#ItzOnWealthTech Ep. 61: Reimagining Retirement Planning with Abraham Okusanya

“I came to a simple realization that the way we do retirement planning sucks! The user interface, the application of evidence and data to the decumulation process was, to put it mildly, practically nonexistent.”

–Abraham Okusanya, Founder and CEO, Timeline App

Abraham is the founder and CEO of Timeline App, the next-gen retirement income software used by financial advisers to create and manage sustainable withdrawal strategies for their clients. As well as the book, ‘Beyond the 4% Rule: the science of retirement portfolios that last a lifetime‘, he has authored several industry papers and delivered talks to the Financial Conduct Authority (FCA), Chartered Insurance Institute (CII), Personal Finance Society (PFS), The Association of British Insurers (ABI), Chartered Institute for Securities & Investment (CISI) and several conferences in the UK, US, Ireland and Luxembourg.

He holds a Master’s degree from Coventry University and an alphabet soup of designations, including the Investment Management Certificate (IMC), Chartered Financial Planner and Chartered Wealth Manager.

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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.

Companies Mentioned

Topics Covered in this Episode

  • History of Timeline App
  • What’s Wrong With the 4% Rule?
  • What’s Your Differentiator?
  • Timeline User Survey

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Complete Episode Transcript

Craig: When Abraham Okusanya read Bill Bengen‘s now famous 1994 paper that created the 4% rule for retirement spending, he had an epiphany. You can’t assume a one-size-fits all withdrawal rate for everyone, highly personalized and tailored approach was required. And the idea for his company Timeline was born. I spoke with Abraham about some of the challenges he overcame when launching his startup, some of the best practices he learned managing a staff that was distributed across multiple countries, and a whole lot more on this episode of the #ItzOnWealthTech podcast.

Thanks for joining me here in the wonderful world of wealthtech. I’m your host Craig Iskowitz, and I run a consulting firm called Ezra Group. We’re experts in everything related to wealthtech. We deliver growth oriented solutions to enterprises all over, including banks, broker dealers, asset managers, as well as our technology providers, FinTech firms, wealthtech firms through our advice and research. On this podcast, I speak with some of the smartest people in the industry who are on the leading edge of technology and innovation.

I’d like to welcome to this episode of the Wealth Management Today podcast Abraham Okusanya, the founder of Timeline app. Abraham, welcome to the program.

Abraham: Craig, thanks for having me. It’s an honor to be here. I’ve followed your work for a while, so it’s great to be on the podcast.

Craig: Thanks Abraham, it’s a pleasure to see you again. We last saw each other at the T3 Conference, way, way, way back in February.

Abraham: It seems like a long time ago now, doesn’t it? The world was in a very different place.

Craig: I know you’re in London now, and I was just in London in the beginning of March visiting my friends. It was after T3 Conference. Yeah. And then we took my mother, my dear old mum to London for a short trip, a long trip, which was cut short by the crisis. And we got to see my daughter, who’s going to university there, and then we had to head home a little early, unfortunately, and we’ve been stuck at home ever since.

Abraham: Yeah. It’s a very different world than March, but you know, we’re still here, which is good.

History of Timeline App

Craig: We’re all still here. Exactly. So can you please share with the audience a 30 second elevator pitch for Timeline?

Abraham: Sure. Yes. So, Timeline is the next gen retirement income platform. Essentially what we’ve done is recognized that retirement distribution is a unique aspect of retirement, and one that needs a different set of theories and ideas from the accumulation phase. So what we’ve done is we’ve put together the extensive research behind the sustainable withdrawal rate framework. We’ve taken this body of work and we’ve blended the two together to create what is an incredibly powerful platform that helps financial advisors apply this body of work to the decumulation or the distribution end of the retirement journey. So that is what we are in a nutshell.

Craig: How did you get involved in this? You’ve got a pretty good history in financial services. I mean, you were a Barclays, you were at RBS. So quickly, how did you get into financial services? Why did you pick Barclays and banking when you first started your career?

Abraham: That’s a very good question. So I was recruited out of university if you like, to work in financial services, and the first place I worked was was Barclays, ultimately moving on to the Royal Bank of Scotland or the RBS. Eventually I set up my own consultancy. So I had that entrepreneur itch as they say, and I had to scratch it. I set up a consultancy that over a seven year period walked with financial advisors and institutional clients in the UK here. And I came to a simple realization over that period of time that the way we did retirement plans in socks, right? The interface, the application of evidence and data to the decumulation process was, to put it very mildly, practically nonexistent.

There was in 2015, a change of regulation in the UK around retirement distribution. So we have this thing in the UK called the pension freedoms, which effectively changed the access that people had to their retirement reports when they reached the age that they wanted to start spending the money. And so I did a lot of work, a lot of consultancy work for financial advisors and institutions around this. And it was that experience that frankly cemented my view that if you think of the demographic change that we’re seeing right now, right across the world and there is just the need for technology to play a bigger role in helping financial advisors and their clients think about unstructured their distribution far more effectively, and hence began that journey to create.

Craig: So what was it specifically about your experience consulting? I’m a consultant myself, so I understand you get to see a lot of different things, which is what’s great about being a consultant. You get to work with lots of different companies and see interesting stuff. So what was it specifically working with what kind of advisor that piqued your interest in distribution, retirement distribution of all things?

Abraham: Thank you. So if you think about it, the walk around distribution, certainly in financial planning, goes as far back as 1994, when the man by the name of Bill Bengan wrote his first paper, which we now know as the 4% rule. So back in the 1990s Bill published that body of work, and there’s been several additional contributions to that body of work. Both by financial planners, and researchers. Financial planners, like Jonathan Guyton and my friend, Michael Kitces, contributed to that body of work on the sustainable withdraw from work. So what I found was that on one hand you have this research that was created by financial planners and researchers around the distribution phase of retirement.

Advisors are broadly aware of this framework, but they don’t necessarily apply it when it comes to actually planning their clients’ distribution phase of retirement. And part of the reason indeed one of the reasons for that, is that in financial planning software we’re completely disconnected from the research. You know, if you think about, not to knock any of the big traditional financial planning softwares out there, this these tools weren’t designed or created necessarily to help advisors apply evidence or data to the retirement income process, they were designed essentially to sell financial products. And as we know, the business model of financial advisors has evolved over time, and today we are vast majority of advisors essentially providing long term wealth management and planning that spans decades with clients.

So what I saw was this disconnection between research and evidence and data and its application. And I was looking for software tools to help get some concepts across to the advisors that we were working with, and I found nothing in the marketplace. I decided that – actually, it started with me thinking, well, I’m going to do this research and I will publish these articles and share with our clients. But ultimately they say to me, Oh Abraham, what if you made this change? What if you made this change? Does it change the results? And I’ll go back to my Excel program and I’ll make the change and all that.

And this process of going back and forth, I thought, why don’t I make my Excel program to the financial advisor so that they can tweak it and make their own changes and see the result. Ultimately that journey led me to creating what was the first MVP version of Timeline, which we put out May of 2017. And then it was my friend Michael Kitces said to me, You know what, Abraham, I think we’re having the same problems here in the US as you guys are having in the UK. There’s a lot of misconception about the sustainable Drori framework and the research behind it. And none of our software allows advisors to apply this really extensive body of work to their client’s unique situations and circumstances. So I said to my team, well, what have we got to lose? Let’s adapt the software for US audience. And we’ve now since gone off to do the same for Canada and a few other countries as well. So that’s the journey that led us here.

Craig: Well I’ll say, if Michael Kitces likes your software, you’re already in good shape.

Abraham: Thank you. Yeah. And Michael is obviously an advisor on the board of the company.

Craig: Oh, I didn’t know that.

Abraham: Yes, he is. Yes.

Craig: Fantastic. Well, even better, I should have you on my podcast. How big is your team Abraham?

Abraham: So we have a team of 26 today. Most of those obviously developers, but also a marketing and sales team.

Craig: Terrific, are they all in the UK?

Abraham: No, no. Last time I looked at this, we had team members in six countries. So obviously the UK and France, and we have a couple of developers out in Argentina, so we’re a global team. And again, that’s one of the things that I like about what we’re doing at Timeline, because we’ve got that diversity. The diversity of thoughts, and the idea that we can bring together different points of view and different backgrounds, to what is indeed a global problem. So, although from a clientele point of view, obviously we’re focused on the UK and the US markets. Distribution indeed is a global problem. There was a paper published in 2019 by the World Economic Forum, and basically the paper says something along the lines of, your typical retiree is on track to outlive their savings by about 10 years across developed world. So it doesn’t matter whether you’re in Europe, or in the US, Japan. The problem is very similar in each of these countries and that is that people are going to run out of money unless, of course, they get help from financial advisors and who have the tools and technology to support them through that distribution.

What’s Wrong With the 4% Rule?

Craig: Let’s talk about the distribution phase and your software. Why can’t advisors just follow the 4% rule and make it easy. Why is that a problem? Why is that something that advisors shouldn’t do? Why should they use your software instead?

Abraham: This is a very good question. So one of the things I say to people about the 4% rule is that I have since realized that only about 4% of people understand it. Mainly because obviously, people have different definitions of what the 4% rule is. So I’m happy to shed some light on this if it helps, but to answer your question specifically, the 4% rule was designed based on basic sets of parameters. So I’ll give you those parameters and you can tell me whether we can apply this to everyone. So the fundamental point being let’s start from the portfolio, the underlining portfolio that led to the 4% rule is a 50/50 US equity bond portfolio. So 50% in US, total market and 50% intermediate government bonds.

Right? So that’s the first thing, the portfolio. Then the second thing is it’s based on a single horizon of 30 years. So based on effects, years, retirement period, and then it doesn’t account for fees, right? So it doesn’t account for fund expense ratio or the advisory fees. And then the fourth thing is that it’s assumed that withdraw is going to increase in line with inflation or cost of living every single year, regardless of your portfolio performance in each year. Right? So if you just take those four parameters, well, it’s obvious to me, as well as frankly, to anyone that, of course people retire at different points in their lives. Not everybody retires at 65, so that 30 year time horizon wouldn’t work for them.

Then you have the issue that people have different portfolios, right. In terms of different asset allocation, and then there are fees. The minute you change any of the underlining assumptions on which the 4% rule is based, essentially the lesson from this is the framework itself is actually very strong, very robust. But we need to apply that to each individual based on their retirement horizon, they might want to spend differently than just this tactic 4% of the initial balance. People have different requirements at different points in retirement. So one of the most popular spending rules was created by Jonathan Guyton. And if you take any of these additional bodies of work, you can actually optimize the withdrawal strategy or the outcome for the clients. And so the point being that we can’t apply the 4% rule blindly to everyone, we we have to personalize the framework to each individual’s needs and circumstances and preferences. And taxes as well.

What’s Your Differentiator?

Craig: So there’s a lot of products out there that do distribution retirement income planning. What’s the differentiating factor for Timeline?

Abraham: Thank you. That a very good question. So I guess so far it’s clear that one of the cost trends of Timeline is that it’s based on evidence, it’s based on data, it’s based on a robust body of work that are probably in peer reviewed journals including the financial planning journals. So one key strength of Timeline is the fact that we’ve built the technology based on an extensive body of work that has been peer reviewed, and it’s robust and defensible. So that’s the first thing. The second thing then goes back to the additional work that we’ve done, which is it’s one thing to create a retirement distribution with strategy with clients. It’s another thing to automate the process of reassessment of that plan.

All right. So one of the new features that we introduced earlier this year is something called Livetrack, which essentially shows that the minute you create the plan and you walk away from the plan, Livetrack takes over and constantly updates the plan by pulling data from your CRM system and reassessing the plan, and then sending actionable alerts back to the financial planner. So I guess it’s this combination of robust empirical data, and an evidence based approach and that approach to ongoing and reassessment and demonstration of the suite’s ability. You know, those are the you core differentiators for Timeline.

Craig: And that’s one of the things I noticed, and I agree that is a huge differentiator. I’ve really never seen that in many programs, I think there needs to be more of that. Most of the financial planning tools we have on the market don’t provide those kinds of alerts. They generate a very complex plan, very robust plan, but there’s no ongoing monitoring. It’s sort of whenever the advisor goes back and checks, but lots of things could have changed between the time you created the, and the time you happen to go and check it.

Abraham: Absolutely. So, what you would find in many of those types of retirement platforms is that the planning becomes almost reactive so to speak, so the process is, well the client calls up the planner during a stressful market condition, and then the planners go to look at the plan and it goes back and forth. We’ve, re-engineered that process or re-envisioned our process to say, well, actually you can say it to the client. Look, we’re going to track this. We’re going to use technology, just like a pilot uses an autopilot, we’re going to track this. There is an ongoing reassessment, and so if anything goes wrong or the plan is no longer on track, well, it wouldn’t be the planner who’s checking on the plan. It will be Timeline notifying the planner and saying, well, actually this plan needs a little bit of attention from you. And then offering suggestions as to how they can amend the plan and get the plan back on track. So that automated process is very key to all we do.

Craig: I like how you have guardrails that you can set up to say, give me an alert if the withdrawal rate falls by more than X, or if spending increased by more than Y. Those are those very interesting details that most softwares that I’ve seen don’t have the ability to set those kind of guardrails.

Abraham: Thank you. And I can’t claim credit for the guardrails. You know, the idea of the guardrails actually goes back to financial planner Jonathan Guyton, who still very much runs his own practice today. He published a paper on the guardrail framework. So, I’ll have to give Jonathan Guyton the credit for guardrails, but we took that idea and we added a couple of improvements to it. And you know, it’s by far the most popular dynamic with the withdraw framework that financial planners use in Timeline.

Craig: So do you link into any data aggregation tools to pull in client spending from credit cards and bank accounts?

Abraham: So we are the very early stages of that right now. So yes is the answer, but we are very much at the early stage of building those capabilities out. We’ve spent the initial part of our development, in terms of integration, with CRM systems, like BlackDiamond and Redtail in the US. And then we started integration with plans, so the idea behind that is that through the integration we applied, we can bring in the client’s actual spending into the conversation. And this opens quite a fascinating set of opportunities where we can track the client’s spending, their actual spending, against their intended spending. And we can compare and contrast that and use that to drive outcomes and behavior. And some of the things that we’re doing in this space are quite fascinating. You can use this type of tracking to spot elderly financial abuse. You can use it to prompt withdrawals and savings, so fascinating work. But this is still very much at the the development stage for Timeline.

Timeline User Survey

Craig: Shifting gears, before we run out of time, time and Timeline, and talk about your user survey, the first annual Timeline app user survey, which I was wanting to talk about some of the statistics and the results that came out of that survey. So you’ve got a global base, 74% are the UK, but the other 26% are spread out around the world, US, Ireland, Canada, New Zealand. So how does having a global focus, help your product to grow?

Abraham: I think the beauty here is that we can share best practices across these different countries so I’ve spent quite a bit of time in the US speaking to US advisors. And of course, I know the UK advising like the back of my hand. And so every time I speak to US advisors, this is how I put it to them and I say, well, in terms of technology you guys are ahead of the UK by about a decade. When it comes to client outcomes and regulations and standards and ethics, forgive me, I think we’re ahead of you by about a decade. And we can argue this back and forth. And so for us, these trends that we can cross pollinate ideas, we can take learnings from US advisors and the US technology scene, FinTech scene and bring some of that to advisors us in the UK to lift and improve the work that they do and vice versa. We can take some of the ideas in terms of client outcome and standards and ethics and we can bring some of that into the US. This is what fascinates me, and give me any the name of any financial planning software that can share insights inside from not just advisors, but also client outcomes in the way that Timeline is set up to. I think you would struggle.

Craig: Looking at your data. You’ve got about 45-50 advisors who have been using Timeline app a year or more versus a year or less. What difference do you see between those two groups? How do they change their usage of your program after they’ve passed the year threshold?

Abraham: That is a very good question. So in the early days in, the first year, we find that advisors need quite a bit of support from us. They need support in understanding obviously the technology and how to use the technology, but they need advice and support in terms of understanding the actual research behind Timeline, the data, the research behind timeline. And so what we’ve done is we’ve built a digital academy and there are three programs in the digital academy, and what these programs do is they offer advisors a self directed way of understanding the science and data behind Timeline, how to have conversations, how to use the platform in their conversations with clients out to use Livetrack to automate the reassessment process, the suitability process.

So we find that those users in year one tend to need a lot of help and support from us. And then once they pass that milestone, they almost become not just an advocate for Timeline, but they’re giving us feedback about their interaction with clients, what part of the software they like to see improvement in and so the relationship changes slightly as they become sort of advocates of the software.

Craig: I was interested to see that there is a percentage, a small percentage, but 17% or so of your advisors who are using Timeline app are using it for prospecting and acquiring new clients. How do they use your software that way?

Abraham: Yes. So one of the things that Timeline allows you to do is to compare and contrast outcomes. So let’s say that Mr. and Mrs. Miggins were working today with their Roth IRA and the traditional IRA and all that stuff, and their current portfolio. Let’s say they come in and say, we’re going to retire based on the 4% rule. And let’s say this couple are in their fifties, for instance, their late fifties. So what the advisors can do very, very quickly is to just put all of that information in Timeline and show them what the result looks like, and then the advisor can go one step further and say, well, actually let me create a value add plan.

So how will this plan change if I a) recommend a different sets of portfolios, b) apply the guardrails, dynamic draws strategy, c) if I look to optimize taxes so I coordinate which account or tax wrappers you spend money from a different points. If I show you what the journey looks like without my help versus with my advice and my help, you can see very, very clearly in Timeline, the value that the advisor brings to the table. And so, yes, I was surprised to see that 17% of advisors use it as a perspective tool, I would like that number to go up a little bit, more of vast majority of advisors obviously use it to deepen their relationship with the clients.

Craig: This has really been enlightening for me. Thank you very much. We’re out of time, thanks for being on the program all the way England. I know we had to work out our schedules here and I’m glad we could align things. And I look forward to seeing you at the next conference whenever we’re allowed to be in person again.

Abraham: Looking forward to it, thank you very much for your time, Craig, keep up the good work. Thank you.

Craig: Thanks you too. Take care.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com