The financial advice industry exhorts retirement preparedness but provides scant guidance for retirees after they reach that milestone, according to Matt Fellowes, well-known fintech entrepreneur who is launching a new digital advice platform.
Fellowes founded HelloWallet, a software company that Morningstar acquired in 2014 for $52.5 million. After a stint as chief innovation office at Morningstar, Fellowes left to launch United Income, which aims to serve a generation of retirees dealing with very complicated lives after work.
"Life in retirement now is as dynamic as it is in working years," Fellowes says. "There's so much talk about retirement, but so few services for retirees."
Fellowes finds fault in how the industry approaches its deaccumulation models, claiming its methods and assumptions are outdated. Key considerations for retirees managing their finances, he says — when will they die and how much will they spend before passing — are "two of the least studied questions in asset management today."
Instead of standardized expectations of mortality and income, United Income relies on the power of big data and proprietary algorithms to develop personalized plans, he says, analyzing a number of variables including health information, education levels and even geographic location.
In so doing, it builds individualized forecasts for clients to determine further lifestyle spending and essentials, rather than relying on income replacement ratios alone. It also applies a very personalized line of questioning to determine risk tolerance.
"We have the technology now to create something much more accurate," Fellowes says.
‘UNMET NEEDS’
The big retirement firms' marketing is "geared toward workers, planning for retirement. But then once you retire, you're sort of left to your own devices. That's where we saw a lot of unmet needs."
Retirees are now juggling financial decisions, he says, including managing streams of income from annuities, distributions and dividends, while improved life spans have created a greater need for managing daily finances.
Studying these complexities, Fellowes became convinced there was an opportunity to tap an unserved market for clients ages 50 to 70, United Income's target users.
Fellowes is confident a digital offering will stick with the intended audience, citing studies that show Internet and digital device usage among retirees is almost identical to people in their 20s.
To serve older users, the platform incorporates specialized digital features, such as a dashboard for clients who might be losing the ability to distinguish colors.
FULL SERVICE
The platform offers different tiers of service, from a digital-only option with a $10,000 account minimum and a 50 basis point annual fee, to advisor-assisted service, with either a maximum 60 basis point fee for a $100,000 account minimum, or a maximum 80 basis points for a minimum $300,000 account, which is advertised as “full service.”
United Income had a goal of reaching $38 million in assets by the end of the year. It has already passed $210 million, Fellowes says.
The platform also has piqued interest from institutions looking for a tool to offer deaccumulating clients, he says, and from investors — noting the startup has heard from 48 different venture capital or private equity firms.
“We may take on some additional capital,” Fellowes says. “There’s a huge amount of interest in what we are doing.”
The platform has a team of four RIAs to serve clients, and there will be more advisor hires sprinkled around the country, he says.
“It is essential to pair technology with financial advisors,” he says.
