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Retirement Planning Is No Laughing Matter: WealthConductor CEO

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Approaching the challenge of retirement income planning in a lighthearted fashion may have friendliness written all over it, but it’s unlikely to be an effective strategy, argues Sheryl O’Connor, co-founder and CEO of the technology firm WealthConductor, in an interview with ThinkAdvisor.

“Retirement income planning is a deadly serious topic,” she says. “It’s scary.”

Engaging people through “games or funny videos” is “really insulting” — “and it isn’t going to help people save more,” she maintains.

What pre-retirees want, surveys show, is a written customized plan that gives them confidence they’ll conquer their “two top concerns” in retirement: the cost of health care and outliving their money, according to O’Connor, winner of two 2021 ThinkAdvisor LUMINARIES awards in Executive Leadership.

Advisors who specialize in the retirement planning distribution stage “are going to be the ones benefiting from the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services,” O’Connor says in the interview.

“This represents the biggest opportunity that advisors have seen in at least 30 years,” she notes.

WealthConductor’s prime offering is its platform IncomeConductor, which supports advisors with an income distribution strategy customized to a client’s needs and goals. 

Further, it helps advisors position themselves as specialists in retirement income distribution.

The online software is available to them on a subscription basis.

IncomeConductor pivots on the strategy of “time-segmented milestones,” devised by O’Connor’s partner Philip Lubinski, a veteran certified financial planner who developed the strategy of bucketing assets, she says. 

The firm’s third co-founder is Tom O’Connor, chief marketing officer.

Because client and advisor collaborate on building the IncomeConductor plan, clients “are more likely to adhere to it,” Sheryl O’Connor says.

Before launching Hartford, Connecticut-based WealthConductor in 2017, she co-founded 3D Asset Management, an RIA where she built a turnkey asset management program designed to let advisors completely outsource their back-office administration.

Earlier — from 1998 to 2004 — she was with The Hartford and MassMutual.

In the interview, she describes IncomeConductor’s distinctive features and benefits — including sending alerts to advisors that “there are opportunities to take some risk off the table” — and how it differs from other bucket strategies.

A former schoolteacher, O’Connor is taking the industry to task for not “evolving correctly.”

“It is sticking with the old way of doing things. But we have to move forward and realize that retirement is different today,” she says.

“We can’t keep using the tools and strategies that we used for our parents’ generation for [today’s] generation,” she stresses.

Speaking by phone from South Windsor, Connecticut, O’Connor says: “There’s a lot of talk in the industry about financial wellness, financial education and client engagement. Those are great goals.

“But I don’t see anybody doing them really effectively,” she says.

Here are highlights of our conversation:

THINKADVISOR: What aspect of retirement planning is most critical for advisors to focus on today?

SHERYL O’CONNOR: Because of the huge wave of baby boomers going from a working career into retirement, we’re experiencing the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services. 

Therefore, people are looking for advisors to provide retirement income planning services.

This presents the biggest opportunity that advisors have seen in at least 30 years.

Advisors that specialize in this area are going to be the ones benefiting from the big change of assets from accumulation to distribution.

How can they approach this in the most effective way?

Retirement income planning is a deadly serious topic: People are starting a whole new phase of their lives full of unknowns. It’s scary. So the best way to engage them isn’t through games or funny videos. That’s really insulting.

Gamification isn’t going to sustain somebody’s interest and get across what they should do. It isn’t going to help people save more.

Why is being assured of a secure retirement so challenging?

Today’s retirees have to rely almost solely on Social Security benefits and what they’ve managed to save in a 401(k) plan or an outside account, or maybe an investment in property.

They’ve been entirely responsible for preparing for retirement. It used to be the company [they worked for] would be responsible [through a pension]; now it’s on the individual.

Aren’t the many fintech companies helping them?

There’s a lot of talk in the industry about financial wellness, financial education and client engagement. Those are great goals. But I don’t see anybody doing them really effectively.

[The industry] is sticking with the old way of doing things because it’s easy. But we have to move forward and realize that retirement is different today.

What’s the implication of that?

We can’t keep using the tools and strategies that we used for our parents’ generation for [today’s] generation.

What fundamental change does this require?

Financial advisors and firms aren’t evolving correctly. They’re looking at important things like longevity and health care in isolation instead of as a part of a systematic whole.

Who must trigger the meaningful steps to move forward?

Firms need to lead the way. People who are at the helm of large BDs, large custodians or RIAs are the ones that have to say, “We need to make this change.”

Are clients aware of what could help them in the spending phase of retirement?

Today’s retirees and pre-retirees have repeatedly told us through surveys that they want the confidence of a written plan. Their two top concerns are paying for health care and not outliving their money, and they want written proof [that they can meet those goals].

But the industry has been giving them basically what they gave their parents’ generation: “Take 4% out [of your portfolio] a year — or whatever.” 

Today’s retirees want a written plan, and they want it customized for them.

Does your firm’s software, IncomeConductor, help? 

It provides that customized written plan and thereby gives advisors the ability to attract clients and grow their business.

It allows the advisor and client to build a written income plan together and test various scenarios and assumptions in real time to see how they impact the plan.

Any added advantages to IncomeConductor?

While doing this, there’s an opportunity for the advisor to educate the client on inflation risk, longevity risk, the impact of spending choices, their health care expenses and Social Security claiming strategies.

Because they [co-]build the plan, clients understand it and are more likely to adhere to it.

How does IncomeConductor differ from typical bucketing strategies?

Usually, the assets are divided into cash, very conservative investments and equities. The problem is deciding when to move the assets among those buckets and how much should be moved in, say, a down market vs. an up market. There are many variables.

And IncomeConductor seeks to solve that problem?

My partner Phil Lubinski, CFP, developed the concept of segmentation, or bucketing. With IncomeConductor, his strategy of “time-segmented milestones” calls for a very precise segmentation of assets based on the client’s individual income needs every year.

Then it presents a very disciplined implementation of those segments.

What are the key benefits of using this strategy?

[For one], you would very easily be able to deal with high inflation.

It gives the advisor and client a very structured process on how to distribute the money using highly efficient and compliant technology.

Most of our advisors [clients] use a combination of both worlds: the guaranteed insurance world and the Wall Street world. IncomeConductor brings them together in a harmonious existence, where the client can see what’s in the plan and how each product is supporting it and developing their income.

How old should a client be for an advisor to broach the subject of retirement planning?

They should do it as early as possible. Surveys say that millennials in their 30s are more concerned about being ready to retire than are baby boomers.