Idea: 401(k)s on the Internet: Needed: $6 million in 2 years

After a Happy Ending — Help Handling Options

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Idea: 401(k)s on the Internet: Needed: $6 million in 2 years

The Internet is revolutionizing the financial services

industry, says Winthrop Cody, and he aims to get in on the ground

floor. offers an alternative way for big financial

firms to administer 401(k) plans for small to mid-size companies.

Cody has founded a 10-person company that now occupies 900 square

feet at the Trenton Business and Technology Center. And yes, all in

the firm quit their day jobs eight months ago. The firm moved directly

from the "friends and family" financing stage to venture capital

investment and is closing on a small institutional run. "Over

the next two years we are looking to get $6 million," says Cody.

If the name Winthrop Cody rings a bell, it should. He is a direct

descendant of the first governor of Massachusetts Bay Colony, John

Winthrop, and is also related to an ancestor of Buffalo Bill, as in

Buffalo Bill Cody. The son of the CEO of various machine tool companies,

Cody went to Massachusetts Institute of Technology (Class of 1982)

and has an MBA from the University of Connecticut. Most recently he

was vice president and CIO of the Copeland Companies, the retirement

planning division of CitiGroup. He is married to an environmental

scientist who now teaches high school physics, and they have two daughters.

Cody says he never dreamed of being an entrepreneur. "In 1982

I was in the mode of `get a job in a big company and work for the

rest of my life.’" But when the Internet came along, he saw the

potential. He put up a personal bulletin board 15 years ago and his

first personal website in 1995. The Internet is a natural for retirement

plan administration.

"Traditional services," says Cody, "have high administrative

fees and find it difficult to adequately serve smaller companies.

The Internet allows us to focus on good service at a reasonable cost."

His firm does not sell to consumers, he emphasizes. It partners with

investment houses, stock brokers, and insurance companies to administer

retirement plans more efficiently — which would lower the price

so small businesses can afford them. Big companies will want to partner

with him, Cody believes. "We have experienced people who have

been in the business, but we are not encumbered by a lot of older

processes and can move very nimbly." He brought several of the

staff members with him from the Copeland Companies, the retirement

planning subsidiary of Travelers Group/Citigroup, and James Scott,

chief financial officer, was most recently CFO for

and vice president of finance for Telecom Analysis Systems.

Fidelity Investments, has a similar service that is limited to Fidelity

products, and lots of other companies are trying to move into this

business. But Cody thinks he has the all-important head start. "We

started earlier than most and have the experience to pull it off."

— Barbara Fox LLC, 36 South Broad Street, Winthrop Cody, CEO.

609-655-1770; fax, 609-396-8603.

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After a Happy Ending — Help Handling Options

After the IPO, then what? One of the exhibitors, Garo

Doranian of AST Stock Plan Inc., hopes to line up as clients some

of these companies that are paying their employees partly with stock

options. His three-year-old firm offers away to outsource the administration

of stock options, which can be a headache for a small firm.

URI Kaufthal is the CEO of AST Stock Plan, which has offices in Manhattan

at 250 Broadway (212-659-2221,

AST Stock Plan is a sister company to American Stock Transfer Trust,

a transfer agent that holds the records of the shares for more than

4,000 public companies.

Theoretically a company can keep all its own records to administer

stock option plans and keep its employees happy, but that could be

both tedious and costly, says Doranian. "You have to know the

compliance issues with the ever-changing rules of IRS, the SEC, and

the FASB (Financial Accounting Standards Board) as to who gets what

shares. Each option becomes available on a vesting schedule that is

difficult to track," he says. To manage this a company will need

to license some software system for $15,000 to $25,000 per year, plus

the cost of labor. AST’s software, in contrast, lets it track thousands

of plans and achieve economies of scale.

"We are like the hub in the wheel of stock plan administration,"

says Doranian, who is a 1996 graduate of California State University

at Fresno. "The spokes are each department. We interact with payroll

to pay out the options. With legal, to keep on top of all securities

issues. With brokers trading the shares. With transfer agents that

our are clients are using — to make sure at the end of the day

that everything in the wheel of stock administration rolls smoothly."

— Barbara Fox

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