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Wednesday, Jul 17, 2024

Firm’s Data in Demand With Big Financial Cos.

BrightScope, a San Diego startup that began rating company 401(k) plans, is still rating those plans and financial advisers, but it is now making more money from all the data it’s collected, and signing up bigger clients.

This month, the 5-year-old business said it signed a contract with T. Rowe Price Retirement Plan Services, part of T. Rowe Price Group, with about $711 billion in assets under management.

“This was very significant news for our company,” BrightScope CEO Mike Alfred said. “It shows the powerful position that we’ve created with all the work we’ve done in the past few years.”

T. Rowe Price now delivers the sales information BrightScope gathers to its asset managers, broker-dealers, custodians, record keepers, and transfer agents who provide services to their clients on T. Row Price’s retirement services platform.

“This relationship with BrightScope allows us to give service providers who use our platform and our own executives a way to quickly understand the sales trends on our platform,” said Doug Comer, head of business development at T. Rowe Price Retirement Plan Services.

Inspiration from Football, Bourbon

While privately held BrightScope doesn’t reveal actual revenue, Alfred said the firm is on track to break $10 million in sales this year, about 60 percent above what it did in 2013. In 2010, it reported $1 million in revenue.

In tandem with the surge in sales, BrightScope has expanded its staff since its launch — when it had only six people. Today, the business has 80 full-time equivalent workers and should have 90 to 95 employees by year-end, Alfred said.

“It’s not rocket ship growth like Twitter or Google, but compared to many other businesses, it’s going OK,” he said.

That growth is remarkable in light of its beginning when the three founders — Alfred and his younger brother, Ryan Alfred, and Dan Weeks — didn’t exactly have a defined business model.

“We knew it was going to be tied to the 401(k) market, but we didn’t know what the product would be and how we were going to do it,” said Weeks, who left the company last year to become entrepreneur in residence at California Polytechnic State University, San Luis Obispo, his alma mater.

Weeks, who obtained a bachelor’s degree in computer science at Cal Poly in 1983, worked for Hewlett-Packard Co. for 25 years, primarily in engineering management.

The Alfred brothers, who were running a La Jolla financial investment business, got the idea of setting up a rating system of retirement plans while watching “Monday Night Football” and drinking Maker’s Mark bourbon, Weeks said.

“I’m extremely happy where the company is now,” Weeks said. “Ryan and Mike may be young, but they’re the two smartest people that I’ve ever worked with.”

Monetizing Data

The key to the business’ success was figuring out how all the data the company was collecting could be used by the largest money-management companies.

Although BrightScope has hundreds of clients, about 90 percent of revenue is derived from 30 major clients, Mike Alfred said, declining to provide their names. The data that the company collects and delivers is used by its larger clients to figure out where their products are being sold, where their competition is selling its products, and to help them make adjustments in their overall strategy, he said.

“Our clients are mostly large asset-management companies, mutual fund companies, retirement plan providers and large banks,” Mike Alfred said. “They’re buying our software platform called Beacon and integrating this data across their firm.”

The rating of company retirement plans is something that Mike Alfred said was long overdue, and similar to what Morningstar did for the mutual fund industry.

As many baby boomers exit their jobs and move into their so-called “golden years,” many realize those years may not be so wonderful given the meager savings they’ve amassed in those retirement plans. In some instances, workers made far too little contributions to their plans. Yet also dampening the returns of those plans were the higher management fees the funds charged, Alfred said.

When the founders launched BrightScope, the goal was to help millions retire with dignity, Alfred said.

“While building a real business is important, I’m most proud of the fact that our work has led directly or indirectly to better outcomes for millions of Americans who depend on their 401(k) plan for a secure retirement,” he said.


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