Jason talks 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.

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.

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.

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.

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
-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? 
-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.
-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
-“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

Resources Mentioned
Facebook – Jason Pereira’s Facebook
LinkedIn – Jason Pereira’s LinkedIn
Woodgate.com – Sponsor

Podcast Editing…(read more)

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Relying on traditional investment strategies may not be enough to secure your financial future. Fortunately, there are alternative methods that can help you create a more reliable and lasting financial plan. One such approach is RISA, or Retirement Income Sustainability Assessment, which can help you achieve financial stability in your later years.

Recently, Alex Murguia and Wade Pfau discussed the benefits and limitations of RISA in an episode of The Long View podcast. Alex Murguia, the founder and CEO of inStream Solutions, is an expert in wealth management, while Wade Pfau is a renowned professor of retirement income planning.

In the podcast, Murguia and Pfau discussed the significance of RISA in retirement planning, starting with the basics of the technique, which focuses on the sustainability of an individual’s retirement income post-retirement. They cited how we often underestimate the level of income we need for a secure and comfortable retirement, without realizing the various risks involved. Many retirement planners do not factor in the potential drop in the market, inflation, and financial disruptions. Pfau highlights how this lack of foresight can lead to a retirement crisis and the need for more individualized approaches to secure a better retirement outcome.

Their discussion centered around the key benefits of RISA, which include stress-testing a retirement plan to ensure it can cope with various financial challenges. As Murguia notes, comprehensive retirement planning cannot be a one-size-fits-all strategy. An individualized plan is vital to consider all aspects of financial planning, ranging from budgeting, taxes, and investment risk management.

Pfau explained how RISA could help solve the challenges of traditional retirement planning by embracing the uncertainty that comes with retirement income planning. RISA helps by running various simulations that test the potential outcome of an individual’s retirement portfolio and adjusting the various investment options that fit their unique goals and life situation. It also identifies the risk factors and suggests strategies such as creating a retirement income floor that can provide a minimum level of income regardless of investment circumstances.

As Murguia further explains, RISA uses “what-if” scenarios that try to mimic different outcomes in the market, inflation, and other factors. This approach helps to identify potential threats that could disrupt an individual’s income, allowing retirement planners to have a plan B in place. Additionally, the plan helps to give an accurate picture of the retirement portfolio’s sustainability, giving clients peace of mind and a sense of control over the entire retirement journey.

In conclusion, incorporating RISA into your retirement planning can significantly impact your financial security. RISA helps to create an individualized and comprehensive retirement plan that forefronts building a sustainable retirement income stream while factoring in the potential roadblocks that could arise. By using these scenarios, RISA empowers individuals to make informed decisions, manage risks better and secure a more comfortable and financial stable retirement.