Why OneDigital is partnering with Zenefits

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After Zenefits last week announced it is transferring its broker of record business to Atlanta-based OneDigital — increasing that firm’s overall clients under management to 37,000 from 30,000 — EBN spoke with OneDigital’s Chief Growth Officer Mike Sullivan to understand more about the deal and what it means for both his company and Zenefits. What follows is an edited version of the conversation.

EBN: How did the deal come about?

Sullivan: We started talking about a year ago. Who called whom first I’m not sure. This has been an ongoing, yearlong discussion to better understand how our two platforms might align in the marketplace. It took a lot of strategic thinking around where the market is going. In a very client-centric way, the alignment of these two platforms makes sense for small businesses.

The other piece of it was that there has been a complete change of leadership at Zenefits. The more they looked at what was going to allow them to fulfill their destiny as a company, finding a different way to go at the brokerage piece was very important. I don’t think it would have happened without a change in leadership.

The more time we spent with their teams [we realized that] we could … position something with our clients with what they built from a software standpoint and what we are building from an advisory standpoint. And that it could be really good for our clients. It’s taken a lot of work to get to this point, but we are really excited about the go-to-market strategy.

EBN: What is that go-to-market strategy?

Sullivan: The way I would describe it at the highest level is that it is a joint investment in sales assets and marketing and everything to do with building out and reaching as many employers in the small and midsize space as possible.

What I think makes us a little bit different is in our industry, the vast majority of advisers play defense when it comes to technology. This is a commitment and an investment on both firms’ parts to shift the investment resources and focus on alignment in a partnership way with clients.

Over time, we will be adding hundreds of people into the mix. We just came to the realization that we needed to get deeper from a technology standpoint. There will be Zenefits teams that come across and join OneDigital. It will allow us to significantly broaden our shoulders in terms of how we go to market with technology assets and how we align market-to-market with Zenefits colleagues to grow. It is really different that anything we ever tried before.

We understand this is not going to be an exclusive OneDigital-Zenefits partnership forever, there will be other brokers involved. But, we have very tightly integrated the solution, and at the end of the day, we are going to be managing 7,000 of their accounts, so we are immersed in the technology, we are building all the integrations between systems. It’s a different kind of deal than anything that has been done in the business so far.

EBN: Why did you opt to partner with them in this capacity, given everything that’s gone on in the company’s history?

Sullivan: [The new CEO] Jay [Fulcher] has brought a new view of what their future is going to look like. Right now, when you look in terms of what is going on in the marketplace today, they were looking at this and basically saying, ‘We think we have the best technology for small and mid-size employers out there and the drag on our business is the brokerage piece.’

Like a lot of firms before them, they’ve come to the realization that the complexity of the employee benefits business, the local nature of the way in which products and regulation play out, it is really hard for anyone to build a national platform. This is a an acknowledgment that their future is, ‘Let’s get back to being a software company, but let’s not lose sight that when thinking about a client-centric solution, the brokerage piece is integral to it.’ It’s an acknowledgment of what employers want, but also an acknowledgment on a DNA level: They are a software company, and alignment with a broker channel market makes more sense. That is how we entered the mix.

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HR Technology Technology Employee benefits Practice management Workforce management Zenefits OneDigital