Sisters Want to Provide New Spin on 401K Service with Arnie

Arnie is a relatively new platform that aims to “make it easy for businesses to offer a customized, flexible, and values-aligned retirement plan for their employees.” Arnie recently raised $2.3 million in pre-seed funding, according to the company.

Founded by sisters Eliza and Izabel Arnold, reportedly, the genesis was based on past experience where their employers were investing in companies diametrically opposed to their values. Unhappy with the status quo, the two founders decided to build a 401K platform from the ground up.

In the US, most individuals have an employee-sponsored 401K program or IRA to save for retirement. Social Security is not very secure, and it falls short if you want to have an actual retirement. Both 401Ks and IRAs are very popular – especially since they are tax-advantaged. A 401K frequently has an employee match making it a popular benefit for employees. The Arnold sisters note that the Investment Company Institute (ICI) states that total US retirement assets were $32.3 trillion as of September 30, 2022 (down from June 2022), so the market is huge.

At the same time, 401Ks have changed little in decades, and according to the Arnolds, they are “extremely archaic and restrictive, failing to keep up with the rate of innovation found in every other financial service.”

Enter Arnie.

The new platform is designed to modernize 401K’s, no longer bucketing employees into generalized funds but instead creating individualized portfolios for every employee. In fact, there are no mutual funds – something most all 401Ks are based upon.

According to the company, they use a custom-indexing process of investing that provides the flexibility of an individually managed portfolio, combined with the diversification you’d expect in a fund. Each portfolio is created uniquely for every individual.

Arnie users may decide to avoid “fossil fuel contributors” and choose renewables instead. The machine learning algorithm is said to be able to identify sources of risk and help with risk mitigation as well.

The 401K’s operate more like a brokerage account providing far greater control over the portfolios. Users pay a flat monthly fee as well as a flat percentage of AUM.

The new spin on 401Ks sounds interesting, but I wonder if it is available for investors that want to invest in alcohol, oil, and guns, as well. Do the same rules hold true? Hard to tell. Not everyone’s preferences align with one specific narrative, and choice can be a good thing.

Eliza Arnold says it is easy to assume that just because something has been the same way forever does not mean it should not be changed.

“…usually there isn’t any rule stating you can’t change it, it’s just that no one has questioned it yet. We decided to question it.”

Arnie is a Registered Investment Advisor (RIA) with the Securities and Exchange Commission. The company reports that currently, they have more interest than capacity, so they have started a waitlist.


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