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ExpertPlan, a provider of online administration and record-keeping services for defined-contribution and defined-benefit pension plans, has capitalized on its Web-based automated technology serving small and "micro" companies that had been burdened with manual administrative tasks and indifference from larger plan administrators, according to the company's CEO and chairman.
The 13-year-old East Windsor company, with 120 employees, has grown from posting its first positive cash flow in June 2006 to revenue of $30 million in 2011, and now has a client base of 16,000 plan sponsors.
"We benefited greatly from the stock market rise in '06, '07 and nine months of '08, then everybody took a hit in the pants — but we were large enough to survive," said Julian Onorato, CEO and chairman of the board of ExpertPlan, who joined the company in 2005. He said the company earns about 25 percent off its revenue before interest and taxes.
The company has differentiated itself, the CEO said, from the large third-party administrators who provide 401(k) and other services who found it hard to turn a profit in the "micro" market of plans that have less than a million dollars of assets.
Most of ExpertPlan's clients' plans are in the $500,000 asset range.
Among ExpertPlan's clients are dentist offices with two dentists, a few hygienists and billing clerks; engineering and architectural firms; and blue-collar companies, such as plumbing contractors.
"We average about 20 employees within the pension plan," Onorato said. "Since we support the micro market, our (defined-benefit) pensions are primarily for one purpose — to provide tax advantaged investing for the principals of small businesses. There's even one-person DB plans."
There are three basic types of third-party administrators, said David J. Wasserstrum, a tax partner at accounting firm WeiserMazars, in Edison.
The large, one-stop shops do all the documentation, compliance testing, custodian and trustee services for the plans. Alliances of vendors, meanwhile, work together on the plans, and separate vendors function independently, and usually are hired by smaller companies.
"The one-stop shops and the alliances, I have to acknowledge, are the best at keeping your documents current. They're going to send you what you need to sign," Wasserstrum said.
ExpertPlan, which is aligned with other partner companies, doesn't sell the retirement plans, but rather sells and services proprietary software platforms that automate the process of administering pensions, with much of that business coming from registered investment advisers and the brokers of record for 401(k), 403(b), 457(b) and other retirement plans.
"Our business is to develop relationships with advisers who sell retirement plans, and it may be an individual adviser or a very large institution like Putnam Financial Services, John Hancock, Guardian Insurance, and other type firms like regional banks, large RIA firms," Onorato said.
In 2011, ExpertPlan grew its business by adding 2,680 new plans to its list, bringing them to about 16,000 being serviced, Onorato said.
Half the growth has been organic, and the other half from acquisitions, particularly the company's addition of "blocks" of retirement plans from small banks or other institutions that had sold a small number of retirement plans to their customers and administered the plans themselves using off-the-shelf record-keeping software products, Onorato said.
The company was founded in 1999 by Win Cody, an MIT electrical engineer who conceived of the automated process as a moneymaker.
Cody has since cashed out of the company.
After several rounds of capital infusion, the ownership stands split just about evenly in thirds between institutional venture capitalists, early-stage angel investors, and current management, the founder and his family, Onorato said.
E-mail to: ktarbous@njbiz.com
E-mail to: KenTarbous@njbiz.com
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