“Healthcare expenses is the leading cause of bankruptcy in this country. And 95% of the people in our survey do not have any idea how much they’re going to spend on healthcare. Our goal is to help financial advisory firms to bring this cause in front of their clients so they can plan their financial future with a lot more certainty than they are today.”
— Bipin Agarwal, CEO, AiVante Health Solutions
After spending 20 years helping PE firms improve the technology of their startup companies, Bipin Agarwal decided he wanted to get into the game himself and launched his own startup called AiVante. Agarwal realized that there were huge gaps around lifetime healthcare expense information when comparing consumers’ expectations versus popular studies, and the actual costs. This became one of the driving forces behind AiVante’s technology, and I spoke to Bipin about how advisors can use his company’s analysis to grow their practices, why Fidelity’s healthcare expense data is totally wrong, and some of the biggest misconceptions that consumers and advisors have about healthcare expenses, and a whole lot more on this episode of the WealthTech Today podcast.
Come on in, sit back relax, and enjoy episode 106 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, the founder and CEO of Ezra Group Consulting. For the past 16 years we have worked with hundreds of fintech vendors and enterprise wealth management firms to guide them towards making better business and technology decisions. If your company has a software product that you’re selling to asset managers, broker dealers, RIAs, or other firms, go to our website EzraGroupLLC.com and fill out the Contact Us form. Our Head of WealthTech Research, Jean Sullivan, and her team, can deliver a wide range of market insights including competitive analysis, addressable and obtainable market estimates, sales targeting, insights on buying decisions and a whole lot more. Every wealthtech vendor needs this data to be successful, especially when entering new markets, and you can start the process of getting it by going to our website.
The WealthTech Today podcast features interviews, news, and analysis on the trends and best practices in wealth and technology for wealth management, asset management, and related areas. This episode is part of our July focus on the crossroads of health and wealth. We’re talking to the founders of innovative startups who are merging health and wealth to help financial advisors build stronger relationships, improve outcomes and enrich their clients’ lives. A quick shoutout to our sponsor, the Invest in Others Foundation, please go to InvestInOthers.org, and be sure to subscribe to our show wherever you listen to podcasts so you don’t miss future episodes.
- Charles Schwab [06:00]
- Fidelity Investments [07:50]
- LPL Financial [14:40]
- Merrill [15:35]
- Morgan Stanley [15:40]
- Northwestern Mutual [15:00]
- Raymond James [14:41]
- UBS [15:05]
- How AiVante Helps Clients Make Informed Decisions
- Selecting Retirement Location Based on Healthcare Costs
- Using Healthcare Projections for Lead Generation, Asset Allocation
- How Tech Like AiVante is Turning FAs into Life Advisors
Craig: I’m proud to introduce our guest for this episode of the WealthTech Today podcast is Bipin Agarwal, Founder and CEO of AiVante. Bipin, hey, welcome to the program.
Bipin: Thank you, nice to be with you.
Craig: I’m glad you could make it, I understand you’re calling in from a mountain area, where are you calling from?
Bipin: I’m calling from Colorado today.
Craig: I love Colorado, I love snowboarding out there, can’t wait to get back.
Bipin: It’s a beautiful place.
Craig: Awesome. So today, we’re really excited to get you on the program. We do a lot fo research at my company on disruptive firms and disruptive trends in the market, and one of the trends we found is the overlap of healthcare and wealth management. So we’re really interested in firms that we see as leaders in the space, bringing new ideas and capabilities to enterprise wealth management firms, which is why we targeted AiVante and I’m glad you could make it. Could you give us your 30-second elevator pitch for AiVante?
Bipin: Well, healthcare expenses for most Americans is their number one or number two expense. It is the leading cause of bankruptcy in the country. How amazing, that even though it is such an important part of life, most people, 95% of people in our survey do not have any idea how much they’re going to spend on their healthcare. And so our goal in life is to help financial advisory firms, financial advisors and institutions to bring this cause in front of their clients so they can plan their financial future with a lot more certainty than today.
Craig: You’re absolutely right, there’s so many people who don’t understand. A lot of it is the unknown, they don’t know what’s going to happen and they’re afraid of the information. So with 95% of people not knowing what they’re going to spend of healthcare, how does your software help for example, broker dealers, other enterprise wealth management firms deliver this information and how does it help advisors grow their business?
Helping Clients Make Informed Decisions
Bipin: So a little quick background, that was the vision. This was a huge poll taken across the country where most people don’t understand their healthcare, so we said first we need to make sure that we have the technology to really understand how to predict the healthcare costs of the people. It’s just like building technology, building machine learning, you file a patent. We just got our patent awarded a few months back, and the idea is to understand how people consume healthcare over their lifetime. As they change, their location, their age, gender, marital status and all that. We took all that data and then said, okay, fine, let’s try to understand how people consume healthcare from a benefit consumption perspective.
Bipin: Now we are able to map it, how it translates into the premium and out of pocket exposure for different people based on the stage of life. So, when you are working for an employer, your premium and out of pocket exposure is different than when you are on Medicare, or when you are buying an exchange plan. We are able to put it all together through API’s, where, if it’s a financial institution and they like to do an API interface, they can call our service, and give the information about the person and we tell them easily, how much money they need for premium and out of pocket over the lifetime. And that’s something which is incredibly important.
The one important piece for financial institutions which has been missing in the industry, and most people don’t know, or realize that the Medicare expenses are not only a function of your age but also a function of your income, because they have an entity with all the earmarks. So somebody who is married and making $150,000 their premium cost is very, very different than somebody who is making half a million dollars, and married, and how do you understand what that cost is, then there is also an RMD related to 401k. So all of those things we take into account and we are able to give our yearly cash flow requirements for the people.
Financial institutions, some of them are sophisticated, and they are able to project the income from different streams, whether it’s 401k, Social Security or other income sources, they can take all of that, and accurately predict their ERISA charge, along with other premium and healthcare out of Pocket exposure, and so they can clearly build a solid financial plan for themselves.
Craig: It’s fascinating because many advisors who are financial planning based will use very sophisticated tools to develop cash flow models for financial planning, but they oftentimes just use these very broad averages for healthcare expenses. So what’s the range you’ve seen when you’re looking at the demographic data that feeds your machine learning engine, what’s the range of seen of healthcare expenses, between different demographics?
Bipin: It is interesting question because the way we look at it even though our initial goal was to serve the majority of the population, what we find is that the people who are really able to use financial advisors, I would say the top 30 or 40% of the people, even if they are going to use intelligent portfolio management through Schwab and those kind of things, you’re looking at quite 30 or 40% of the people at the top of the country. The expense changes by expense range for these people, is predominantly based on their income, and the life expectancy and what we see that a typical advisor, I remember Fidelity had published a report saying, Okay, you put in $285,000 of healthcare expenses, which has no basis. It is not based on your life expectancy, not based on your income so it’s totally wrong. What we found that expenses could be $250,000, all the way to $600,000, depending on your income profile.
What was also missing that people don’t understand that the Medicare is not free. The second thing is they didn’t understand that, apart from planning for their healthcare expenses they also have to plan for their long term care expenses. And you can self fund it if you do it early enough, right. I remember when I was at a conference, one of the girls, 24 years old, she was asking me I said, if you stop drinking Starbuck coffee for $8 every day, right, and you save that money, do you understand that that would be enough to meet all your healthcare expenses when you’re 24 and you’re saving 365? Because by the time you’re 60, you realize, wait a minute now I need a quarter million dollars to meet my healthcare expenses. Too late, right, because you didn’t understand it, you didn’t plan to save for it, and things like that. So if you have the information, you can make an informed decision, if you don’t have the information, obviously you cannot make an informed decision.
Craig: So if I’m an advisor from an enterprise wealth management firm, and I want to take in this data, what are the ways that can help my advisors grow their business or help their clients to plan better?
Bipin: It’s a great question. What we saw there are two things right, we think some of the institutions can use our what we call is an API interface to take our data, include that into their software and things like that and they can generate some quick report. What I saw from a financial advisor perspective, they’re also using it not only as a financial planning tool, but also a prospecting tool. So, if I’m a financial advisor I find some prospects, I know their basic information I know their date of birth and the zip code they are currently living, I can make certain assumptions and create a report using our system, saying that okay, your healthcare expenses or long term care expenses are going to be this much, this is their present value, and if you are more interested, give us a call we will do a deep dive, and do a better analysis for you. So they are using it as a prospecting tool.
The second type of financial advisors are the ones who already have a client. Now what they can do is a current asset allocation. So rather than putting all the money into the stock and bonds, I would need let’s say X dollars per year to meet my healthcare expenses on an average, they can buy annuity products, or they will need to plan for the long term, they can buy an IUM product. So now, advisors can allocate that dollar among the different asset class, because they have this information that they didn’t have before.
Craig: Indeed. So, let me rephrase. So what you’re saying is that with your software, it’s able to calculate the present value of future health care expenses, and the advisor can create a goal for that, a retirement goal you need to have X dollars. On your website it says, if the client’s medical expenses might be $325,000, but the present value is $185,000 at retirement, you would set that as a goal for them, and that way what you estimate to be their retirement medical expenses will be covered.
Bipin: That’s right.
Using Healthcare Projections for Lead Generation, Asset Allocation
Craig: And that will change. Are advisors doing that now or most aren’t doing that now?
Bipin: So, we see two types of advisors, one, which are using as a prospecting tool right, where they are using our software so they get a list of the clients and they send our report to their prospects so that they can get into and start having conversations. And the second type of advisors are really using it for asset allocation, like exactly what you’re saying. Somebody who’s 50 year old, let’s say has a half a million dollar in assets or $700,000 in assets. Now they can say okay fine, let’s put some money allocated for long term care expenses and some for healthcare expenses, and it’s not like all or nothing. They might say okay, let’s plan for 50% of your healthcare expenses now, because you have those kinds of assets, and then we will revisit in five years or three years from now when before we can plan for the remaining part of your healthcare expenses. So they are getting this information which they are able to use now to do incremental planning, based on what they have now and what they’re likely to have in the future.
Craig: And so back to the the prospecting tool. What is the report that the advisors would send out because I think a lot of advisors are always looking for new ways to prospect and something to differentiate themselves. Every advisor sending out, you know I get these cards all the time come out for dinner and learn about retirement, but this seems to be a unique way that advisors could reach people. So what is it about the report that would attracts prospects to this information?
Bipin: So initially what they will do is send a summary report, the way the summary report is structured, it has a page number one, which will tell you here is your lifetime healthcare expenses, here’s a present value as of this year, and this is your expected long term care expenses. This is the present value of these expenses, and if they are anticipated ERISA charges they will point that out too. So that a summary report with a disclosure and all that and once they have a more detailed conversation, then they can share with them a more detailed report. So it becomes like you mentioned, come to the conference, have a dinner and we’ll talk about it, it becomes more aggressive and forthcoming, but no you don’t have to come to the dinner. Here is a three page report look at what we can do for you now, right before you have spent any time. And then let’s do a call on a dinner when we can do a personalized healthcare expense and the remaining financial planning for you. So it helps advisors utilize their time rather than a broadcast type of thing which they are doing at the dinner. This is more targeted client acquisition as opposed to a broadcast based.
Craig: That’s excellent, that’s what everyone wants. That’s really the gold standard, anybody can broadcast or buy a Facebook ad but having targeted prospecting tools, I imagine that the success rate is much higher.
Craig: So also, with your tools, and with your technology, how does this increase the AUM of advisors who have existing clients?
Bipin: Some of the advisors which we have talked to what we find interesting that most of advisors, they’re trying to figure out how to get this client to stay with them for a very very long time. If everything is stock and bonds, right, then you change your financial advisor, you move your bond and stock portfolio and you are done. Now, if you are LPL or you are Raymond James where you have access to those products, I find is more engaged and really guiding them that is not just stock and bonds it’s also the other products tech support for products, and you will see Northwestern Mutual using a lot of those tech support product and UBS using it. They become more engaged with the client so now the client has to leave them and has to find another financial advisor, it’s more involved, and I think so it becomes more of an affinity between the client and the advisor so they are able to manage that relationship for a lot longer than otherwise.
I know I changed my financial advisor from Merrill Lynch to the Morgan Stanley like 15 years back, with just a click away. I don’t like you anymore and I’m done. But if the advisor was engaged with me where we had not just stock and bonds but other products and I saw the value where rather than doing a stock putting, they’re really trying to plan my financial future, I think I would be more hesitant to change the financial advisor. So I think our product will help a financial advisor form a deeper relationship with their client and inherently then that will result into assets staying with them for a long time.
Selecting Retirement Location Based on Healthcare Costs
Craig: So your patented analytics engine, how much data does it require the advisor to gather from the client in order to deliver these targeted results, is it more than they normally gather or is it just a little bit more?
Bipin: It’s a few extra questions because a machine learning engine can do the rest of it. There are a few extra questions which we require from from the client. So for example, we might just say, on a scale of one to five and one being the best health meaning no chronic condition or prescription, and good lifestyle and things like that, five being, you have three chronic conditions and three or more prescriptions. We have a question around that so we can make an assessment of what your health status is between one through five. The second question which we require is, what is the likely place to retire. Do you know if you’re going to retire in Florida, or are you going to stay in Colorado where you are, because it can impact both your health care and long term care expenses. So those are the two I would say primary questions, we can make assumption about everything else in terms of what kind of plan you should use even when you’re retired, and you’re not Medicare eligible yet from the exchange because we have all the data. So a few more data elements, and I think that so the information, typically financial advisors should already have.
Craig: So two main questions one, what’s your health history, at a high level do you have any serious illnesses in your health history, and where do you plan to retire, those are the two additional questions, and you’re going to get a lot more information from that.
Bipin: That’s right.
Craig: So based on your data and your analytics, where is the best place to retire in terms of healthcare costs?
Bipin: It’s interesting, right, so let’s say if I take the place in Alabama right, then it is a lot cheaper there from a supplemental plan perspective and Medicare Advantage plan perspective, and more importantly a long term care perspective. There are two key decisions there one is the long term care cost, and then there is a cost related to the supplemental when you are on Medicare. And the third part I would say is in between now and Medicare, what is the health care cost. So it might be easier to have let’s say for example in Colorado Springs, to live before you’re 65, but when you are 65 maybe you go to New Mexico, but we can look at all that analysis for each county, right, because we have data. And that’s the beauty of it, if a client is saying hey you know I love to retire in Long Island, but I’m willing to look at Montana, the two extreme example. But on a click, they can just say okay, here is the likely zip code or the main city where I’m likely to retire and they can see those two costs in a fraction of seconds. You’re giving the data to your clients so they can make an informed decision and remember this is a point in time analysis, so if you change your mind, we recommend that you run this analysis every year at least. So that if something has changed in your health history or something has changed in your perspective or where you are likely to retire or when you’re likely to retire, then you should rerun the report, and you can make incremental adjustments.
Craig: The reason I like AiVante and the things you’re doing is that we feel that advisors need to be more holistic about what they’re working with with clients. They tend to be too asset focused, too investment focused, ignoring the rest of their life, whether it’s college planning, other aspects or especially healthcare. These are things that they don’t think about, but here’s an area where you can talk about where you’re going to retire, that’s something most advisors don’t necessarily ask they know when you’re going to retire, year you’re gonna retire, what your expenses are, but why not be able to tell them here’s where you should retire that’d be best for you?
Bipin: That’s right, and it is a pretty dramatic difference. I think you’re in New York right or in that area, on the East coast?
Craig: I’m in lovely New Jersey. Better than New York.
Bipin: Very expensive.
Craig: It’s expensive because it’s worth it, Bipin, that’s why it’s expensive.
Bipin: I get it, but you are making an informed decision, right, that your long term care costs in New Jersey is four times more than the long term care costs in some county in Colorado. But if you have the data you are making an informed decision as opposed to, I love it and that’s great, but at what cost?
Craig: Yes, and most people don’t do that when they decide where to live, I didn’t choose to live in New Jersey, my parents moved to New Jersey and I was born here. Well, I grew up in New Jersey. I didn’t choose it, I was just here. So most people don’t, and I don’t even know how they chose New Jersey, who knows. But, having this data I think would be helpful to see by region of the country your healthcare costs. And costs aren’t the only concern, it’s also a quality, so do you measure the quality of health care as well?
Bipin: That’s right. So in our projections particularly, it is related to the long term care. We look at it in terms of what kind of long term care and what is the cost of that. There is a base, long term care what we call is let’s say you decide that you’re going to do a homecare, then there is no issue, but when you look at let’s say the nursing home. There is a difference in quality of nursing care so we give you an opportunity, say you want, average, or there is a luxury, luxury premium, because the cost can be different. So, what we have seen, let’s say, long term care costs nursing home is $8,000 a month. But if you went to a high end long term care facility in the same area, it could be $15,000 a month, it could be twice as much, but we want you to have the data so you can make a decision that you rather spend $15,000 here or for this same $8,000 you can get a premium long term care facility in Colorado Springs, or in Wisconsin. Our goal is really that since the data is not there, people don’t have that information, to give them the information so they can make the decision.
How Technology Can Turn FAs into Life Advisors
Craig: Indeed, and the advisor becomes part of that decision which makes their relationship stronger because you’re not just a financial advisor you’re almost their life advisor, you’re giving useful advice useful information, actionable intelligence to your clients that gives them every reason why should I go to another advisor that, whether they’re cheaper or have bit different investments when this advisor knows much more about me and is giving me advice across all my life aspects.
Bipin: That’s right. I mean I hear from my people, that they work with this advisors because he is paying attention to them, not only just what his condition is, and they see it coming across in their conversation. So, and what I found what was common in those relationships was that not all their portfolio was just the stock and bonds, there were multiple products, and typically it included some kind of annuity, some kind of life insurance. So advisor was doing more than just picking the stock, and that’s why they had a deeper relationship with their clients.
Craig: Another aspect of your technology we were talking about earlier was that you have the ability to measure healthcare costs but not just for individuals but for companies, and that you can show a small business where health care costs is a huge factor I mean I’ve run a small business. I’ve got a bunch of employees, and healthcare as it is it is a big cost for us, so you can measure healthcare costs across 3,000 different counties and tell a small business where the best place is to locate. Is that an accurate description?
Bipin: That is very correct actually and also what happens is that even within the same county, somebody can choose the healthcare they can buy it from a PEO, or they can buy directly from the insurance company. But they also can say, Okay, I’m not doing any of that, I’m offering this much money to my employees, and they can buy the plan from the exchange. There is no tool in the market today for employees, where they can make a decision or an employer to make those decisions what kind of option they should offer to their employees. Right now it’s pretty simple. I’m a small employer, I have 15 employees. I found some broker and he’s going to tell me what to buy. That broker unfortunately doesn’t have the tools that educate the employer what their healthcare cost is, how they can use the same healthcare dollar to give a better experience for their employees.
So we do that for like for example the Cobra situation is incredibly powerful, if somebody leaves an employer, and in the premium of that healthcare plan is $3,000, because there is no longer any employer discount, which was being offered. The employee can go and buy the plan from the exchange for $700, why should they pay $3,000? So, because we can provide all this data, whether it’s employers, employees, financial advisors, they can make an informed decision. That is our key, and that’s how we are leveraging opportunities to make sure that people really can give the data.
What we have seen from my employer perspective, I’ll give you an example, a large company, the large company was offering two healthcare plans, and they came to us and we were evaluating for them should they offer this third healthcare plan to their employees, and it happened to be a self funded group, it was 4000 employees. And what we were quickly able to determine in half an hour once we got all the data analysis was that okay, your total cost is $50 million. If you offer this third health care plan, your employees should choose this third health care plan, X percentage of employees, and as a result of that you the employer will end up spending $3 million more. Is that the decision you want to make? And getting that information from the traditional broker, which was one of the largest brokers would have taken months. From us, half an hour. They could they could get that information so they can make a decision on what should they do. So the kind of analysis we can offer for the brokers and employers is incredibly deep, and again, since we are so focused on business acquisition, let’s say you are a broker, and you know that this particular employer is currently using United, our system will prepare the brokers saying, Okay, if United is being offered as an insurance company, this is the health care costs for this employer. On a same basis, what would be the cost of the healthcare plan for this employer if they were using Rocky Mountain, or whatever there are 3,500 different insurance companies, and maybe 15 of them are available in that market. We will equip the broker and employer with the information so they can make an informed decision.
Craig: Excellent. Bipin, we are running out of time, I’ve got a bunch of more questions, I’m really excited about your technology and what you guys are doing but we have to wrap up. Where can people find out more about AiVante?
Bipin: There are two places www.aivante.com. They can also send us an email, firstname.lastname@example.org, and we definitely will get back and get in touch with them as soon as we get their email.
Craig: And for anybody listening it’s AiVante, Aivante.com.
Bipin: Yeah, because AiVante for us means going forward and we are helping the people move forward.
Craig: Keep moving forward, and we’re gonna keep doing that. Bipin thanks so much for your time, it was really a pleasure talking to you.
Bipin: Thank you Craig and thanks to all your listeners who would be listening and we are happy to be part of their decision making process.