard Aaron Shoom a while ago talk about how legacy record keepers are these huge Titanic ships and how Veswell is this little speedboat that can run circles around them. And it kind of didn't register with me. Like, I just thought it was kind of a sales pitch. But I started to pay more attention to this over the last few years and it is quite shocking when you, when you finally like pay attention. And I'm working with Voya, Hancock, Transamerica, these different companies, and, and I need to get something change in their system and the type of form they send my way, like the Excel spreadsheet that I need to fill out looks like it's from 1993. And then I, I start to realize that their systems are very archaic and, and I apologize for my lack of vernacular here, but you know, just code on top of code on top of code and stuff. [1:06:49] Chad Parks: Yeah. [1:06:50] JD: And so there is a lot of truth to the fact that building something, developing something today with, for, you know, I don't know, again, the terminologies, but like stacking on technology, you can build things where you don't up something in the beginning and you gotta go all the way back and fix the code that's up the code on top of it. And that's a big deal. And so I guess my question to you, Chad, is there's a lot of truth to that, right? That the old coding and the old systems, even, even Omni and Relias are looking to unveil a new product in the next five years or something. Right? To this point. [1:07:33] Chad Parks: No, it's absolutely true. You know, this, the code stack, how it. Okay, anybody from the Midwest, anybody know what a tractor pull is? [1:07:40] JD: Chad would if he was here, unfortunately. [1:07:42] Chad Parks: Okay, so the tractor pull is this, this kind of thing that those folks in the Midwest love to do where there's a tractor in the mud and it's got a sled on the back and the sled slowly brings this weight up the top of the sled so that it will bog down the tractor to the point where it can't move forward anymore. The game and the challenge is how far which tractor can go faster and farther before it gets bogged down and can't move anymore. That's basically what's happening in the software with his legacy record keepers. That software is going to bog them down to the point they can't move forward anymore. And what do you do? You just scrap and start over. That's almost an impossibility. You've invested. I know, like for example, tia, you know, they've invested hundreds and hundreds of millions of dollars in their software platform. [1:08:20] JD: But then Omni Instance, teachers institute of something. [1:08:23] Chad Parks: Oh my God, fine, I'll do it. But you know, so they, you know, there's no way out in some cases. So sometimes the best way is just to start over. In my own instance, we are on our fourth generation platform. What that means is when I started, I built some proprietary web interfaces and some systems that I licensed. Relias, sorry, Quantec. Anybody remember Quantech? [1:08:49] JD: Yeah, sure. [1:08:50] Chad Parks: And that was my. So I had the car and the engine model. I built the car and I licensed the engine. And it was Quantech, my second generation. I went to invest link. So I Upgraded my car and I changed the engine to invest link. My third generation, I upgraded my car with my own stuff and I licensed relias. When it came time for my fourth generation, instead of building on top of what I'd already built on, I took all those learning of all the systems and all the processes. [1:09:16] JD: About what year is this? [1:09:17] Chad Parks: This 2012. So yeah, around 2012. And I said, you know, I'm not putting more on top of more. Like you just said, it's time to start over. So let's take all these learnings, build from the ground up, build a system. Which, and I'll tell you this, I don't mind sharing this with you guys. We did an audit of how many systems we had cobbled together to make this work. We had 55, zero different disparate systems, bubble gum together. It was like Chitty Chitty Bang Bang, right? It was ugly, but it flew. And it was just like, this can't be sustainable. So we had to go ground up, take all of our learnings, consolidated into a new platform. And I was still looking for the engine. I was out in market. I was like, hey, I don't, I don't really know much about the actual engine that we have to use here. Can I go license one? We talked to the regular, you know, forget relias. That was done. We're off of that. No, Omni SRT was basically, oh, Schwab Retirement Technologies. All right, fine. [1:10:11] JD: This is basically, this is just same, same, same kind of stuff. [1:10:15] Chad Parks: Then there's Sapiens and Retirement Revolution. And we looked everywhere, we looked at dst, which is a name, not, not an acronym. And we. [1:10:23] JD: I challenge you on that one. [1:10:25] Chad Parks: Yeah, I gotta challenge that too. Anybody tell me what it means, I'll [1:10:27] JD: give you some research. Do some research on that one. It's something, okay. These, I guarantee you, but go on. [1:10:36] Chad Parks: And so all these systems, just like you said, you know, underneath it all was some legacy hardware, legacy code. I mean, for gosh sakes, one of them had a mainframe still in there, right? I'm like, this can't be. And so it really forced me to say it doesn't exist and I'm going to have to build the complete package myself. And I went forward reluctantly to do it. And then we hired some folks who were subject matter experts who knew the guts of record keeping. Like, what are the gotchas? If you could change what you had built. In other words, some folks from RELIAS came over, if you could do it again, if you could change it, what Would you do? And they came and they consulted and we built it and, and you know, it was, it was quite a lift and we launched and I think everybody knows we, we really shot ourselves in the foot there for about a year because we had some difficulty with the conversion, gave ourselves a black eye. But we worked through it and now every year thereafter we've just been consistent, constantly making it better. And what I said earlier about the cost of technology, you know, with Amazon Web Services, with cloud hosting, with all these tools available to me, my costs aren't going up like this like they were in the past. My costs are leveling or actually declining in some cases for the ability to do this. So we're at that inflection point where, you know, software is eating the world, which I think was also a Marc Andreessen quote. And. But you have to stay in front of it, you know, doesn't mean that my system is not going to ever get old and bogged down. You know, I wonder. [1:12:04] JD: Go ahead, Josh. [1:12:05] Justin: I was going to say adding one element to this, the, the tech, the technology piece. Now being in this and myself a lot of cases, that's the easy part. I think what you also have to understand is the incentive with these really large companies where their goal isn't to do great thing like to, to, to hit home runs. What they want to do is not fumble inside the five yard line. [1:12:38] Chad Parks: I've seen even baseball or football, which one are we talking about? [1:12:43] Justin: But I, I've even seen this with what I do now and with some of the really large broker dealers and, and firms is you have executive leadership that, you know, they, they don't want to take the, the. [1:13:00] JD: Yeah, it's a scary, the risk. [1:13:02] Justin: They don't want to take the risk of change. And so it's, it's both a technology piece in here, but it's also the inertia around leadership that says, you know what, it's working. I don't want to put myself, you know, on the line here or I just don't have the, the will or the desire to push something forward. It might be better, but it's working. [1:13:26] JD: I'm good, it's working. Until, until I'm just imagining here, but companies like Veswell or Human Interest all, they'll throw Chaz Co. In their ubiquity, whatever. I've got the stack technology. Until they start being able to give advisors things that they can't get from Voya and Fidelity and Nationwide and Principal and Empower. And if that happens, I mean, I'M just guessing here, but you could see the tide turn really quickly. I mean, if, you know, we're in this world of wellness and financial planning and all these other kind of revenue sources. Imagine if the new Guard could add on things, snap on things, put things in, and the Voyas cannot. I think that could change quickly. And Voya could be sitting there going, holy shit. Why didn't we make the change we needed to make? You look like you had a thought, Chad. [1:14:18] Chad Parks: Well, I was laughing at Will's comment there on what. But let's. Let's compare this industry to so many others that we have seen come and go. It's very easy to do, right? Where's Blockbuster? Yeah, right. They didn't adapt right. Hey, VHS is here forever. Oh, we got DVDs now, but that's okay. People still going to walk into my store and pick it up. You know, I'm gonna go on. You guys know them all, right? The Kodak. And you know how they had the digital camera, and they're like, we're not going to sell this digital camera because it'll eat into our film business. [1:14:52] JD: Right? You could say tax. [1:14:53] Chad Parks: That was. That's a true story. I could say what? [1:14:56] JD: You could say taxi cabs, too. I mean, there's a lot of industries. [1:15:01] Justin: Here's what happens at that point. They're capitalized, and that's when they say, you know what? [1:15:07] Chad Parks: We're late. [1:15:08] Justin: And Microsoft has been great at this. They don't invent many markets, but they come in and they've got capital. Like, you could wind up big boys say, you know what? We're going to Human Interest now, and we're going to buy them and. Or we're going to come to Ubiquity, and they're going to, you know, give you a gazillion dollars and you say, you know what? Okay, if it come. If it comes. [1:15:36] Chad Parks: I mean, that is an option, right? I mean, I can't tell you how many times in the last 10 years when someone's asked me, like, so when is so and so gonna buy you? I'm like, I can't speak to that. I don't know, you know, if they wanted that enough. [1:15:47] JD: Hey, Parks, we gotta. We gotta end this for everyone. But what is your number, bro? Like, you gotta sell this thing. Like, [1:15:57] Chad Parks: I think a gazillion is good. [1:16:01] JD: Come on, J.D. [1:16:03] Chad Parks: i cannot answer that question. It moves every day. [1:16:07] JD: $1 million. [1:16:09] Chad Parks: There you go. [1:16:10] JD: What he said, I'll buy it, Chad. [1:16:13] Justin: Let's talk after this. For a million Bucks. I'll, I'll take it. [1:16:16] Chad Parks: No, no, no, no. Not a million. Definitely not a million. [1:16:19] JD: But I won't. Okay, let's do our chapar champ. Because we have to. There was so much more I want to talk about. I can't. I mean, maybe you're gonna have people like you kind of come back on a more regular basis. Yeah, there's a lot more that I want to unpack here. And I do think the reason why I wanted to have this subject matter tonight because we kind of stayed in a genre, right. Is I think for the first time and I'm slow to learn here, but I actually do feel like our industry is on the precipice of some type of change. And if I'm a financial advisor, hell, if I'm a third party administrator, if I'm whomever, I need to open my eyes to this and kind of bob and weave with it. And so I just think things are changing. I think it's happening at a pretty rapid pace and I'm excited about it. I'm not scared of it. I'm actually really excited about it. And I think that the people that see it coming and kind of align their business model with it and take advantage of some of these new changes can really flourish in this environment. I mean, look at you. It's so not to plug you, but you developed, you know, a solution, a technology that's doing good things. I mean, this isn't something you would have done five, 10 years ago. You're doing that. I mean, that's part of the story of change I'm talking about. I'm finally tipping, tipping my cap to these disruptors. I talked a lot of about them for a long time and now I'm friends with these guys and I'm letting, telling them, patting them on the back, not that they need my pat on the back, but tell them, hey, you guys are, you're doing it. You know, I like to see that they're starting to pay more attention to the advisor. That's another subject we didn't get into tonight that I would have loved to is, is like how important is the advisor in this market and can we do micro plans without them? And then they grow up and then the virus can take up on when they're 1 million, 2 million. I never, I never would have thought I would say that. But I'm starting to warm up to that idea a little bit anyways. Yeah, lots of things. Last week's shepherd champion was none other than Sherry Fitz. She told everyone that she loves Red Vines or whatever the it is. So I sent her a whole bunch of Red Vines. Okay. Box checked. We did that. She got. It was delivered to her house. Tonight we're gonna do chapter champion again. So, Justin, your vote for chopper champion tonight. Tonight. Oh, this is tough. [1:18:40] Chad Parks: Everyone was good, but I gotta go with. [1:18:43] Justin: Oh, man. [1:18:45] Chad Parks: Sorry there's some of you guys, but, [1:18:47] JD: Justin, we do this at every show. At the end, you've been. I know, but, dude, Webby was good, Hack was good, Sam's was good, but I gotta go. [1:18:55] Chad Parks: Kush. [1:18:56] JD: Oh, Kush. He's already got a book coming. I think it's. So are you sticking with Kush 100. I'll drink for your last name. Nice. Nice vote. Josh. Joshua. I appreciate that one, Chad. Your vote for chat bar champion. [1:19:14] Chad Parks: I mean, I think it was. You guys call him Hack. Is it Will Hackler? He really stood out. [1:19:19] JD: Yeah, yeah, he looks great in shorts. By the way, your vote for chatbot champion. Samson got me Sampa a couple times. Sam's fired at me a couple times. I think that works. My vote was probably going to be for Kush. I'm going to see Kush. Kush. Me and you, buddy. I'm gonna be at the retirement plan advisor group conference on Sunday night to watch Vince Giovannazo. I don't know if that's how you say his last name. Are you crashing that thing? Are you? Actually, no, bro. Those gave me a pass. Those crazy psychopaths. They literally gave me a pass. Allow me to legally run around there. So I'm. I'll be chilling at the Ritz coming up in a few days, rubbing shoulders with those guys. So if you're gonna be at that, don't say hi to me, okay? Don't come say hi to me unless you're Kush. Stay the away from me. All right, so Kush is the vote, and this is how it works. Kush, Hackler, Samson, you know the drill. Ready, get set, go. You have to finish the following sentence. If you could take Nevin and Fred, God bless them, those icons, on a vacation with you, all expenses paid, just you and the two of them. Where would you take them and why? Or where? You know, be creative. All right, look in the chat bar for those people. We're looking for Kush, Samson, and Hackler's response. And you don't have to be fast, but sometimes speed helps. And then we vote for a winner. Guys, they're taking their time. They're thinking about this. If I was. If I was going to take Nevin and Fred, it would be to like some, you know, nudes are allowed island. Where we could just bathe naked together. Sir, you just take him right to a conference. Didn't he retire and just go straight to a conference? Yeah. Never retired and went straight to a conference. He's full of Devin. [1:21:33] Justin: Better late than never, buddy. You're coming on strong at the end here. I thought you were. [1:21:37] Chad Parks: I thought you were mute. [1:21:38] JD: Listen. [1:21:39] Justin: But you can talk. [1:21:40] JD: Me too. It's great to hear you do this to somebody else. Let's go. Hack cushion. We need some. We need some responses here. At a certain point, I'm going to flag you for a delay. [1:21:51] Chad Parks: Well, so while we're waiting, I want to give a shout out to Marco Brown, who is attending tonight. That was a blast from the past. Hope you're doing well, Marco. And I was also promised to mention Ted H. That's all I'll say. He's watching or not. Ted H. I did it. [1:22:06] JD: I would take Fred Kushner this Kushner. I would take Fred to the police station for a restraining order against jd. And Nevin would be the witness here, Right? Yeah. Hackler tubing down the a tadish river because hopefully one wouldn't make it back and I could take over. That's dark. And I thought he was gonna say Epstein Island. I'm taking them to JD's house to destroy his trash cans. Let's be clear. I don't with Fred's trash cans. I just like to see what's inside of them. Any clear winner? Justin, I'm gonna let you pick. I. I got one going with my original vote. [1:22:53] Chad Parks: It's got to be Kush. [1:22:53] JD: Can't go away from that. Kush is the winner. Okay, Kush. Hey, maybe I'll. Maybe we'll give you your chat or champion prize at the Ritz. I'll buy you something in Laguna Niguel. Congratulations, Kush. Chad Parks. Thank you for coming back and spending time with us. We really do appreciate it. Our audience appreciates it. It's really good to. We don't all get to hear the perspective of people like you that have built something to that level. You are. You are one man. I know, with a team alongside you. But for you to have 10,000 plans and build your own record keeper and have the brand and the name and be in it for two decades, to me is far more impressive than any suit and ties at Fidelity or Voya or Empower. Like, you're the real rock star in that. So hats off to you. Congratulations. And, Mr. Ito, you're a little. That's what you are. I haven't seen you. And the audience love you. [1:23:58] Chad Parks: On the other side of that, you [1:24:00] JD: can help save the show. That's how you. Peace out, everybody. Baby. Thanks, chad. Thanks, josh. Thanks, justin. Yeah. [1:24:14] Chad Parks: Thanks, guys. [1:24:20] Justin: Devin. [1:24:21] JD: Get used to this side of the screen, Bro, I couldn't even speak. If you like. If you're not into yoga if you have half a brain if you'd like making love at midnight in the dunes on the cake Then I'm the love that you've looked for Write to me and escape.