BlackRock Invests in Fintech 401(k) Provider Human Interest

Asset management powerhouse BlackRock has invested in Human Interest, a San Francisco-based recordkeeper for small business 401(k) plans, according to a press release on Friday. The firms did not disclose the amount.

Human Interest CEO Jeff Schneble said by email response that the firm’s started talking last year, and that BlackRock’s investment will support Human Interest’s next phase of growth.

“Our primary costs are people, so we plan to use this new capital to accelerate our hiring in product and engineering, customer acquisition, compliance and operations that scale as our customers do,” Schneble said. “It’s not a major departure from our previous plan, just an acceleration.”

The investment comes just weeks after the passage of the SECURE 2.0 Act, a series of retirement saving reforms targeted in large part at advancing new retirement plan creation through a combination of tax incentives and mandates in areas such as automatic enrollment. That legislation could further retirement plan uptake among small business employees in particular, CEO Schneble said.

“Less than 50% of small businesses with fewer than 50 employees sponsor a plan in which workers can save for retirement,” he wrote. “We partner with many small to medium sized businesses, and we’re pleased to see that legislators share our passion for giving them more options. In 2022, we doubled our customer base.” 

Human Interest, which was founded in 2015, touts itself as providing affordable 401(k) and 403(b) plan services catered to small and medium-sized businesses unequipped to take on the many administrative and fiduciary burdens that come with offering a plan. Since a fundraising round in 2021, the company has grown to have 12,000 customers, and covers more than 200,000 plan participants, Schneble said. The BlackRock investment brings Human Interest’s total funding to $500 million to date.

The company saw more demand in underserved sectors like restaurants, home services, and construction, he noted. In Q4 it announced a partnership with Neighborly, which franchises over 4,400 tradespeople with over 2/3rds being first-time 401(k) plans.

Human Interest also has a host of competitors who also have recently discussed a sector surge. In interviews last month, small business 401(k) providers Vestwell, Ubiquity Retirement + Savings and Icon Savings Plan all discussed client growth in part due to market demand, state mandates and their low-cost models offering 3(38) investment and 3(16) administrative fiduciary services.

BlackRock’s investment in Human Interest “reflects a continuation of BlackRock’s efforts to make strategic minority investments in companies that operate adjacently to our core business,” according to a spokesperson’s email.

BlackRock’s defined contribution division develops and distributes plan strategies and services for institutional as well as retail clients, reaching 65,000 plan asnd 35 million people, according to the company’s website. It also pioneered an in-plan target-date lifetime income strategy called LifePath Paycheck, which uses annuity contributions within retirement plans.

“Getting people on a path to a secure retirement is core to BlackRock’s purpose, from pioneering target-date funds 30 years ago to managing retirement assets for more than 40 million Americans today,” Anne Ackerley, head of BlackRock’s retirement group, said in the release. “We look forward to helping Human Interest close the access gap.”