#WinnersOfWealthTech Ep 28: Aaron Schumm, Founder and CEO of Vestwell

“One of the core things I love the most is that every person who touches our platform is better off than without.”

— Aaron Schumm

This month’s Winners of Wealthtech interview is with Aaron Schumm, the Founder and CEO of Vestwell, an entirely new kind of digital retirement platform transforming the way plans are offered and administered — for the benefit of advisors, employers, and employees alike.

Prior to founding Vestwell, Aaron was a co-founder of FolioDynamix, a wealth management and advisory services company that powered $800 billion in assets for over 100,000 advisors. At FolioDynamix, which was sold to Envestnet in 2017, Aaron oversaw the strategy, revenue, marketing, customers and product. Aaron holds a B.S. degree in finance from the University of Illinois and an M.B.A. degree from Duke University, The Fuqua School of Business. He was named as one of 40-under-40 by InvestmentNews and WealthManagement.com’s “10 to Watch”.

I was inspired to start the Winners of Wealthtech series by one of my mentors, Tim Ferriss, who is a best-selling author, incredibly successful investor, entrepreneur, and podcaster. Actually, Tim doesn’t know that he’s one of my mentors, since we’ve never met. But his work and his writing have been a big influence on me, so I’m going to keep saying it until he tells me to stop. (By the way, I highly recommend Tim’s latest book, Tribe of Mentors, which you can buy online or even in a brick and mortar bookstore.)

The feedback on this series has been overwhelming! If you have a suggestion for someone you think I should interview, please send it to me at craig@ezragroup.co.

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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.

Topics Covered in this Episode

  • How Aaron got into the industry [00:54]
  • How he ended up at Northern Trust out of college [04:33]
  • The biggest thing Aaron got out of his experience at Fiserv [09:49]
  • What pushed him to move on from Fiserv and the opportunity he had going on there [11:35]
  • How the idea for Vestwell manifested itself [28:11]
  • Discussing how businesses are always more expensive than people expect, and how that causes businesses to fail [38:33]
  • What has become most important to Aaron in his personal life [41:13]
  • How he keeps his entrepreneurial spirit alive [45:13]
  • How Aaron identifies people who are a good fit for Vestwell [48:57]
  • Aaron discusses his morning routine and what he does during the first 60 to 90 minutes of the day to get things going [52:55]
  • Bad advice he has heard being shared within the industry [54:38]
  • Aaron’s favorite failure that he learned the most from [56:42]
  • His favorite books to gift, and why [59:55]
  • Aaron’s most recent app discovery that aids in efficiency [1:02:46]
  • What message he would you send to his 25-year-old self [1:04:31]

Companies & People Mentioned:

Here are a few of my interviews with previous Winners of Wealthtech:

wealth management consulting

Complete Episode Transcript:

Craig: And welcome to this episode of Winners of Wealthtech for the Wealth Management Today podcast. I’m joined for this episode by Aaron Schumm, the Founder and CEO of Vestwell. Aaron, welcome.

Aaron: Thank you Craig, it’s great to be here. I appreciate the opportunity.
Craig: I appreciate you being here. And congratulations on being this month’s Winner of Wealthtech.

Aaron: Thank you.

Craig: What I wanted to do was go back and talk about how you got into the industry. And one thing that was interesting when I was doing some research was that your father actually got you interested in investing in the stock market.

Aaron: He did yes, at a very young age. I remember vividly, I think it was in eighth grade when I set the course that I was going to go into finance and be a stockbroker. My dad is a retired carpenter, but he always had this affination for the markets. I remember all the time he’d come home from work and we’d be sitting at the dinner table, and he would talk about what was going on in the markets. I always found it fascinating, I enjoy the mathematical side of things, so that actually set my course in undergrad to go into finance with the idea that I was going to go into something. At that time it was brokerage, and then I quickly realized I didn’t want to be a stock broker, but still had this attraction towards the financial services side of the industry.

Craig: Isn’t it interesting how something gets introduced to you when you’re young, and some people seem to know what they want early. I was the same way with computers, but you knew in eighth grade that you wanted to get into finance.

Aaron: Yeah, for better or worse. It was interesting. Would I make the same choice now, who knows? But it’s been great to me so far.

Craig: Indeed, I think you’re doing pretty well if I could say so myself. So we’ve known each other for a while man, but I never knew you had a football scholarship?

Aaron: Yes, yes. I played a lot of sports growing up; soccer for five years, I quit that to play American football, baseball, track, basketball, volleyball. So I was kind of all over, hence why my joints are not what they used to be.

Craig: Yeah, join the club.

Aaron: I had this drive to go to college to play football, and not with the notion that I would ever go pro, but I wanted to play division one, I wanted to start, and I want to pay for college, because I was footing the bill for it anyway. That was my criteria, and I was lucky enough to obtain a scholarship. That quickly was lost after I blew out my knee my senior year in high school. But, all for the best.

Craig: Oh so you injured your knee in high school, not in college.

Aaron: Yeah. I had already made the acceptance to go to Kentucky, and then blew out my knee. Then they were at one of my games saying, “Hey, what happened here?” And after I kind of went through it, and back then it was far more risky to have knee surgery than it is these days. So anyway, it set the course and that’s how I ended up at University of Illinois, which is a great business school. And still I wanted to do finance. I wanted to go to a good business school, Illinois had a great business school at the time, they still do, and that was how the decision was made.

Craig: It’s crazy how those things happen. Like what if you hadn’t blown out your knee and you had gone to Kentucky, you might’ve done something totally different.

Aaron: Right? I’m sure it would have been fun. I mean, this was back when they had a solid team; Couch was playing there and yeah, it would’ve been fun. But if I were to rewind, I would probably stick with soccer. That’s probably the only sport I still play a little bit, a little easier these days than getting hit in a football game.

Craig: Yeah tell me about it, man. So when you graduated with your finance degree, how did you wind up at Northern Trust? That was your first job right, at Northern Trust?

Aaron: Yes, that was my first job out of undergrad. My internship was actually at a company called Everen Securities, if you remember them. They were a brokerage firm acquired by Wheat First and First Union and Wachovia and then Wells Fargo, that was kind of the lineage there. So that was actually my first unknowingly exposure to managed accounts, during my internship. After I graduated undergrad, I got a job at Northern Trust on the large corporate risk side of the equation, doing large corporate pension plan analysis and working with asset managers in that realm, with the likes of Lucent and Honeywell and Avaya, guys like that. So it was kind of interesting how it all has come full circle in my career, and I had zero idea it was going to happen like that; I didn’t know what I was doing.

Craig: Come on, you planned it that way.

Aaron: Yeah, right!

Grand Aspirations

Craig: You were at Northern Trust as a portfolio analyst and you said, “I’m going to start a company to automate all of this one day.”winners of wealthtech

Aaron: I had no idea what I was doing, it was funny. I worked there for two years, then I left there and came to New York City, with this grand aspiration of going to be an asset manager. I was studying for the CFA and started going down that path, and everyone I talked to in the asset management space said, you need to know this software program to be in this industry. And it was the managed accounts industry, and that software program was a program called APL, which at the time was owned by Security APL, then was acquired by CheckFree. CheckFree is now known by Fiserv.

Aaron: So CheckFree actually offered me a job when I first moved to New York City, a jobless kid just showing up saying I’m going to find something and make it work. And CheckFree was like listen, we’ll hire you, you’ll learn this program called APL. I became a product manager there, and that was how I first cut my teeth in the financial technology space. I had zero idea what I was doing, I was just this annoying kid who kept asking why all the time. And they were gracious and supportive and encouraged me to explore that. That curiosity is what drove me into this space and kept me here.

Craig: Yeah, that’s great. And another interesting circumstance how you got in at CheckFree, because CheckFree APL is the place where a lot of people came from. It was an epicenter for managed accounts at the time, and a lot of people in the industry who went on to big careers just like yourself came out of that CheckFree group.

Aaron: Yeah, they were a huge leader in the space and I forget what the market share was, but they had the vast majority of the space covered, like 70 or 80%. It was great. When I was there on the financial services arm that I was employed under it was relatively small, a couple hundred people at the time probably, so it was fun. It was a great culture. Cheryl Nash was there still running that side of the space. She was my first boss in the space and we’re still friends to this day, she was awesome. They just had a great culture that they created there and it was fun. So I became a product manager and started working on this idea, we called it multi-strategy portfolios but it actually became known in the industry is unified managed accounts. That was kind of my world that I got to help create, it was a lot of fun and became an industry staple these days.

Craig: It sure is. A lot of my businesses are implementing UMA programs and selecting UMA technology. It’s not as big as they thought it was going to be and it didn’t revolutionize the industry, but it certainly is a strong component of the managed account business.

Aaron: Yeah, absolutely. And I think about it now from the tech side of it and our underlying architecture or the way that tax slots were looked at and how tax efficiency was managed at scale, is still applied across anything in a taxable wealth management account today. Whether it’s in the construct of a formal UMA or not is up for argument, but the philosophy and how it’s actually treated still holds true, all the way back to what that was 17 years ago.

Craig: It was, yeah. Time flies. So what is one of the biggest things you got out of your experience at Fiserv, APL?

Aaron: I think to ask, “Why?” And not only from the context of, I can do this better, but putting yourself in someone’s shoes to figure out why things were done a certain way or approached a certain way. And oftentimes what I found was it was just generally accepted to be done a certain way, and there wasn’t a big drive for a lot of people to upset the apple cart and say, why would you map a security this way? Or why would you look at tax loss this way? What if you did it this way? And CheckFree was great, they just said that’s a great idea, here’s a couple of developers, go figure it out. So that was how my product team got formed, and that’s how it all came to be. But I learned a lot – you also learn what not to do, what works and what doesn’t work. And I think at any job and in any experience, I think that’s one of the big takeaways. I always encourage people at our company, especially the younger folks that are coming in, how to look at things. Just as much as you learn what to do you should also learn what not to do, and apply things differently.

Handshakes and Margaritas

Craig: That’s very good advice. So you’re at the peak of managed accounts, you’re at a company that’s growing leaps and bounds, has tremendous market share. You’re there for three and a half years or so, and then what happens? What pushes you and gets you to move on from that?

Aaron: I was in grad school at the time, I was getting my MBA at Duke and I was living in New York, and I was flying back and forth. My average day was up at 7:00, I’d leave the office about 11:00 PM and I would go home and do grad school work until about three or four in the morning, and then I would get up at 7:00 and do it all again. I did that every day, and it took its toll physically; I was just wiped out and got burnt out. There were some things I wanted to do at CheckFree. and I took it to my boss who ran all of the product groups over at CheckFree at the time, he came out of Placemark, Joe Mrak. And I took it to him and I said this is what I want to do, and if guys are on board great, if not I have to go do something else. Because I didn’t want to spin my wheels and not be productive, especially at that stage in my career; I had a lot that I wanted to accomplish. So Joe looked at me and he’s like, “I love it, but there’s no way they’re going to give you a budget to do this.” And I said got it, no problem, and we parted ways.

Craig: I can see you and Joe having that conversation.

Aaron: Yeah, Joe and I got along great. On my last day we were in a meeting out in Princeton, New Jersey, and after the meeting he and I went to a pub around the corner and had a beer, and we were sitting at the bar throwing ideas around about what the industry needs, literally drawing circles on bar napkins. And that was the impetus for our next company. I left and said this has been great, appreciate all the support over the years, and took off. I left, finished up my MBA, and I got a job at a company in London. I was just going to go over to London and kind of hit the reset button and try something different. I’d never lived outside of the US, so I thought let me go try it. I was 26 at the time. So I packed up my apartment, got my visa, and the phone rings and it was Joe. And he said, “Hey, you remember that idea we were drawing on the bar napkin? I think I got a company who’s going to back us to do it. Do you want to do this?” And I just said, no. I said I’m moving to London, I had boxed up my apartment, and he said let’s sit down and chat about it. And Joe can sell some stuff. He sold the idea to me, we sent it out.

Aaron: He had just landed at a company called Bisys, they were a fund administrator (that was acquired by Citi in 2007). They funded us like a newco and he convinced me to stay. He said, we’ll build out this managed account outsourcing business; it was the skeleton of what we had sketched out on that bar napkin. So we went to Bisys, we knew they were up for sale at the time; everyone was under the belief that they were going to go private. And we went over there and we built this business. We signed six major deals in six months, which is kind of unheard of in this space, enterprise deals. It was moving and we an awesome team, it was out in Columbus, Ohio. I was flying back and forth between there and New York. And then they were sold, our side was going to Citi Group and the other side was going to JC Flowers, the insurance side. During that process I was looking at a lot of vendors out in the space, because Bisys didn’t own any technology, we just integrated things. So I was looking at different solutions and trying to figure out how do we actually put together the best wealth management system? And one of the things we realized was we had APL running underneath, we had Vestmark running underneath, and we said we need to own the core of this from a processing side of the industry; if we don’t own the core, we’re not going to be able to drive it as far as we want and control the variables.

Aaron: So during that process, a gentleman who both Joe and I knew introduced us to his neighbor who had a small software company, they were like a body shop. I went in and I sat down with them, Joe was on the phone and I was in their office, and he showed me what they built. And it turns out they were this engine inside the fee-based brokerage side of Ameriprise, and he built this high scale engine. And I was like wow, this is cool. Then we started going into managed accounts and mutual fund wrap and wrap directive and all of those segments of the industry and started laying them out, like could you do this? Could you do this? Could you do this? And he said no; we could do it, I just don’t know how to do it. So we had dinner and we did a handshake deal. And basically the deal was, we’ll teach you the industry, we’ll teach you how to build this, we’ll design it for you, and then you take your team and you build it, and we’ll go build a huge company. And that was how FolioDynamix was created, over a handshake and margaritas.

Craig: Who was this guy?

Aaron: AJ Jadhav. So that was how FolioDynamix became to be; we started building this thing, and, it was super shaky. It was October 2007, perfect time to start a fintech company. We got things going and started building out what we wanted to do. Joe came on board towards the end of the year, or early 2008. We knew we were going to have to go raise some capital, and the market collapsed and we couldn’t get a meeting. The second you’d get a meeting and they would go, “You’re in financial what? No, not interested.” But we had complete conviction in it, we just have to get someone to write us a check to help go do it. So we were trying to get the wheels going on the tech side, and then also roll up an RIA into the business. We ended up pulling it off in August of 2008, Edison Venture Partners out in Edison, NJ wrote us a check and we got it going. That was our jumpstart into Folio, and then we were able to build that out. It was shaky and it was not easy; we failed a lot, to the point of near disaster a few times, but we were always able to pull it out and persevere. And we built a great business over the years with it.

Craig: Indeed. It was one of the top firms; everyone knew about you and you were in the mix in a lot of business.

Aaron: Yeah, there were a couple of deals that I think put us on the map. We had a large bank deal, and then another very large broker-dealer deal. I think once we shored up those and put those in market, I think it legitimized who we were. People were like, these guys are real, they built a real business and they can do this. And it was fun. We sold it to a PE firm at the end of 2014, and at that time we had about 5 million individual wealth accounts on there. It was like 800 billion we were powering, we had like 27 billion that we were advising on and managing a chunk of that, and like 100,000 advisors. It was, it was a large scale business. No one knew we existed but it was great; it was kind of by design, right? We just wanted to be the engine, so it was fun. I had some grand aspirations of what I wanted to do post-acquisition, but the guys who owned the bank account were probably less ambitious than I was.

Craig: Right. I thought that deal was strange…

Aaron: It was, yeah, I would say there was a good crew of people, very smart, all ex-operators. But it was effectively run like a public PE firm, which is a difficult spot to be in. So we are one of four portfolio companies, and when you’re building these businesses at large scale and re-investing back into the business, it’s a tough thing to show to a public market, especially with the complexities of what we are actually doing at FolioDynamix, and having that resonate in the marketplace. So it was a tricky deal. I actually, during the deal, I wanted to go after the retirement space, defined contribution and defined benefit.

The Idea Behind Vestwell

Craig: So when you came up with the idea for Vestwell, how did that manifest itself? Was everyone like, you did Folio here’s a boatload of money, go build it?

Aaron: So we sold Folio at the end of 2014. They wanted me on board for three years, I actually negotiated six months. I was like listen, I’m around; I will make sure I’m here for you. You have the bat phone number, call me if you ever need me and I’ll fly in. Right. Because I wanted to make sure that they were in a good spot, I wasn’t going to leave them high and dry. So I left and a buddy of mine who I had met through the industry had just started a firm a little bit before called Quovo, Lowell Putnam, and he said, “Can you come help me? We’re starting to get a lot of traction and I need help scaling this thing.” And I was like yeah, happy to help. But just so you know, I’m starting this other company, so I’m going to have to go do that at some point. But I’ll help you for six months or so and get you moving or do whatever I can. Not that they needed my help moving, they had a great company, but just applying some tweaks to their model. So went and did that, and through that process started refining what Vestwell was going to be. Because I first came up with the idea in 2010, when we rolled out our own 401K at FolioDynamix to our own employees. That festered in my mind for a long time, and then I was started putting it on paper. So I started sketching this out and then floating the idea to some folks in the industry that I knew, RIAs or broker-dealers or trust shops.

Aaron: Like hey, if you had access to something that looked like this Vestwell idea, would it be interesting to you? And it was a resounding yes across the board and I was trying to figure out, where do you get the most traction? So I designed a deck, went out, and had fortunately been through the capital-raising process before so I understood what was there, started talking to people, and it was far easier this time around than it was in the FolioDynamix days. A, yes, because you’re somewhat of a proven entity, right? You’ve been through it, you fought the battles before, you know what you need to do to achieve success. I knew the industry, although not exactly the same it was tangential to what we had done with FolioDynamix. So I had that in my favor also. The other side of it too is that the private venture capital world has far more interest nowadays than it did 10 or 15 years ago.

Aaron: And obviously for everything that’s in the press and that you see, it’s much easier to get cash now through the venture channels than it was way back when, when I first experienced it. So you had all of that going on, and then the third piece of it was there was just the industry trade winds of what was happening in the defined contribution space. That was kind of my kickstart, like it’s got to happen now, where the Department of Labor was talking about the refinement of the fiduciary standards and where the SEC was potentially going to step in. All of those things were flying around, and I was able to leverage all of that and take it, harness it, and then find the right investors along the way. I was super fortunate with the interest we had when we were doing this – it’s hard. The first check you get is always the hardest, right? Because it’s just an idea, right? There was zero code written, it was just on paper, and you’re getting people to invest millions of dollars on paper.

Investing in People

Craig: Well that’s because they’re investing in you.

Aaron: Yeah, right? And that’s what most people do, especially in the early stage; they’re investing in a team. So, I circled off a group of individuals that had faith in me to go get money and start creating a business, and I had faith in to do the hard work and start writing code, and putting something out there that wouldn’t be perfect (obviously you’re going to iterate it a million times), but would actually show well in that process. And then say, who’s going to understand this in this industry and go after it? So what I ended up doing, we did an angel round that rolled into the seed round, and we were fortunate. I had one early stage fintech investor who led the round. We had F Prime, who is the venture arm of Fidelity, who obviously had deep knowledge of the retirement industry, and they’re kind of the kings in the space, if you will. And then we had another West Coast-centric B2B investor, Commerce Ventures. And then Primary Ventures here in New York, who is more of a generalist and a good portion of their portfolio is allocated to B2B enterprise-type structures. So I had an interesting view of someone with deep industry knowledge, someone that understood fintech, someone that understood the tech, B2B landscape from a West Coast-centric mind, and someone who is kind of a broad oversight, a generalist if you would. It brought together a good crew of minds that I was happy and fortunate to have around us.

Craig: Yeah, those guys know what they’re talking about and they’re more than just passive investors. They can actually help you with the business.

Aaron: Yeah, without a doubt. I can’t tell you how supportive these guys are. They are truly my first phone call when I have a question or if something is shaping up that I don’t quite like the way it looks and I’m just trying to think through all the permutations of how we should be approaching it. So it’s been awesome to have that support where they’re like no, we get it. And it’s also people who understand this space. And that’s by design. I don’t call it old age or impatience, but I had no interest in working with investors who didn’t understand this landscape, especially as it pertains to not only retirement, but how financial advisors work. Because it’s actually critical to our long-term success, and the path that we’ve set forth.

Craig: If you have to explain to your investor what an advisor is and what their motivation is, they’re not on same page as you are in terms of what the business has got to do.

Aaron: I can’t tell you how many conversations I’ve had like that, where I was talking to potential investors… And not to knock our friends on the other coast, but there are investors on the other coast with a different mindset, right? They’re like don’t worry about profitability, just acquire users, acquire attraction. I’ve been on calls where they’re like, tell me what a financial advisor does. And I have to cut the conversation and be like listen, this is not going to be worth any of our time right now. Sure. You guys are thinking about things in a different way and that’s great, and I’m sure it’ll be wildly successful, but this is the way that we’re going after this industry.

Craig: Yeah, and that’s been the case. I’ve heard that from many founders, it’s the East Coast, West Coast mentality. Where the West Coast wants to flip, and the East Coast, they’re building the business.

Aaron: It’s different. I mean, a consumer-facing model is very different. The way I break it down is although it’s financial technology, it’s ultimately there to support financial services. And in financial services, I truly believe that you have to have a profitable, scalable, viable business that can stand on its own. And if you don’t have that and you can’t create that with some amount of cash, because it’s a wide lift, right? The whole system has to be baked ultimately, before you can put it in market. If you don’t have that mindset and you don’t have a model and a business that can achieve that, then you’re going to find yourself in a hard spot later on. And I hope everyone in this industry is successful, because when there is failure it just puts another black mark or another stain on all of us, right? That no one in this industry needs. This is about providing a service, and we have to instill trust. And trust is the most important factor in this industry. It’s very easy to lose that trust. And when you do that, ultimately people end up feeling the pain of that over the course of their life, by not being able to invest or save properly. So we’ve got to build it the right way ultimately. That’s how I view the right way of building the framework for a business like this looks like.

Startup Advice

Craig: So I was doing some research on you, even though I know you pretty well, and one of your other interviews you talked about advice for starting your own business. And this is the third time you’ve done this, right? So you’ve got a good track record and you’ve learned what to do and what not to do, as you said. You mentioned in this interview that businesses are always more expensive than you expect. So what are people expecting, and how does that cause businesses to fail?

Aaron: I mean, it’s an expensive industry. Especially as I look just as it pertains to Vestwell, right? It’s a very wide platform, and there has to be depth there. Because we’re not just solving for one equation or one user persona or one type of use case, right? We have to solve for an asset manager that ties to a home office that ties to an advisor that ties to a sponsor that ties to an employee; to everyone that’s moving around that ecosystem, right? And then everything that happens in the background. From record-keeping to custody to trust to execution in the brokerage channel, those are all moving parts, right? And if one of those breaks down, the business falls. So you have to account for that, and that’s a wide thing to build, and it’s expensive. It’s also a mature industry, right? So there’s already a mindset or an understanding of how the industry needs to work, so you have to take that into account. And you can’t be naive or egotistical that hey, you know better than the next person that the industry doesn’t need to function that way.

Aaron: There are inherent parts of this that you have to be cognizant of in doing that, and all of that adds up. It creates time and money, and people are expensive, right? Especially nowadays, I find the most expensive thing you’ll have in your business. So I think just accounting for that and being conscious of your spend. We’re very conservative in how we spend, to a point where even sometimes our investors say hey, just spend the money, don’t worry about it. But I think you have to be, because it’s very easy; you see companies all the time blow through cash. And if they haven’t gotten to those proof points that are needed in the business, it’s hard to get that next check. The way I think about it is, I don’t want another check. How do we create this so it’s profitable and it’s standing on its own? So being conscious of those things I think is very important to ultimately the long-term success and viability of a business.

Craig: All good advice that founders or people who are considering being founders should take. Moving into a different phase of the interview, I’ve got some questions for you that are more personality and motivation questions. So what has become more important to you in your personal life over the past few years?

Aaron: The biggest thing is my son. We have a little boy, he is almost three and he is absolutely awesome and hilarious. Just has a good disposition, a happy kid. So that’s been a lot of fun and a huge shift, right? As you know, the second you have kids, all of a sudden you’re no longer a priority. Right? You take a back seat. Both my wife and I work obscene hours, so it’s hard to take two individuals who are incredibly driven and going 1,000 miles an hour at all times to stop and say wait, we have to shift gears and reallocate. I think that’s the biggest change. Obviously you allocate as much time as you can to your kids, but it’s no longer your time, right? It’s no longer on your schedule. That’s a hard thing to adjust to.

Craig: Nothing else anymore. It’s now, what’s your son’s schedule?

Aaron: Right. And both my wife and I are super efficient individuals, but then you have to adjust your game, right? You have to say, well I don’t have that pocket of time here anymore because of whatever reason, so I’ve got to shift it and find it somewhere else. So you have to create that time, when doing that.

Craig: Now you had your son around the time you started Vestwell. Isn’t that true?

Aaron: Yes, yes.

Good Advice for Founders

Craig: More advice for founders – don’t have a child at the same time you’re founding a company.

Aaron: It was great motivation because I was on the clock, right? I was like listen, this kid’s coming and I have to get this thing out the door because it’s going to get even more challenging quickly. So that was an interesting motivating factor. We actually put our own plan on Vestwell, we were our own guinea pig if you will, and my wife gave birth to our son the same week. I still get a hard time from her for it because I stayed home for I think three or four days? And then I was back in the office. And it was hard, but it’s not like I had a large support team around me; there was less than a handful of us, so she just had to kind of make due. I juggled what I could and I was up all hours, I was the one up all night with the little guy, and you make it work. It’s amazing what your body can do when you don’t have any other choice.

Craig: Being in a startup before and working all kinds of crazy hours is good training for having a kid.

Aaron: Yeah, I would probably also say that grad school was my training ground for it. When I was at CheckFree and I was working late and up all night studying, that was when I understood what my body was capable of.

Craig: So having been through three rounds of startups and foundings and being an entrepreneur, how do you stay motivated now and how do you keep that entrepreneurial spirit going?

Aaron: There’s different motivating factors at different points, right? There’s a couple things with Vestwell. One is we’re solving a problem that impacts every employee in America and every business across the country. One of the core things that I love the most is that every person that touches our platform is better off than without. And that’s a great thing, right? When you can see it not only from solving how advisors engage, because we’re huge fans of advisors and how they work and what they’re doing. A few bad apples kind of spoil a bunch at times, but there are thousands of advisors that are awesome. They’re trying to do good, and when you can help them and thereby help their clients and then help their employees, that’s awesome. You can see the long-term impacts of that over time, so that’s the number one motivating thing.

Aaron: The second thing is, some of my investors will say this, but I’m a highly, highly competitive person that just refuses to fail at anything. I’m one of those people that I love the pressure, I love being thrown into it and just like, I’m going to figure this out and make sure that we’re all better off. And if I have to put everyone on my back and carry them out, I’m fine doing that. That’s the other thing, I just want to go do it. And I also just think we have a very short time on this planet, right? And there’s a world of things I want to help accomplish. Not that I’m going to be able to achieve it all, but I’m going to set the bar high and try to go do it and add whatever impact I can across the world. This is US-centric, obviously, but this just creates a framework that I think a lot of people can build from. And it’ll change over time and I hope it does change, right? But if we can help reset that bar, I think we’re doing something better for this world. I have friends who started businesses, they’re super smart individuals and they’re great friends, but I just think their businesses are fluff in a lot of ways.

Craig: Who are these people with fluff businesses?

Aaron: I can’t name names, but they know, I’ve told them to their face; they’re well aware. But especially when you see someone who’s so talented, I’m like why waste your time with something that just doesn’t matter in the grand scheme of things? And if you’re capable, then do something that people are all going to benefit from, because not everyone is capable. So let’s try to try to help out and leave this place better than when we got here.

Craig: Indeed. So again, you’ve done a number of startups and one of the biggest parts, as you mentioned, the biggest expenses of a startup is the people. But also the biggest parameters or the characteristics of a good firm is the people that are there; the first people you hire are some of the most important people to determine whether you will succeed or fail. So how do you identify people that will be a good fit at Vestwell?

Aaron: Yeah no, it’s hard, right? People are hard.

Craig: How do you get a feeling for people if you haven’t been with them for a while?

Aaron: I’ll be the first to admit, I don’t think I’m a great manager. I can lead teams and I love being a captain of a team and going, but I don’t like dealing with all the other things that come with it. I’ve hired a lot of people over the years, I have interviewed a ton of people, and you learn. You learn who you work well with, who’s going to play a certain role well. You have to put people around you that you trust. I will say, our management team and our senior leadership team are just phenomenal. I can fully trust them to do what they need to do and I don’t have to micromanage them. That’s huge, right? Because you have to scale and you’re all doing a lot at once, so you’ve got to trust your team members and that they’re doing the right thing and that they have your back in the process. So you have to interview for that and find certain goals.

Aaron: Also, there are people who are very good at certain stages of businesses, that don’t always translate to different stages, right? Like people could come in and do very early, early, groundwork in a seed stage that by the time you get to a series B, it’s not for them. And there’s nothing wrong with that, right? But it’s also just recognizing who you are and who the team members are and where they add the most value, and giving them directive or milestones to hit, to make sure that we’re achieving that. Because the business is going to change over time, and I think that’s important. It’s hard because there’s times I’ve hired people that I like and value as a person, or I want them to work because I think they’re great in so many ways, but they just don’t have a certain skill or a certain adaptability that is needed for a particular role at a particular time. Those are the hardest ones, right? You’re like, I’m giving you every chance here to get after it and it’s just not coming together and you’re not connecting the dots. And you have to let go of those people, or find a way to go in another direction.

Craig: What is your morning routine? You’ve obviously refined a bit in the last three years, I’m sure your routine now is different than it was before you had a kid, but what do you do during the first 60 to 90 minutes of your day to get things going?

Aaron: I’m usually up somewhere between 5 and 6:00. I’m usually showered, dog fed and taken care of by the time my son gets out of bed. He gets up, I get him ready, feed him and take him to school usually, depending on my first meeting. Then I shoot over to the train station, and then to the office. So that’s kind of my routine. Obviously there’s emails in there, to a point that my wife always yells at me to get off my phone and my son yells at me to get off my phone, which is not something you want. I do try to make a conscious effort to stay off it for chunks of the day. I’ll put it on airplane mode or whatnot, usually in the morning I’ll just check it quickly, are there any fires I need to worry about. If not, I’ll deal with them when I get on the train or whatnot in the morning. Then I hop on the train and usually on the train it’s just e-mails, I do a lot of my management reviews, things like that. I knock out things that are not a huge lift, and then when I get to the office I’m ready to go at it.

Craig: So being in the industry for as long as you’ve been and going through the whole startup process as many times as you’ve gone through, what kind of bad advice do you hear being given out most often?

Aaron: Bad advice given out most often, huh?

Craig: Or any bad advice you’ve heard?

Aaron: The advice I hate is the one I mentioned earlier, when people say don’t worry about the revenue or don’t worry about the money side. Like the revenue, the inbound side, just worry about users or worry about this or that. And I don’t think you can worry about one and not the other. I know that people with businesses have to stay focused at certain stages, but building, a real business from day one I think is important. Because if you don’t think about those things, I think you’re setting yourself up to fail. The other one is, there have been people that have come in this office and say, you should go direct and go after the Fidelity’s of the world and the Schwab’s of the world and go compete with them. And I’m like no, I don’t want to do that; that’s not in our DNA. And I want to work with them, I want to help empower them in other ways. Those are great businesses, but there are things that they could use help with. I want to help be that party that’s in there.

Craig: You mentioned failure and having failed, and everyone fails. One of the questions I like to ask and I find to get the most interesting answers is, you learn more from your failures than your successes, so what’s your favorite failure that you’ve learned the most from?

Aaron: At FolioDynamix we went hard fast. And we didn’t pay enough attention to some of the finer architecture details in the early days that became a very expensive fix for us. It was like three years in, and the wheels kind of fell off of that business. Maybe not fell off, but it got shaky and it was a very hard fix, and very expensive. From day one here, I just ingrained in not only the team but also our investors, we’re doing this right and we’re not going to do this in a Wild West fashion. Not that Folio was the Wild West, but we just didn’t pay as high a level of scrutiny as we should have. One of the first guys on the team was a senior cloud infrastructure, architecture, security guy from SunGard, and I brought him on in the very beginning. Our investors were like, why is this person part of this initial crew? They gave me a lot of flack for it. And I was like listen, the companies we’re going to deal with and these institutions we’re going to work with, what we’re building and the level of security and everything around cybersecurity to overall user security and architecture and scale is critical, and it’s too expensive to fix it later.

Aaron: Because you need some scrappy people, but you also need the kind of the folks that have been there and done that. Right? So we invested upfront to do that, and it has paid off in spades. When I look at the diligence and the procurement processes that we’ve sailed through, some of the public ones like BNY Mellon. And being able to get through their procurement process at such an early stage of a company is almost unheard of. And we got the full exam, right? And it’s great. We do pen tests and we’re finishing up our SOC 2, and those are things that 10 years ago you just didn’t do, or you did it later. We’re going to invest the capital now to do it. And yes, it’s an expense out the door, but it is worth it for where we need to be as a business.

Craig: Yeah, that’s another good example of what you’ve learned the hard way.

Aaron: Yeah. Trust me, I fail every day at something. That was one of the more expensive ones though.

Craig: A lot of learning. Another good question I find is interesting is do you give out books as gifts to people and if you do you, what book or books have you gifted most often?

Aaron: I used to give out books, not as much anymore. More because I just don’t have time to read anymore. I still read, but not nearly to the level that I used to. Just because there’s always something. And I think by the time I’m done firing off hundreds of emails a day, I can’t read another thing. But my favorite book that I’ve actually given out a lot that I love is “A Brief History of Time” by Stephen Hawking. I am kind of a physics geek, I love that side of it. I just think it’s an interesting view of how some of these things come together. And then you tie in math and the heavy wave of physics in there, and think about it from a grander scale, I think it’s pretty interesting. There are business books that I’ve given out that I think are interesting at certain times, when you can glean certain things from it. Like “Zero to One” and some of those sorts of things. But I tend to think those get dilutive in a lot of ways, and people can’t necessarily take it. It’s hard, I think I’m fortunate because I’ve lived through a lot of it where I’ve been able to glean certain things and then just ignore others. What’s the one I’m reading now? Reed Hoffman.

Craig: Is it his new book?

Aaron: “Blitz Scaling,” that’s what it is. Yeah. And there are certain things like, yeah sure, I get that, but that doesn’t apply to everything. It’s different business models. I’ve seen certain team members hand out books like that. Now I’ll kind of give them a warning. Like, here are things that you need to quickly set in your mind that are not applicable in this book.

Craig: Exactly. All right, just a couple more questions because I know we’re running out of time. Do you have a favorite app that you found recently to be helpful or make your life more efficient?

Aaron: Oh yes. Superhuman.

Craig: Are you describing yourself, or are you talking about an app?

Aaron: Yeah, I wish. It is an e-mail app actually. One of our investors turned me on to it, he met the founder and he was like, hey try this. Because there are days I get upwards of 1,000 e-mails a day, and I read all of them. I don’t respond to all of them, but…

Craig: I’ve read your email, but I may not have responded.

Aaron: Yeah no, that happens frequently, right? But it is a super-efficient way to get through e-mail and kind of kick it out where you’re like, hey remind me in two hours or remind me at 8:00 tonight after the little guy goes to bed and I have a minute to circle back to it and apply the thought needed. It’s a very efficient email app, I almost get to inbox zero every day. That’s my goal.

Craig: Superhuman, I can’t imagine that. I’ve got 85 in my inbox now just since we started talking.

Aaron: Yeah no, it’s hard, right? It creates anxiety in a lot of ways. I look at my wife’s email, she’s not one that does it. She’ll have like, 100,000 plus e-mails, I’m like I need to fix that, let me help you.

Craig: That’s an excellent one, thank you. Thanks for sharing that. Hopefully it’ll get a lot of downloads from this, I know I’m going to get right on that as soon as we’re off this call. So last question, what message would you send to your 25-year-old self?

Aaron: I think the biggest message I would send to myself is, let the small fires burn and focus on the important stuff. I think that’s one thing that I’ve been able to take from previous lives is, things that you used to get worried on. This just comes with maturity, right? I think everyone kind of experiences this to a degree over time, but I think being cognizant of that and realizing maybe I could let this thing go and not burn a zillion hours trying to fix something that has no impact.

Craig: Yeah. Let the small fires burn is like “don’t sweat the small stuff.”

Aaron: Yeah, yeah. In a lot of ways. Like, it’ll be there. You can fix it later, but the world’s not going to burn down in the process.

Craig: And there you go. That’s also good for people who are over-anxious or letting social media or other aspects get to them and control their lives.

Aaron: Yeah. You can’t, right? You have to ignore those things. I kind of keep my life very focused on business, probably to a fault, but that’s where the importance lies for me. Family and business is about it, and you have to kind of drop the other things.

Craig: Family and business, yeah.

Aaron: Yeah. I mean that’s it, right? I have time for those two things in my life. Things change at different points in your life, but just being cognizant of that is important.

Craig: Indeed, I think if more people felt that way they would definitely be a lot less stressed about the way life is going now.

Aaron: Yeah, or you’re going to stress about the important stuff. There’s always stress, it’s just going to hit you somewhere else.

Craig: Exactly, awesome. Well thank you so much. I’m going to wrap things up because we’ve gone over time and you’ve been very gracious with your time, Aaron. Thanks so much for being here. This was a fantastic interview, I got a lot out of it and hope a lot of people who don’t know you as well as I do got a lot out of it as well.

Aaron: No, thank you. It was fun. I enjoyed the time and appreciate you doing this with me.

Craig: You’re welcome.

Aaron: Alright, thanks Craig.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com