Retirement income discussions can be uncomfortable.
“Sitting down with a client and talking income with them is setting their death date, in essence,” said IncomeConductor co-founder Phil Lubinski.
For many advisors over the years, taking clients from the accumulation mindset of gathering assets during their working years through the transition into retirement has been as much about art as science. In other words, many advisors rely on their experience, perhaps some training and a variety of calculators and a mix of product types in working with clients on this final phase of their financial lives.
Among the many advisors I’ve now spoken with about distribution/decumulation planning all have brought up factors that can make it a more difficult planning process than accumulation. Retirees often have unrealistic or overly optimistic assumptions about how long they might live, often have budgeted too little for future health care needs, and are often confused by Social Security and Medicare decisions, among others.
Enter IncomeConductor, a retirement income planning tool focused on spending and asset drawdowns post retirement. It quietly came on the market in 2018 for the use of independent RIAs and reps at independent broker/dealers. The offering comes from WealthConductor LLC, co-founded in 2017 by Lubinski, CEO Sheryl O’Connor and CMO Tom O’Connor to address what they refer to as the “distribution” phase of retirement.
Other key aspects to keep in mind about the software are that it is investment product agnostic and uses time segmentation.
In an overly simplified nutshell, an advisor takes (or a prospect discovers through fact finding) all the assets, insurance and holdings a client has. The advisor then begins collaborating with the client on the decision of when they would like to retire and how much income they want and need. Figuring prominently in these decisions are things like when to claim Social Security, and all of it has to be looked at from multiple angles, especially when planning for a couple versus an individual.
The software-as-a-service takes in all these inputs and supports going through multiple hypotheticals on the fly. Working through the process collaboratively with the clients, the advisor and software come up with calculations demonstrating the best order to liquidate or add (annuities will be one possibility for some) to meet their day-to-day income needs—and plan for the unexpected.
Most often that unexpected comes in the form of a need for long-term care. While probably not a problem for the ultra-high-net-worth population, for everyone else it can represent a challenge, whether due to the high costs and a shortfall in assets or simply a choice of how to approach paying for care.
Long-term care insurance is one solution, especially for those that bought these products while in their 40s or 50s when policies were more affordable.
In my last column, I focused on decumulation planning in general and provided short overviews of two technology solutions. Today, I’m sharing highlights gathered from interviews with three users of IncomeConductor. All were provided to me, as the company and its product do not yet have a large footprint on the market.
A Focus on LTC
Richard Hoover, an advisor with SagePoint Financial Inc. based in Las Vegas, said his team had been specializing in retirement income planning for more than a decade using a far more rudimentary version of segmentation software from a national insurance company when they came across a retirement symposium interview of Lubinski online.
Hoover reiterated something I had been told repeatedly by the founders behind WealthConductor/IncomeConductor and seen for myself while exploring their website: There are a lot of training videos and other resources to help advisors both educate themselves and inform clients and regular webinars held for users of the application.
“They have a three-minute video that is the best tool, best marketing and pre-conditioning tool I’ve seen in 30 years,” he said, referring to a video that quickly brings clients or prospects up to speed on the philosophy behind retirement income planning and the software.
“The software really helps us break down the budgeting for the client and the cost of living, health care costs, expenses and Social Security benefits,” Hoover said, adding that integration with a live medical database showing average costs of care by age and state is very helpful when working with clients. He then follows up by taking the prospect or client through an actual sample plan.
IncomeConductor, Hoover said, will help the advisor identify potential assets the client may never spend if their longevity expectations are exceeded. This can be used for LTC expenses they may need, or a super-emergency fund, or, if they live a perfectly healthy retirement, that can be used as a legacy for their inheritors.
I asked specifically about the issue of long-term care, something I have found accumulation-phase advisors far too often avoid.
“Every single plan we do we go out and get an LTC insurance quote and embed it in the plan,” he said, noting that he reminds clients that it is this “one Achilles’ heel” the possibility of which must be taken into account.
“If either one of you need home health care, nursing care or a nursing home, I’m happy to let you know that we have budgeted this in, we have it in your plan,” Hoover said of how he describes the situation.
“I’ve literally had clients that were in tears once they realized they were going to be okay … that they are ready for retirement and that we are only going to over-plan not under-plan,” he said.
Tracking the Plan
Jason Hamilton, a solo practitioner and proprietor of Keep It Simple Financial Planning based in Orange County, Calif., works with clients virtually from 37 states. His practice, he said, represents a mix of young and old, those accumulating assets and those soon to retire or just going into retirement.
He said they are 100% online and comfortable with that and the ability to easily collaborate virtually with IncomeConductor was a strong draw for him.
“Many of my prospects and clients are planning to retire soon and want to go from portfolios full of target date funds—you cannot see what is going on in them—to a more predictable, time-segmented strategy,” he said.
“We can’t predict the future but we can track the plan [created in the software], and we’ll know if we get off track and know far ahead of time to make changes to the client’s portfolio or their spending,” said Hamilton.
Flexibility, but Nothing's Perfect
Raymond J. Lucas Jr. runs the financial planning and training section of Integrated Partners in Worcester, Mass. Having been in the advice business for more than 33 years, he continues to practice with his own clients in addition to his role overseeing planning and training for the firm’s 130 advisors.
“We’ve been using it for a year, and it provides us a lot of flexibility,” Lucas said referring to IncomeConductor, though he said he has known Lubinski for far longer.
“Is it a perfect income planning tool? No, but it is probably the best one out there,” said Lucas. One thing he said was missing was being able to immediately know a client or prospect’s available investable assets (something he said was in a previous version of a similar tool developed by Lubinski that now forms part of technology owned by another firm). He added that he and his advisors can easily bring that data in from financial planning application eMoney Advisor, but that it adds another step.
On the Road Map
CEO Sheryl O’Connor said that adding additional automated account aggregation providers, for this and other purposes, is on the immediate road map. (It already has integrations with Albridge and Plaid.) Also on the road map are additional integrations with custodial platforms, something Hamilton said he would like to see as he currently uses Betterment and Interactive Brokers but wants to be able to easily use others with the software (it currently has integrations with TD Ameritrade Institutional’s Veo platform, E*Trade’s Liberty Platform and Raymond James for the daily tracking of client assets, among other providers).
IncomeConductor offers a 30-day free trial and recently repriced its software, which runs from $540 annually for the basic offering to $2,700 annually for its full premium package.
Davis Janowski is Wealthmanagement.com’s technology columnist and senior editor for wealth technology. He previously worked for Forrester Research, Wealthfront and Investment News.