[The Institute for Innovation Development interview series invites innovation experts, innovative business leaders and emerging FinTech companies to talk to our readers about their latest innovation activities. The series seeks to learn from innovative business creators, uncover innovation best practices, and apply these insights into a financial services business model.

We recently sat down with Michael Roth, Chief Strategy Officer of FinTech company RetireUp – a retirement income planning software-as-a-service (SaaS) provider – to discuss innovative new tools and strategies they have developed which address the DOL-inspired changes needed in the retirement income field for financial advisors.

Hortz: Do you see the recent DOL ruling driving a change in the way advisors will have to interact with their clients?

Roth: Yes I do. The interaction between the advisor and the client is destined to become increasingly client-centric. Instead of a cookie cutter approach, the advisor will have to dedicate more time, energy and resources on each client to provide a thorough retirement planning process and an efficacious retirement plan.  The immediate consequences and practical responses to the DOL rule, we feel, will be driving advisors to implementing thorough and repeatable processes within the framework of prospecting, advising and operating a fiduciary grounded financial planning practice. This heightened level of process demands technology tools that are robust enough to provide structured support yet do not add complexity to the advisor’s day-to-day practice.

Hortz: Based on that, can advisors also use your retirement income planning software and service as a fiduciary compliance tool as well?

Roth: Yes. RetireUp provides the ability for the advisor and the client to interact around different retirement risks and assists in demonstrating how to fill any gaps as a result of those risks. RetireUp also allows the advisor to easily document any key points of conversation or specific rationale for why the advisor and client chose a specific course of action.

Hortz: You have expressed concerns about the industry’s reliance on financial planning and risk tolerance questionnaires and advocate replacing or complementing them with a collaborative planning process like the one you have developed with RetireUp. Can you explain that process and how that addresses the DOL ruling?

Roth: Financial planning or risk tolerance questionnaires do add a level of value. However, the issue with these questionnaires is that they are static where a collaborative planning process is dynamic. RetireUp is a deeper version of the financial questionnaire. We address the needs analysis and risk questions needed in a way that provides a fuller financial picture of the client, as well as, allows for ad hoc changes within the client’s retirement plan. We are concerned that the client’s stand alone answers to standard questionnaires may vary based on market conditions, current client mood, changing goals, recent popular press articles, etc.  An advisor using our narrative and visual process actively works with a client to communicate their current financial plan, demonstrate what their plan may look like in different scenarios, and then the advisor involves the client in determining what course of action they should take with the retirement plan. In regards to the DOL, RetireUp acts a bridge between the advisor and client so they take the best possible course of action for the retirement plan not only in regards to monetary goals but also customized to the intrinsic goals of the client (I.e. increased income stability at retirement may be of greater value than a higher ending asset value).

RetireUp is a dynamic needs analysis tool gathering financial planning and risk parameters of a client, but you also have the psychology of the client in real time while you are doing it. That higher level of engagement and understanding of the client’s needs should provide more support in addressing the DOL ruling and concerns.

Hortz:  How does your visually designed narrative process add to the financial planning experience with clients? How does it help create - as you have described - “light bulb” moments?

Roth:  Instead of just providing information, RetireUp also allows the client to be fully involved in their retirement income narrative. Instead of an advisor simply saying yes or no to the client’s different goals, needs and desires (i.e. can I afford this goal, can I retire at an earlier age, etc), RetireUp provides the advisor with tools to interactively communicate and explore the risks or the sacrifices around the client’s specific goals, needs and desires. The client can then play a part in what they are willing to do on their end.  We designed this narrative process to be heavily visual, to enable clients to better see the impact of their decisions. Science has shown that images flow 60,000 times faster than words or text. You are giving information to the brain more effectively and creating better understanding. This sets up the potential for what we call “light bulb” moments to happen – where the client is fully engaged, can clearly understand the choices and consequences they have to decide on.

Hortz:  You have mentioned how RetireUp can also help advisors redraft the conversation around investment vehicles in their retirement income strategy? Can you further explain this?

Roth: RetireUp facilitates a deeper conversation between the advisor and client. The tool identifies the risks, needs and goals of the client, communicates how specific investment vehicles respond to different variables, and how that response will affect the client’s retirement income. Thus, the retirement income strategy that is implemented will be built on knowledge around the client’s goals and what investment vehicles will help facilitate in reaching those goals.

For an example, while we do not promote annuity sales, we do list annuities as a retirement income option, describe what an annuity does, and accurately communicate that to a client. We build in the specs and fees of the annuity with the main goal of putting everything on the table in the retirement conversation. The problem traditionally is the client and/or the advisor may come to the table with assumptions based on what they were told by the media or common practice (this product is too expensive, etc). Thus, the advisor or the client may have inadvertently eliminated the best investment solution before the retirement discussion even started. Including a diversity of investment vehicles allows the investment advisor to then ask the questions: what is the value-add of the specific vehicle based on you and your goals Mr. Client? What are your priorities? And every client’s priorities are different; not just quantitatively, but also qualitatively.  RetireUp categorizes these options. What’s most important to the client:  ending estate value? or income stability? If income stability, what can I do to increase it?

Now, the advisor is having a conversation around a client priority and they may be willing to accept an added cost to gain the greater security of income in retirement. Another client may say asset value is most important to me so I will never pay for an annuity. With this discussion the advisor allows the client to have the authority to make the decision of what is more important to them versus commandeering the conversation beforehand.  RetireUp is product agnostic but also wants to be thorough in providing the client with an array of investment options , full disclosure and costs associated to make an informed decision with their advisor.

Hortz: Tell us about your patented income stability ratio in your software. What does it allow you to determine that other income planning tools cannot?

Roth: It is not a Monte Carlo. The Income Stability Ratio communicates how much of the client’s income is protected from market volatility. In other words, any income that is autonomous from the market sequence risk. The trademark tool allows the client to understand the concept that it matters when you retire within the market sequence. As a result, the client now has the knowledge to play a part in determining how much of their retirement income they are comfortable having at risk to the market.

Hortz: Can you give us examples of different kinds of cases or unique applications you see advisors have been successful with using your software and process?

Roth: Successful and unique applications of RetireUp range substantially. The advisor may use it to demonstrate the value add of a specific life insurance annuity, or to demonstrate the impact of taking care of an elderly parent while supporting their kids at the same time, or to communicate the impact a pension annuity compared to a lump sum payment may have on their retirement.

Whether at the advisor level or the institutional level, RetireUp’s visual narrative is used as the most powerful and impactful aspect of our offering - even for a highly numerical, quantitative personality. The advisors and their clients respond positively to our ability to demonstrate the interplay of scenarios and choices and what happens as the most likely consequence. Our software can answer very complex questions in complex plans through an easily understandable lens.

Hortz: Can you share what you are working on and learning in your Research & Development efforts on your team and what are your plans to build on your software to remain cutting edge?

Roth: We are looking to capitalize on the massive growth that is taking place in the machine learning space where RetireUp will take even greater strides in being the conduit to this technology for advisors. We also are adding tools focused on the fiduciary landscape, which will ultimately position RetireUp to be more of an end to end solution.

Hortz: What is your best advice for advisors in the retirement income space?

Roth: Clients want the advisor to simplify the retirement message so they can understand the issues and can feel secure in their future. They do not want an endless list of decisions to be made but they want a retirement framework in which they are a part of but not burdened by. Clients want the freedom and autonomy to make decisions on topics that are at the height of their priorities and concerns. Providing clarity and an understandable strategy to get there is the value that the advisor is offering.

The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).