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Penelope makes retirement plans intuitive for the smallest businesses

Jean Smart’s experience growing up as the child of small business owners, combined with two decades of experience in finance, has led her to create a company that can help small businesses quickly and easily set up their retirement plans.

Named after her daughter, Penelope was formed in 2021.

Smart was born in Korea before her family moved to California in the 1970s. Her parents ran a series of businesses, including a grocery store, restaurants, and a dry cleaner. Smart would help them interpret tax forms and other documents and pitch in with the bookkeeping.

Jean Smart
Jean Smart

She went on to work with institutions like Schwab, Citigroup, UBS, and TD Ameritrade, often on the corporate and institutional side, gaining a solid knowledge of different stock options and financial wellness plans, what worked and what did not. Most of those products could not work for small businesses.

With advancements in technology and the right product design, they can certainly be designed for business owners like Smart’s parents. Reduce jargon, make it self-service, use simple terms and incorporate an intuitive UX. Employ a SaaS-based subscription model.

‘Want to be the Oscar of retirement plans’

“What Oscar did for healthcare and the ACA, we want to for retirement plans,” Smart said. “I think there is a huge opportunity to humanize and personalize retirement, wealth building, and generational wealth building.”

Smart said that much of the technology is essentially automating keeping for thousands of small businesses, but Penelope’s stack also leverages sophisticated data modeling capabilities and cloud technology. That is significant when competitors, following initial investments in other technologies, now have to pivot to keep pace.

“Our underlying infrastructure and our tech stack are super modern,” Smart said. “It’s state of the art, and the big advantage we have is that we’re building and doing it in 2022 versus 2010 and 1980. This is a product that is born by heavy regulations, and that hasn’t shifted a lot. But the ability to be very agile with the tech stack and features that help us create enough flexibility to move quickly is important.”

The current AI and machine learning capabilities perfectly position Penelope to grow with each individual as they progress through the different phases of their financial lives. That could, for example, identify when a new beneficiary is added to a person’s account. If that beneficiary is a new child, it provides opportunities to discuss 529 plans early on when they can have the most significant effect.

Growth through serving needs at every life stage

“(With past companies) we weren’t able to collect enough data sets quickly enough to do a mass campaign,” Smart said. “You had to work with an advisor who had to remember everyone’s life sequences. So if you’ve got hundreds of clients, say thousands of clients, it is very difficult to manage. 

“We’re going to start collecting all of that now. And I think that’s going to be very rich from industries people work at. What is the point of retirement if you’re not connecting it to these life goals, and so much of it happens where you work.”

Penelope’s growth plan is to augment its services so they can cater to an individual’s needs at every stage of life. That will involve partnering with like-minded firms specializing in different products and services.

Smart said this is happening as many people live check to check, and one in four have no savings or retirement plan. By 2034 (only 12 years from now), Social Security will not be able to fully payout.

Many state governments have reacted by passing legislation requiring small businesses of a minimum size to offer their employees a qualified retirement plan. So far, 14 have done so, with legislation being introduced in another 20.

“You’re starting to see this, and over the next two to five years, the alarm bells will ring, and it will happen,” Smart said.

Simplicity attractive

Another responsibility for busy small business owners, who will be attracted to the simplicity of Penelope’s platform, Smart believes.

Enable them to sign up and get information in minutes and take much of the thinking out of it. Eliminate them from dealing with the multiple intermediaries no one may tell them they have to work with. It’s a compelling proposition, including for women and people from visible minorities, two groups who have been gravitating to the platform.

Smart noted that small business owners also enjoy the benefits of pooled employer capability. While such plans have long existed, especially among industry trade associations, a “bad apple” rule would leave all contributors vulnerable to the actions of another’s non-compliance. The SECURE Act changed that for the better.

There will also be some educational opportunities, beginning with explanations of terms and how to use the system. But just as Penelope will grow with their clients, so will new opportunities for engagement arrive.

“We’re staying specific to the 401k plan right now, but I think there are huge opportunities to just be foundational,” Smart said. “What’s a stock? What’s a bond? What should your allocation be? What do you need at 30? What do you need at 50? We have very little time to get anyone’s attention, so doing something quick, fast, and meaningful, that lands.”

Take a busy world, with folks used to instant gratification and plenty of competition for their attention. Smart said your messaging and engagement processes have to be very deliberate in their design. Yes, make it easy, but also enjoyable.

“We’re really excited about truly humanizing this and not just have a bank account tied but a way for people to use it to make it accessible and not feel threatened to learn about just the foundations of money and really build that generational wealth,” Smart concluded.

Seed funding announced

Penelope this week announced a $2.1 million pre-seed raise led by Slauson & Co. Additional investors include Amplify LA, Black Jays, and executives from Wells Fargo, Citigroup, and US Bank. The funding will be used to create a self-service retirement platform for small and micro businesses, expand Penelope’s team and accelerate customer onboarding.

“Saving for retirement is an essential tool for building wealth and financial equality. For many small business owners, the jargon, paperwork, and time required makes retirement plans out of reach,” said Austin Clements, managing partner at Slauson & Co. “Penelope fundamentally changes the way small business owners and employees invest in themselves, their families and their communities.”

“Our mission is to make the American dream of generational wealth building available to small businesses and startups by creating access to affordable 401(k) models and enabling financial inclusion across all socioeconomic levels,” said Jean Smart, CEO, and Founder of Penelope.

“Historically, their inability to provide a channel for long-term financial security for employees through a 401(k) plan has made smaller businesses vulnerable to losing talent. With Penelope, this legacy obstacle is no longer a concern.”

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.

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