The always-charming Andrew Rudd of ASI Advisor Software has a knack for making complicated subjects easy to understand (he does have a Ph.D., after all). Few subjects are more complicated than retirement income, or more specifically, creating sustainable income streams for retirees that can weather good markets and bad and potentially last 30 years or more. The company recently began a dedicated push into the RIA space, an area in which they’ve traditionally existed, but nowhere near on the order of their market share with independent broker-dealers. The expertise and solutions they bring to both are certainly worth a look.

What kind of growth has ASI Advisor Software seen in the RIA space as opposed to larger broker-dealers? 

It’s a little hard to answer because if you consider an LPL Financial or that type of firm, we’ve got a lot of exposure. But over the last six months or so, we have specifically targeted these RIA firms with marketing campaigns. I’ve been pleased to see a pretty good growth rate amongst them. We’ve been pushing our approach to goal planning and tried to come up with a simple and direct approach to understanding what an individual’s goals are and how they can be interpreted into a number of different tools for the advisor.

What was the catalyst for going into the RIA space six months ago?  Are you trying to capitalize on the wirehouse exodus? 

To some extent, yes, but I think we’re cognizant of the fact that the advisory marketplace is interconnected. There are definitely benefits for us to having the individual firms as well as having exposure to the enterprises. They both give us feedback. The trouble with being exclusively with the enterprises is that you might lose some of the insights that come from working directly with somebody who’s got their feet on the ground.

How does your goal planning fit in to the retirement income planning puzzle?

Historically, the retirement approach has been too simplistic. We see that there are three important levers that advisors and their clients can pull: how much they’re saving, which includes the length of time that they’re saving it over; the investment strategy that’s employed; and the rate of consumption of that investment portfolio. It’s an interesting problem in that you have these enormous periods over which you’re making these investments. So think of somebody who is starting out in their early 30s and has 30-plus years to accumulate and another 20-plus years, typically, to withdraw. You’re talking about an investment problem that’s a 50-year problem. That has not really, we believe, sunk into the psyche of a lot of vendors out there. By looking at a 50-year problem and thinking about it as a holistic entity,  you come up with a slightly different perspective than typically is seen.

How does it differ from regular stochastic modeling and Monte Carlo simulations?

We look at the goals as self-imposed liabilities, so we put together a balance sheet that shows the current level of resources and the present values of the goals. That enables us to identify the level of risk that individuals can have in their investment portfolios to meet their goals with their degree of precision. 

We’re effectively developing an analytical approach to what the investment policy and withdrawal policy should be, rather than basing it on some simulated characteristics. We feel that we can do a better job of modeling this long-term problem, rather than sweeping it up in a simulation basket.