RISA with Alex Murguia and Wade Pfau | E275

Understanding retirement insurance styles.

On today's episode of Fintech Impact, Jason is going to talk to Alex Murguia and Wade Pfau, cofounders of Risa. It is an online questionnaire and tool for helping determine what an individual's retirement styles are like and specifically helping advisors steer them toward the type of retirement solutions that help ensure that they both succeed, but also that they are comfortable and their preferences on how they wish to retire or how they wish their income to be general in retirement come about.

Episode Highlights

  • 01:05: The risk that people face in retirement is different from pre-retirement, with the sequence of returns, risk, and market returns.

  • 01:19: There are a lot of different viable approaches people can use to building a retirement income strategy, but we haven't really ever had a way to help guide people or help them understand which is the appropriate starting point for their own retirement.

  • 03:13: Wade and Alex were managing principles of McLean Asset Management, which is a traditional both management firm. In addition, they had a non-asset-based RIAA called retirement researcher which was Wade's blog that they turned into an educational membership site in which a lot of folks were just asking them questions.

  • 04:46: Alex shares how they took reoccurring constructs and then wondered could they quantify them that were reliable and in a manner that was valid.

  • 06:28: Jason is not a big fan of bucketing, but for some clients like visualizing and understanding that might be the difference between them panicking and being comfortable.

  • 07.20: If someone have bonds covering the next five years of expenses, they don't have to worry about a dip in the stock market. If that resonates with an individual and helps them stick with their strategy, then it does become a better strategy for them.

  • 08:41: Alex informs that they have an implementation matrix, which is how someone prefers to implement financial advice.

  • 11:07: You always have to overlay the numbers; the advisor has to help you sort of curate through that journey.

  • 12:42: Are you comfortable committing to a strategy that you know will solve for your lifetime need and let you take that? Take that off your To Do List and so with these two factors on the matrix we get 4 quadrants in each of those four quadrants is one of the core retirement styles translating into a retirement strategy, says wade.

  • 16:33: Knowing if somebody before the meeting is a collaborator is a delegator, you know what we found in our studies is that there is a good 75% chance that they already have an advisor or they want to really engage with an advisor, says Alex.

  • 19:23: As per Alex there is no annuity proposal in much the same way that there is no like government worker puzzle in the United States.

  • 21:46: You don't see differences across age groups, so you see a pretty consistent distribution, whereas a risk tolerance question approval says as you get older, you get more or less risk tolerant.

  • 22:23: The distribution of advisor preference largely comes down to licensing standards.

  • 24:38: The best salespeople are the people that get to close loss the soonest.

  • 27:13: Alex explains that they created funnels, if you are a collaborator and delegator, they will happily send you to McLean. If you were a validator, they didn't have an offering that was just planning. They created this just for this group and it's worked well. 

  • 29:51: There are a couple of other things Alex and Wade are trying out simply because it's there for a natural extension, but that's the next one that they are already starting to have a build-out for.

  • 30:25: Questionnaires are designed for accumulation. It's assuming modern portfolio theory, which is there are no liability that you're trying to fund. It's just an asset only growth model.

  • 32:00: There are current efforts going on about how all retirement accounts in the US are at some point in the near future going to have some sort of estimated income amount.

  • 32:55: Just framing the investment account as a potential sustainable spending stream is probably going to be a big realization for many people that there is something different going on here.

  • 35:48: One of the unique characteristics of the US is that there is so much focus on people investing for their own retirements and a lot of other countries still have a stronger social safety net.

  • 35:48: One of the unique characteristics of the US is that there is so much focus on people investing for their own retirements and a lot of other countries still have a stronger social safety net.

  • 38:12: As per Jason, people spend a lot of time these days talking about understanding client bias.

  • 41:02: Pulling the best of different approaches and finding what's best for each person really will create better financial planning outcomes for individuals.

3 Key Points

  1. Alex explains how they kind of take a step back and say what strategy is the one you should begin with when it comes to retirement planning? 

  2. People either need safety or they won't accept risk, and they are different degrees of willing to basically lock themselves into something, so it's static.

  3. The first step of retirement income planning is to identify your retirement style and then build your financial plan and then take your risk tolerance questionnaire and choose your asset allocation and so forth.

Tweetable Quotes

  • "With COVID after reading a certain amount and collecting notes, we realized that there were certain constructs that seemed to be reoccurring motifs." – Alex

  • "We all have different risk tolerances. We all have different preferences for security." - Jason

  • "I may, as a consumer, have not known that there are different strategies that there are and here is the strategy that looks like it does fit best with my own psychological considerations and makeup." - Wade

  • "The time segmentation or bucketing is safety 1st and optionality-oriented income protection about building a protected lifetime income floors with usually fixed annuities that are safety 1st and commitment orientation and then risk graph is more that world of like a variable annuity with a living benefit where you have more potential for step up opportunities and growth." - Wade

  • "The end consumer doesn't realize that there are options available to themselves for different retirement income strategies." - Alex

  • "There are a few things that in research frustrate me more than trying to break an advisor value down to a percentage cases per year." – Jason

  • "Every strategy will include an investment portfolio, but for a long time, I have talked about kind of with retirement income, one of the last steps in the process is choosing the asset allocation." - Wade

Resources Mentioned

Fintech ImpactJason PereiraFintech