In a nutshell, the new features provide advisors with the ability to easily model various spending outcomes based on portfolio performance in retirement.
Using them, advisors can decide with clients on a predetermined value to set for their portfolio—a threshold that if reached through a market decline or shock—will trigger a decrease in spending to allow the portfolio to make up for it and keep the client on track and on plan during retirement.
And conversely, when portfolio value increases, the advisor can consider letting the client know they can feel safe spending more. In other words, these spending strategies allow for fluctuations based on a client’s actual portfolio performance.
“With decumulation-only [planning] products, the advisor will not be able to incorporate any of the dynamic retirement spending into a financial plan of those clients currently in the accumulation phase and this can result in an incomplete and less optimal financial plan for those clients,” RightCapital CEO Shuang Chen wrote in an email. “RightCapital is a comprehensive financial planning solution including both accumulation and decumulation."
He added that the application’s existing tax-efficient retirement distribution and Roth conversion module already represented important aspects of decumulation and income planning and that the addition of the dynamic spending strategy represents a differentiator from other comprehensive planning tools on the market.
Bjorn Amundson, a certified financial planner and a principal advisor of the two-man RIA Quarry Hill Advisors, based in Saint Paul, Minn., said while he had yet to use the new features in any client plans, (the feature just became available within the last week) he had performed some hypotheticals with it and had in months past been looking for decumulation-specific tools. His firm has been using RightCapital for the last four years.
“This should give clients a lot more certainty,” he said, because with the new offering he can provide concrete actions—changes to spending—that other accumulation-focused applications lack when relying solely on percentage chance of success calculations.
“There are very few retirement plans that will allow you to marry the depth of tax planning you need to do and have a guardrail rule and RightCapital has taken a crack at that,” Amundson said.
His fee-only RIA firm has approximately $167 million in AUM and leads with detailed financial planning. It has a mixed client base made up of roughly one-third mid-career professionals, another third a few years from retirement and the final third already in retirement.
“I think that fully two-thirds of our clients will be able to benefit from these features,” said Amundson. He added that he had been evaluating a standalone decumulation phase planning product but it would have meant a lot of hassle in terms of entering client data from RightCapital into it; the new developments should make that unnecessary, he said.
The new features are included with the basic RightCapital offering at no additional cost, currently $124.95 per month, per advisor, with an annual commitment. The premium offering, which includes account aggregation powered by Yodlee and several other features is $149.95 per month per advisor. RightCapital has integrations with all three major custodial platforms (including TD Ameritrade Institutional Veo), as well as several large independent broker/dealers, including LPL’s ClientWorks platform and Raymond James, among others.
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