Does the world need another robo-advisor? United Income CEO and founder Matt Fellowes thinks it does. And here's why.
Many advisors focus on investing and increasing the size of your nest-egg for retirement or other goals such as paying for college, buying a house, etc. Fellowes says relatively few — especially among the three dozen or so robo-advisors out there today — deal with "decumulation," a fancy word for spending.
He may have a point. A lot of the financial advice industry is centered on growing people's assets, maximizing returns and getting them to save or invest more.
In reality, a lot of people are so stressed about outliving their assets that they are afraid to spend at all beyond what's needed to cover the bare essentials once they stop working.
Fellowes says it's an area that's often poorly addressed by traditional advice. It's made more complicated by the fact that most of us don't know how long we're likely to live.
In addition, Fellowes says many retirees get tripped up by the cash flow transition once they've stopped working full time. Generally, they then go from one main of source of income (ie, a paycheck) to multiple sources such as withdrawing from savings, collecting Social Security, pensions, annuities and fixed-income payments from bonds.
"They're not sure about which checks to cash, and what to do with their savings," he says.
So United Income — which is actually more of a hybrid, pairing algorithm-based investment research and in-house advisors — has aimed its services squarely at that age 50+ cohort, a target-rich environment with about 80 percent of the country's investable assets, according to Fellowes.
One feature that may have the greatest appeal is the "Retirement Paycheck" which aggregates different retirement income streams to simulate a monthly paycheck, so retirees know how much they have to spend and can budget to that amount – just as they did during their working lives, according to a press statement.
The affable Fellowes, 42, founded HelloWallet in 2009 before selling it to investment research firm Morningstar in 2014 for more than $50 million and becoming Morningstar's Chief Innovation Officer. Prior to that, he was a fellow at the Brookings Institution. And he may also be a distant relation to Julian Fellowes who created "Downton Abbey."
This advice doesn't come cheap, however. The base annual fee is 0.50 percent of assets for self-service financial planning and goes up to 0.80 percent for unlimited access to a personal financial advisor. That's serious cash if you have a large portfolio. (Though you can register for a free financial plan.)
Fellowes says their fees are justified because their solutions are customized to each client as well as their specialized offerings including a "Concierge Service" which takes care of the tasks clients do not want to do, such as helping them enroll in Social Security and evaluating Medicare benefits.
United Income will also curate opportunities for users to pursue their hobbies, passions and dreams, according to the press statement.
"They are as low as they could be to build a sustainable business," Fellowes says of the fees, and lets United Income "avoid taking hundreds of millions of dollars of venture capital money, which would then pump and dump the company." (Morningstar is a backer.)
Another potential downside: You have to transfer all your accounts to them, which means if you have money stored with Vanguard or Charles Schwab, for example, you have to move it to Apex, their custodian.
Still, how to spend down those assets wisely in retirement is a conversation very much worth having. If United Income can move that along, so much the better.
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