Ep. 194: Say Goodbye to Uncertainty: Embracing Reality-Based Retirement Strategies with Sheryl O’Connor, IncomeConductor

Come on in and sit back relax, you’re listening to Episode 194 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting and this podcast features interviews, news and analysis on the trends and best practices all around Wealth Management Technology.

My guest for this episode is Sheryl O’Connor, from WealthConductor. Sheryl founded this provider of retirement income planning software back in 2017. Sheryl has over 25 years in the financial services industry at insurance and investment management firms, leading strategic business growth, and technology innovation. Back in 2006, Sheryl co-founded 3D Asset Management, an SEC registered investment management firm focused on providing innovative practice management solutions along with investment portfolios, fee-based advisors to help them grow their business.

But before we get started, if you are an executive at a broker-dealer, enterprise RIA, family office or a TAMPs, your tech debt is holding you back. Your old software platforms are rusty and falling apart and they need either a complete overhaul or to be replaced entirely. Your disparate systems don’t communicate with each other and it’s driving your operations staff and advisors crazy with manual processes and other errors. If this describes your company’s tech infrastructure you should run, not walk to our website, EzraGroup.com and fill out the Contact Us form on the home page. Our experienced team can evaluate your technology ecosystem, deliver targeted recommendations, optimize your existing systems and operations, or run an RFP or RFI to help you implement new software to help take your firm to the next level.

Please subscribe to this show wherever you listen so you don’t miss an episode. Now let’s kick this thing off!

Topics Mentioned

  • Using Data Analytics to Improve Client Experience
  • Reality-based strategies versus probability-based formulas
  • Approach to retirement income planning and time segmentation
  • Addressing risks in retirement planning
  • IncomeConductor Integrations
  • HealthView Services and the importance of longevity projections
  • Upcoming features and roadmap

Episode Transcript

Craig: I’m happy to introduce our next guest on the program is Sheryl O’Connor, CEO and co-founder of IncomeConductor. Cheryl, welcome to the program.

Sheryl: Thank you Craig. It’s a pleasure to be here.

Craig: We are happy to have you on the Wealthtech Today Podcast. Can you please give us a 30 second elevator pitch for IncomeConductor?

Sheryl: IncomeConductor is a B2B technology platform that focuses on retirement income planning. It provides a strategy that gives individuals the confidence they want to retire and the peace of mind throughout retirement. It also gives advisors and firms a way to really differentiate themselves and grow in this highly competitive but lucrative retirement planning marketplace. Just to lay the groundwork here, we are not a full financial planning tool like eMoney or MoneyGuidePro, but we act as a compliment to those softwares. Advisors continue to use them and they turn to IncomeConductor when they start working with a client on a retirement income plan or want to land a new prospect who’s interviewing clients for plan in retirement. It’s very intuitive and it allows the advisor to engage their client in building their own customized income plan.

Because the software is very dynamic, it allows them to see how new data or changing an assumption impacts the plan in real time. It’s very engaging, very graphical, very well understood by clients. Having a written plan, not just a probability of success, as most softwares provide, is really critical in understanding how that plan is performing throughout retirement. Once the client’s plan is approved, the advisor can link the underlying accounts and products into the plan for daily valuation and tracking. We have several direct integrations with custodians, other wealthtech advisory platforms and aggregators such as Albridge and Plaid. Then Income provides a dashboard with analytics and business intelligence based on current account and position values, and sends automated emails to the advisor that alert them about opportunities to protect the client’s future income stream. It gives one click client review reports, and the advisors and clients really know exactly how the plan is performing every day and gets the data to them that they need to make important decisions. As things change, markets change, tax laws change, the client’s needs change throughout retirement.

Using Data Analytics to Improve Client Experience

Craig: You touched on a couple areas there, Sheryl, that I want to talk about a little bit later. I definitely want to dig into a little bit more about how your software works, the planning in real time and more than just a probability of success, I’m interested in that. I’m interested in your integrations, as you just talked about. But before we get there, I want to talk a little bit about data analytics and how IncomeConductor is dealing with that, how you’re helping your clients with that. Because it’s a problem all across the industry. Here at Ezra Group, we do a lot of work around data assessments, understanding client’s data, how to move it between different systems, how to leverage it as an asset. Can you talk a bit about how you approach data analytics?

Sheryl: It’s a fascinating area. I know you really concentrated on it. I attended a Beacon Strategies Innovators round table last month. Chip Kispert hosts these round table events throughout the year, inviting top leaders in the industry to come together and discuss topics they’re working on, and sometimes struggling with. It’s a great opportunity to hear how mid and large size firms are dealing with these issues and what challenges they’re facing.

The two areas around data that engendered the most conversation had to deal with building good advisory platforms and how to use the data that these firms collect to improve the advisor and client’s experience. It was interesting to hear that large firms, regardless of the amount of money and resources they have, struggle with the same issues we do. What is the data required to accurately perform a process? Too much versus not enough. How should that data be presented to the user and in what order should that data be presented? How should the data be accessed, grouped and summarized for the user? Is there a hierarchy of importance around the data that is needed for a certain process? Are we lacking data that would make the experience or process better? Then of course, there’s AI and machine learning. These two areas can provide a much deeper understanding of the data. It’s inter-relational properties and even opportunities around sales and marketing.

We had some lively discussions around how that data could be used to gather insights around current clients and also referrals from those clients. It’s really a fascinating area in which I think we’ll see a lot of experimentation. Some of that experimentation will result in really good outputs as well as some that are going to be dead ends. It’s really new territory for everybody right now, but I think finding reliable data sources is the first step. Your data has to be good, and then you have to decide what your end goals for that data are, and then all of the questions I asked before, how should it be ordered? How deep should we go in the data? What makes sense to the user, because humans have a certain capacity to take data in and make sense of it. So it’s not just the data, it’s the presentation, it’s the algorithms behind it.

Craig: Can you give me an example of using data that’s collected to improve advisor and client experiences? 

Sheryl: I think there are a couple of things. First of all, I think people want instant results nowadays. We’re used to apps on our phones that are going to give us data. We’ve got Google and Bing, and we’re just surrounded with seas of data. I think the first thing is approaching from a technology standpoint, approaching that with a new process that’s interactive versus a step-by-step process. A lot of legacy tools are built, first you input this and then you input that, and then you input that. If there’s a change somewhere along that chain, that process, you have to go back to an original step or a previous step in order to make those changes.

We decided with Income Conductor, we were going to go with a dynamic use of data, which is a challenge from a technology standpoint. But what IncomeConductor does is it pulls all that data together. It does not need to be entered in a step-by-step process, and it’s all interactive. You can change an assumption in a plan at any point during the creation of that plan, and the plan will update in real time to show the impact of that data on the plan. It could be a small impact or it could be a very large impact. It really helps in the decision making process when you can see that real time impact of a data change on the overall structure you’re building, which is, in our case, the retirement income plan.

Craig: You mentioned even the largest firms are struggling with data, specifically around what data’s required to accurately perform a process? Too much versus not enough. What’s the big deal with too much data? I can always get rid of some. Why is too much a problem versus not enough?

Sheryl: Well, again, I think we go back to the human interaction with the technology and the data. There’s just so much that people can take in and some of that data should be displayed. Some of that data doesn’t need to be displayed. It may be overwhelming or just not necessary. Maybe that data is used behind the scenes, but only a certain amount is displayed to the user that is the most meaningful. That’s really the key is to determine what is most meaningful to an advisor or to an end client, rather than just overwhelming them with all this data. How can you distill it down to a meaningful context that will help them make decisions?

Craig: Finally, let’s talk about finding reliable data sources. Why is that an issue? 

Sheryl: No it’s funny, but people realized, I mean like Chat GPT, when it first came out, my husband was one of the original adopters, and he asked it to write a bio for me. Three quarters of that bio, that Chat GPT wrote was incorrect. Now, you would think that with Google and websites and LinkedIn, that, that would be an easy process to gather basically resume experiential information on somebody’s life, but it was incorrect. I think we have to realize, number one, the sources of that data are key. You have to get the data from a reliable source that you can trust, and then secondly, you can take that data and make deductions from it, which may be right or wrong. That’s the machine learning aspect of it. But then also how you present that data that makes sense to the reader in this case.

Reality-based strategies versus probability-based formulas

Craig: Let’s shift gears and talk about IncomeConductor. You provide reality-based strategies rather than probability-based formulas. What’s the difference between those two and why is that important?

Sheryl: Our approach really aligns with what advisors already do for clients during their accumulation years. If they’re planning for a short-term goal, they’re investing those assets very conservatively because the client needs the assets now or very soon. Whereas long-term goals can be invested more aggressively because they won’t be needed for quite a few years, and you can take advantage of time in the market. The same concept applies with targeted funds and retirement plans. Our question is, why should advisors take a different approach to retirement income planning, where the client retires and they need money immediately.

But then, if you can assess what their cash flow needs are throughout retirement, you can then apportion those needs into time horizons and the money you won’t need until much later in retirement can be much more aggressively invested. There are also some unique risks in retirement the time segmentation addresses. Sequence of returns risk is really high on that list. By always taking income from a product or portfolio that doesn’t have any market risk, we’re completely avoiding that sequence of returns risk for the client. That’s a major driver of behavior, especially in down markets.

So it addresses this behavioral risk, which can be damaging to a client’s investment portfolio during accumulation years, but it can be fatal for a retiree. I saw that in 2008 when I was managing a TAMP. Having the ability to invest the assets that won’t be needed until later in retirement in a more aggressive portfolio also addresses inflation risk. Which is a real concern for retirees because, one of the main reasons is they’re paying for their own healthcare. These healthcare expenses along with long-term care expenses, which are particular to retirement, can inflate at much higher rates than typical CPI expenses.

Some advisors and firms don’t understand that this is really necessary for today’s retiree, most of whom are in that mass affluent category. They question investing any assets into a portfolio with the majority of investments like in higher risk equities. That’s one concern that IncomeConductor really addresses well, since these portfolios are tracked on a daily basis. They may go through two, even three market cycles over the course of them being held and invested, and there are multiple opportunities to actually de-risk the portfolios. Either rebalance them or take the assets completely out of the market and lock them in, before each segment is needed.

It’s not as if you invest a portfolio for 20 years in a, let’s say a, 80-20, equity to fixed income allocation and keep it there. IncomeConductor’s tracking that and saying at some point during those 20 years, you’re going to be able to take those assets out of the market and put it into something with very little or no market risk and really guarantee that income for the client, but still address that inflation risk. We’re always assessing how much risk each segment actually needs to deliver the future income the client wants. We always use the analogy that it’s almost like having your own personal pension board, which is basically saying, I know the liabilities I need to meet, I’m going to invest to meet those liabilities. But as the market fluctuates, I’m going to make adjustments that are needed in order to give me the highest probability of delivering on those liabilities.

Approach to retirement income planning and time segmentation

Craig: The benefit here, or the main way your software differentiates itself from other tools is by breaking the plans into the time segmented milestones? How does it do that? Is there an optimization algorithm there?

Sheryl: Well, it’s actually driven by the advisor. They could create a one segment plan if they wanted to. But most of our advisors use a standard, they either do like a go-go slow, go no-go type of three segment approach. Many of our advisors define the segments by certain events that occur. Whether social security starts or an expense at like travel or mortgage. It’s very adaptable to every single client and that’s the beauty of being able to create a customized plan. They can also decide and see the impact of how risky they want to make those investments. What are the trade-offs? If you ask somebody going into retirement, if they wanted to take market risk, the answer would be no. But unfortunately, very few of us can fund our retirement without any kind of market risk. The goal of IncomeConductor is really to meet those cash flow needs and the other goals they may have, like leaving a legacy or a special goal, like leaving money for a grandchild for college education. Actually meeting those goals with as little risk as possible. That’s the goal. Many of our advisors, even for the longer term money, they won’t use a portfolio that is more than like a 6% return on investment over a 20-25-year period. That’s really not a lot of market risk over that period of time.

IncomeConductor’s Integrations

Craig: Indeed. All right. Shifting gears once again, let’s talk about IncomeConductor’s integrations, which you discussed in your opening. Can you talk about those integrations, the ones you have with Albridge and Plaid and, what are the other critical integrations you have for IncomeConductor?

Sheryl: Right now we have integrations with nine firms, and we add to that every single year. As I’ve said, it’s really important to have current position and account values in order to track an income plans performance. We try to add new integration partners, and it’s usually based on our advisor’s requests. If a large office comes to us and says, Hey, we use this software like recently we added Black Diamond, we will engage with Black Diamond and have a direct integration with them. Many of our integrations provide UMA capabilities, which is a really elegant way to implement a time segmented plan because you have one large account at the custodian, which may be funding multiple segments.

With that UMA capability, you can take that account and allocate portions of it to different portfolio strategies or products that are then going to be linked at that portfolio, a product level into the segment of IncomeConductor. Lots of nice innovations in portfolio management and advisory platforms that are benefiting the advisors that use a time segmented approach, making it much easier to implement. The other integration we have, which we are very excited about, we launched a couple of years ago, was with HealthView Services.

Craig: What’s it called again, Sheryl?

Sheryl: HealthView Services. They’re based up in Boston, run by Ron Mastrogiovanni, who’s been in the industry for quite a while. He started the company because he saw how his parents were struggling to meet their healthcare expenses. And it was mostly because they didn’t have a plan that those expenses. So our integration with HealthView Services pulls in actuarial based personalized longevity projections, healthcare expense projections that are customized to the individual’s clients, date of birth, state of retirement, gender health conditions, as well as social security claiming options. Again, all of these interact.

When you claim social security is driven by your longevity. If everybody lived to 100, everybody should wait to claim until the very last minute. But that’s not the case. It is often best to claim earlier if you are not in good health, and that can also benefit you, benefit your spouse who is going to live after your death. The claiming strategies take the survivor benefits into consideration. It really is important to have this kind of reliable data that institutions use when they underwrite products and create products. To apply to the retail market for advisors and clients because it gives much more reliable plans and it helps advisors plan for that widow period.

I suspect that the rules of thumb that are used by advisors and the lack of good data is a major driver in the fact that 80% of widows leave their advisor within a year of their husband’s death. I think it’s because, one of the main reasons is because that plan did not address their survivorship period. In order to do that, you need good longevity data and social security that’s based on that longevity.

Craig: Do you believe that’s primarily because they’re not using the right actuarial data, they’re assuming people are not living as long as they do?

Sheryl: It’s not a case as not living as long. It’s looking at each individual person. We run into advisors coming to us who are very surprised at these longevity projections. But it’s based on 600 million sets of claims data, and it’s very, very good data. If large institutions rely on it, why shouldn’t we use it in the retail market? But what advisors have been doing is running all their income plans, assuming that both of their clients, both the partners and the couple will live to age 95 or even 100. We know that’s not going to be the case. That not only creates a bad plan, it also does not do service to our clients. They saved diligently for retirement and they’re not being allowed to use those savings to enjoy their retirement to its fullest.

Product Roadmap

Craig: We are almost out of time. I wanted to run one more question by you. Can you share some of your roadmap? What are some of the new exciting features coming down the pike for IncomeConductor clients?

Sheryl: We’re working on a large enhancement right now that should be rolling out very soon, and we’re very excited about it. One of the challenges in retirement, of course, is taxes. But again, taxes do not exist in a vacuum. You’ve got other data that you need to consider like RMDs, and that liquidation order is very complicated when you consider not just the taxes, but also the impacts of RMDs, other money coming in during retirement, spikes in expenses. Really aligning with the client’s goals. Then also bringing into that the possibility of Roth conversions, our Roth conversions going to be beneficial? Are they going to be a wash or are they actually going to be a detriment?

We have these accepted precepts in financial services, like Roth conversions are good and there’s a certain tax liquidation order you should follow. But the truth is that, again, that data should be interactive with all of the other data in the plan. That’s what we’re going to be launching soon is the next iteration of retirement income planning where all of this data is going to come in, it’s going to be interrelation and it’s going to be customized to the actual needs of the client.

Craig: All good things. Well, that was fantastic, Sheryl. I’m so glad you could be here. Can you tell everyone where they can find more information about IncomeConductor?

Sheryl: Well, you can go to our website, www.incomeconductor.com, and we have a button there where you can schedule a demo. We also have a trial, and during the trial we give a complimentary case consultation to the trial user so they can actually bring a client case to an expert on our team with decades of experience in retirement income and create the best plan for that individual client, learn all the aspects of the benefits of using the software, and really engage with a client and sell a plan before they even subscribe to the software.

Craig: Fantastic. Great. Sheryl, thank you so much for sharing this with us. I really appreciate you being here.

Sheryl: Well, thank you, Craig. I appreciate the opportunity.



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