Blog: We saw the need—and responded to it

October 11, 2021

A/AText size:AAA
 
Steve Holman

Steve Holman

Vanguard Retirement Plan Access™ (VRPA) celebrates 10 years of service

In 2011—which wasn't so long ago—the defined contribution (DC) plan landscape was brimming with myriad plan options from a host of major players. And while it was a blessing to have the freedom to select from a diverse field of reputable plan administrators, there was still a huge swath of Americans engaged in the small-business marketplace—teachers, construction workers, medical professionals, small-shop personnel, and the like—whose employers faced obstacles in offering them a quality 401(k) or similar retirement plan.

And so Vanguard resolved that it was time to help change the narrative.

Recognizing that small businesses make up nearly 98% of U.S. companies, and that 95% of retirement plans manage total assets of less than $10 million, we committed to giving underserved investors access to more options for achieving financial well-being.1 The small-business segment offered us the opportunity to fulfill our overarching mission to give participants the best chance for retirement success. And it wasn't enough to give them a basic by-the-numbers plan. We believe small businesses and their employees should have access to the same low-cost, high-quality plans as larger plan sponsors.

The experiment

By entering the small-plan marketplace and making our world-class solutions available to a wider pool of investors, Vanguard acknowledged the needs of small-business owners who sought to make that connection with us—for the sake of their employees' future and the growth of their own business. Without a doubt, this was a bold new arena we were entering—an experiment we were unsure would be successful.

So we—Vanguard Retirement Plan Access—signed on to service small businesses, ranging from start-ups to firms with up to $20 million in retirement assets. And to ensure we would properly fulfill the unique needs of this segment, we partnered with Ascensus, an award-winning recordkeeping firm specializing in small businesses, to provide the day-to-day administration of all VRPA plans.2

Competitive prices plus quality investments and reliable recordkeeping services combined to create the VRPA experiment. And we believe these ingredients set the stage for extraordinary opportunities for positive outcomes.

The disruption

We were eager to shake up the expensive and limited service models that had long impeded the retirement dreams of many Americans. This meant delivering a lower-cost option to help support participant outcomes.3 What's more, it was critical for us to drive fee simplicity and transparency.

And when you undertake disruption of long-held business practices, it helps to partner with a recordkeeper with the expertise and technology to get the job done. That's why we looked to Ascensus—the nation's largest independent recordkeeping services provider—to help us leverage the strengths of both organizations.4

quote

The innovation

To solidify our space in the small-business arena, we understood that we would need to ramp up our focus on innovation. Kicking off with the launch of VRPA, we delivered what I viewed as a groundbreaking take on fee transparency. We offered a simplified pricing model based solely on the number of participants in a plan, which results in meaningful savings to businesses as plan assets grow—compared with traditional asset-based fees. Furthermore, we deployed the latest technology to elevate the total plan sponsor and participant experience. And, of course, we leveraged existing Vanguard retirement thought leadership on plan design and participant education, as well as a wealth of benchmarking data and analysis.

As our offer got stronger and more popular, we expanded our capacity in 2020 to service retirement plans with up to $50 million in assets. What's more, we've made meaningful progress on several of our top priorities—expanding payroll integration, enhancing the participant mobile site, and offering access to Vanguard stable value funds. And we continue to push for more advanced, differentiated capabilities designed to ease plan administrative burdens for plan administrators and improve participant outcomes.

The gratitude

VRPA didn't start with me—nor will it end with me. The proverbial soil on which I stand, as head of VRPA, was nourished by those with the foresight, humility, business savvy, and benevolence to anchor, and then advance, a smart business model guided by Vanguard's customer-centric blueprint.

My extraordinary predecessors, a diverse lineup of powerful women—Kathy Fuertes, Jing Wang, and Crystal Hardie Langston—each took what started as an experiment and then proceeded to blow up the traditional service model, bringing the "Vanguard Effect"—lower costs for all investors—to small businesses throughout America.5

Fast-forward to the present—and against the ominous background of the pandemic. Our clients have weathered the storm and stayed on the path to financial well-being. VRPA plan design features combined with Vanguard thought leadership encouraged participants not to react to short-term volatility and to sustain their long-term investment strategies. With all the uncertainty and volatility that VRPA investors had to contend with in 2020, only 2% of our participants made use of their withdrawal feature. The overwhelming majority—a whopping 98%—trusted our guidance and preserved their retirement assets.6

Here are some more reasons I am thankful to be a part of VRPA's legacy:

  • As of August 13, 2021, VRPA had $58.5 billion in assets under management.
  • We service some 18,000 plans, supporting 900,000 participants—inclusive of our partnership with Ascensus and Newport, another nationally recognized retirement services provider.7
  • We boast a 98% plan retention rate.8
  • We deliver best-in-class service among DC providers (small-business market).9

As we proudly celebrate the 10th anniversary of Vanguard Retirement Plan Access, I am even more convinced that the actions that got us here—experiment, disrupt, and innovate—will serve as our mantra going forward. As successful as we've been in our first decade, we still have the capacity to serve more small-business owners across the country. We know that complacency in all its forms has no place at Vanguard because our clients' standards for financial well-being are always evolving. We are wholeheartedly committed to continuing to take innovative measures on behalf of our clients to deliver the value they deserve and help them realize the future they've worked so hard to attain.

 

1 Sources: U.S. Department of Labor, Private Pension Plan Bulletin Historical Tables and Graphs, January 2021; and Investment Company Institute, Quarterly Retirement Market Data, Fourth Quarter 2020, March 2021.2 Source: Ascensus Receives Top Honors from Retirement Plan Sponsors for Providing Best in Class Support, February 1, 2021 News Release, Ascensus, 2021. The Best in Class award addresses providers in segments up to $50 million in assets from the 2020 PLANSPONSOR Magazine Defined Contribution (DC) Survey.
3 Lower-costs mean investors can keep more of any returns they earn.
4 Source: www2.ascensus.com, Helping millions save for what matters, 2021 Ascensus, LLC.
5 The Vanguard Effect is a term coined by independent experts to describe the competitive pressure Vanguard's low costs have placed on other asset managers to lower expense ratios.
6Source: How America Saves 2021: Small Business Edition, 2021.
7 Source: bbb.org, Newport Group, Inc., Better Business Bureau, 2021.
8 Ascensus, Onboarding Client Satisfaction Survey, as of June 30, 2020. Excludes plan terminations and mergers and acquisitions).
9 PLANSPONSOR, 2020 Defined Contribution Survey, PLANSPONSOR Best in Class DC Providers (Small Market), addressing participant services, plan sponsor services, service teams and support, plan administration, and investment fees. January 2021.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • Retirement plan recordkeeping and administrative services are provided by The Vanguard Group, Inc. (VGI). VGI has entered into an agreement with Ascensus, LLC, to provide certain plan recordkeeping and administrative services on its behalf. Ascensus is not affiliated with Vanguard Marketing Corporation, The Vanguard Group, Inc., or any of its affiliates. Ascensus® is a registered trademark of Ascensus, LLC.