Does "Probability of Success" lead retirees to the regret zone?

good morning everyone and thank you for joining retirement income Intel with income lab we'll give everyone just a

0:10

moment to get um to join the meeting here and we'll get started um at the end

0:17

of the webinar today we will have a survey that has uh opportunity for

0:23

feedback and a couple questions so please take a moment to fill that out also um a couple people asked in advance

0:29

if this will be recorded it is recorded and we will send it out tomorrow uh in a followup

0:35

email and um if you have any questions along the way please submit them into

0:41

the Q&A if uh we will address the most liked ones there's a little thumbs up on

0:47

the questions um so if you want to hear a question that your peer submitted then

0:53

please like that and uh we'll address those liked ones first just in case we run out of time so with that I will pass

1:00

over to Justin and we will get started all right thank you Taylor and thanks everybody for for joining us um to our

1:07

webinar today on does probability of success lead retirees to the regret zone

1:12

so a little less than a year ago we had a webinar um on um moving beyond

1:19

probability of success problems with probability of success that was a a really successful webinar I thought it

1:25

was great um still a lot of people watch the the um the recording of that one one

1:30

uh and so this is kind of like a a part two of of that and we're here with Jason

1:36

juel from Carson wealth and Ryan Townsley from town Capital um to talk about this two advisers with a lot of

1:43

experience um both in the probability of success world and in the adjustment

1:48

based planning um world and uh so we're going to um hear from them um we're also

1:56

going to uh we're g to I'm going to start first by ask asking uh Jason and Ryan to talk a little bit about them

2:03

themselves and their practice um then we're going to do a fun little uh exercise uh just to kind of get the

2:09

juices flowing on probability of success and then go into our uh our panel discussion um to hear about um uh Jason

2:17

and Ryan's experience um with their retirement clients and and hopefully um

2:22

share a lot of great ideas about how to how to talk um and and do retirement

2:28

income planning better um with our clients to hopefully um give them better

2:33

experiences in retirement definitely better outcomes as well better experiences and avoiding um regret and

2:39

anxiety so we'll start uh just by asking um Jason and Ryan we'll start with you

2:45

Jason just to um tell the uh the audience a little bit about your yourself um and and your practice and um

2:53

maybe a little bit about um you know your your use of income lab how long you've been been using the software AB

2:59

absolutely Jason juel partner uh wealth advisor uh started the industry in 2009

3:06

worked with about 1500 clients uh since that time frame and uh ultimately worked

3:13

with clients of all walks of life um and and what I've really learned and realized is who I feel I can help the

3:20

most is those nearing retirement and in retirement and uh that's ultimately the

3:25

perfect segue you know probability success is something that I've utilized in the past and now Focus much more on

3:32

guard rails and so excited to dive into the material and talk about uh those conversations and and how fruitful those

3:39

have become that's awesome and 1500 clients not all today right please tell

3:45

me no no no no so I work uh currently uh assets under management about 550

3:53

million uh and just under 300 households okay so I've refined refined my business

3:58

substantially yes yes still that's a a long breath of of experience uh Ryan how

4:05

about you hey good morning everybody I'm Ryan Townsley I'm the owner of town Capital um I'm actually a career

4:11

changing adviser uh so I worked in the nuclear power industry for about 19 years uh before I made the change into

4:18

financial planning um I did that about five years ago Dove right into starting my own firm and so I work with a lot of

4:25

people from that industry or other analytical types like uh physicists and chemists and mathematicians and so very

4:31

um very Analytical Group um for my practice uh started about five years ago

4:37

grew to about $100 million under management for about 78 households uh

4:42

right now and about 90% of my clients are either retired or retiring in the

4:47

next two years so this is a very important topic to me awesome all right um just to uh as I

4:55

said get the uh get the juices flowing here I'm going to pull up a

5:06

little about to take five five 10 minutes here to uh to just uh go through

5:12

some some things with the audience so this a silent poll there's no you know just answer these for yourself uh we

5:17

don't have a little place that you could you know put in the answers that would that would be uh kind of cool but um if

5:24

you use probability of success in your practice and not everybody does uh if you don't you can just sit this one out

5:29

or imag imine if you did what your answers would be um what do you think a reasonable probability of success is for

5:35

a client retirement plan at retirement and then as time goes on that probability of success would change at

5:42

what point do you think your clients would start getting worried and when do you think you would start getting

5:47

worried for your clients right so think about those jot them down if you

5:54

want um okay so um we'll be talking a fair out about this but um what survey

6:01

research seems to show is that when you ask retirees what they want they their highest priorities tend to be the kinds

6:08

of things you could put under the live a good life umbrella right could be live a fulfilling life um on the negative side

6:16

you will hear things like don't be a burden on my kids don't run out of money but it generally tends to be around like the stuff of Life while you're alive um

6:25

the leave money behind when I die priority tends to be extremely low if it's mentioned at all and um definitely

6:30

in my experience talking with advisers the I want my last check to bounce goal is not

6:36

uncommon um when we were first building income lab um advisers told us this was

6:42

a common conversation especially when they had first started doing retirement planning is they would ask a client who

6:49

was nearing retirement so how much would you like to spend and they would say uh well how much can I

6:55

have so uh we definitely built uh um

7:00

income lab originally around this and many of you know this that it's it's it's built around this question what can

7:06

I spend at any given time and if you were trying to come up with a kind of

7:11

best guess or most likely um answer to that questioned um long ago and even

7:17

today you know many people might just kind of use time value of money calculations now you can't actually do

7:23

this if you're doing you know if you've got Social Security that starts in 5 years and a rental property that's this

7:28

that and the other thing and you know when things get complicated you can't use a financial calculator anymore but basically um you would take an average

7:35

expected return most likely return just by definition when you use an average that's what you're saying if you didn't

7:41

think that was a good guess you'd use a different average um and and you put that into here right but most people

7:48

actually use um some kind of simulation analysis usually Monte Carlos simulation

7:53

analysis and if we imagine that that's basically saying hey here's a bunch of ways the future could go for

8:00

you um and for each of those there's a there's a spending level that that hits

8:06

all your goals um but doesn't you know leave too much behind when you die right so hits

8:12

them exactly um and we could line those spending levels up uh like this and if

8:18

you if you saw a graph like this and you said what's my best guess where where would I go on this graph If This Were

8:23

you know a game in Vegas where would you where would you put your your chips well

8:28

you you'd put put them right there right I mean that's that's kind of obvious um but if that were a probability of

8:35

success what is that it's 50% it's a 50% probability of

8:43

success that's the best guess that's the most likely outcome in other words um doesn't mean it's the right

8:49

outcome uh it just means it's the best guess at the outcome the most likely one

8:54

right okay so where would 100% probably probability of

9:00

success lie here so the the spending level you're messing with your software you're trying to figure out a spending

9:05

level and you want to get it to 100% where would that spending level be on this

9:11

graph it'd be right there on the left right it is the spending

9:16

level where 100% a thousand out of a thousand times you could have spent more

9:23

that's what that means 100% success means 100% chance I could have spent

9:28

more in other words when we're using probability of success and it's driving us toward that 100 because it's a score

9:35

I want success as much as the next guy right I want it to be 100 what I'm really doing is saying I'm predicting

9:42

you're under spending by this much right that is that is what that means the problem is that's not what success means

9:50

to your clients and probably to you right the word success already means something we're going to talk a lot

9:55

about that with Ryan and Jason uh but probability of success thinks it means you know be like Eben or Scrooge

10:04

right be a miser live a lot of leave a lot of money behind when you die and by the way be worried while you do it right

10:10

that's and so there is a there's a thing going on here where this word

10:16

success is it's fooling us it's distorting the world and just having seen this it's not going to help it's

10:24

not going to help uh that you now know that probability of success 100% probability of success means 100% chance

10:29

of under spending or as we'll talk about 100% chance of

10:35

regret because it's like an optical illusion like have you seen this before uh say to yourself which which

10:43

which line is shorter now probably a lot of people have seen it and you know that actually they're the same length they're

10:48

exactly the same length but look left to right it doesn't matter knowing that it's the same length doesn't change your

10:54

your your brain still makes you see the bottom one as shorter it's the same with probability of success so if you give me

11:01

a probability of success plan I'm going to want it to be 100 try try to convince me just try to convince me that 50%

11:07

success is better than 100 not a chance right so this is a a nice little segue

11:14

to um to that conversation about um the

11:19

problems with probability of success and you know kind of why it's so important

11:25

that um that we take this really seriously um so that's the you you saw kind of the uh the mathematical side of

11:32

it but um I think we'll dive um a little bit more into um you

11:38

know the uh the client communication and um and experience side of it now so

11:47

um I think uh let me jump to uh to you Jason and just kind of um if you want to

11:54

take this this ball and run with it on kind of your experience with clients um

12:00

as they enter retirement and go into retirement in helping them you know what

12:05

their goals are uh what their worries are and where you've seen kind of their

12:10

the um them unable to kind of match uh their their goals with with what they

12:17

actually do in retirement yeah um certainly uh a unique

12:23

transition from work life to retirement and you in your work life you've been saving you've been investing

12:29

you've been saving you've been investing you're amassing this this Nest day that eventually is going to generate you

12:35

income and retirement so you you make it to retirement throw your hands in the air and now your paycheck goes away and

12:43

there becomes this anxiety how do we turn our investment accounts our retirement accounts and our assets into

12:50

income and how do we replace our paycheck well yeah Social Security is going to be a piece maybe we're fortunate enough to have a pension as a

12:57

piece but ultimately how do we take District R butions from our accounts in order to generate not only income but

13:03

tax efficient income um and so that's really where where rubber meets the road and the

13:09

challenge that I've seen with retirees is

13:15

they're very frugal in their working years they're making these sacrifices and when they get to

13:22

retirement and their paycheck goes away they almost tighten up their first

13:29

strings by two by five by 10 they get even more frugal and so what's what's the risk of

13:35

getting more frugal well they're concerned about running out of money is their number one concern and in turn

13:42

they end up making even more sacrifices in retirement and potentially delaying some of their

13:48

goals right and this is where um we'd

13:54

like to talk about the difference between lifespan and Health

14:00

span so let's think about that lifespan let's say we're going to live into our 90s we plan on our our financial plan is

14:08

established thinking our clients are going to live into the 90s and their health could be taken away

14:14

at a much younger age um you know for example my father my dad um you know

14:21

they've they've had some some Financial challenges they're actually misguided by by an adviser so that was a challenge he

14:28

delayed his retirement and he's going to retire this summer uh so we're excited about that but unfortunately uh what's

14:35

happened is he's had a double hip replacement he's been diagnosed with rheumatory arthritis and he's got a pinch nerve in his back so he's in bad

14:42

shape and the vision he painted for retirement the picture he painted his

14:48

Picasso there's a lot of question marks around that uh because of his health and

14:54

so the point is let's let's let's take advantage of our health early in

14:59

retirement let's give ourselves permission to spend some of our hard-earned money early in retirement

15:06

where we likely will spend more those go- go years if you will when we are healthy um and let's pursue some of

15:13

those goals how do we give our clients confidence around their spending capacity and that's all Mal income lab

15:19

and the g rails come into play that makes a lot of sense I really like that that terminology that the

15:26

lifespan and health span um because it's not just about how long you live it's

15:31

about you know what you can do to make your life you know hopefully as fulfilling as possible at each point and

15:38

and that's just there's a different answer for different phases of life I this time of year in particular I like

15:44

to mention my grandma she she's 90 now um and she's a huge college basketball fan so this is like this is her time um

15:51

but you know in her 60s she would she'd spent more I mean she was never like a massive spender she was a teacher her

15:57

whole life but you know she went to Hawaii she went to California she do some travel now she she likes to read library books and watch college

16:03

basketball that's just a less expensive thing to do right um so I know Ryan you

16:09

actually have a really interesting way of talking about exactly that um and

16:14

introducing this idea of um the regret Zone which is kind of like when your

16:19

health span or even just well I guess it is your health span even if you're not

16:24

you know particularly unhealthy just by the time you're in your 80s and 90s it's it's different than it than it was before about introducing that concept

16:31

with clients and the concept of regret how do you do that so um I use a pretty simple illustration uh Justin and this

16:38

is great for not only communicating with clients um but also communicating with

16:43

prospective clients right it's a great marketing tool as well and if you have clients that are um read they read about

16:50

finance and they do their own research and they've done their due diligence especially when it comes to picking an advisor then they have definitely run

16:56

across things like the 4% role and other types of what you call it standard

17:01

inflation adjusted spending path right so they're very familiar with that and it's kind of second nature to them to

17:07

think that that's what they should do that they should start at a particular income and then just increase that by

17:13

inflation every single year and that's kind of you know very um simply shown by

17:18

this uh this illustration in front of you where you just have really a straight line in the up diagonal Direction showing that we're going to

17:24

start a particular income and then we're going to move up with inflation every single year so really our our today's

17:30

dollars or our real dollars stay exactly the same through our whole life uh so go ahead next slide

17:37

Justin so then I like to to show them well okay what if we do it a little bit different and we use an Age based

17:43

spending path and we say well maybe we're going to look at retiree data and

17:49

you know life expectancies and just you know other types of information to say okay how do retirees actually spend

17:55

money throughout the course of retirement and in the beginning of the retirement maybe we spend a little bit more and then later in retirement maybe

18:02

we spend less and then I like to Overlay the graphs and that's the next slide Justin and show them what the difference

18:08

is where if you have this just simple inflation adjusted spending path this linear path and then you overlay the

18:15

age-based spending path you can see that the age base starts at a higher value

18:21

and ends at a lower value and but for the math people out there if you look at this and kind of say okay what's the

18:27

area under the curve or the total spending it may actually be the same so really all we're doing is just shifting

18:33

the spending profile up into the front in those early healthy uh go go years if we will and go ahead to the next

18:40

slide I say this is your you know what I believe is one of the biggest risks in retirement because time is a precious

18:48

commodity and there's nothing you can do to get more time back and using an inflation adjusted spending pet there is

18:54

a point where you can get to somewhere in life where you've been under spending

18:59

so your nest egg has probably grown significantly you haven't been doing the things that you wanted to do because you

19:05

limited yourself early and now you look back and say man in those early years when I had my health and I had my

19:11

mobility and everything I really wish I would have done more another way to put that next slide

19:18

Justin is in the beginning if you're using that that simple spending path I

19:24

have the health and energy but not enough income because you're limiting yourself but then later in life you

19:29

realize I really do have the income but now I don't have the health and energy and I kind of overlaid the go go slowo

19:35

and the noo years in there yeah this is I think this is an

19:42

amazing like just set of terms for people um well hey like what what kind

19:47

of response do you get from from people when you introduce this idea like one of my goals is to avoid you hitting the

19:54

regret point and looking back and saying I don't have the health but I do have the income like what do they say uh the

20:00

most common response is I've never thought of that I've never considered an Adaptive you know you know a spending

20:07

plan that was not linear right that didn't just start at a particular income and end at a particular income so uh

20:12

having not be introduced to it never you know been familiarized it's it's nothing that it's something that people don't

20:19

even really consider until you put it in front of them and after seeing it they're like wow that really does make sense and I would rather this is

20:27

response for most clients I would much rather rather do the things early in life knowing I may not be able to do

20:32

them later yeah um have both of you I I've heard

20:39

this story a lot but about people you know kind of not only sort of UND

20:45

spending in early years but but worrying about it um this whole time and then reaching that point where there's this

20:51

like aha moment of oh my gosh I I can't possibly spend this money um do do you

20:58

either of you have um you know kind of anecdotes or or or stories about just seeing clients kind of negatively

21:05

affected psychologically by you know the framing of retirement as success and failure and

21:12

that you know that way that that makes him I mean Jason that your point was really good where they even get more uh

21:18

conservative and Frugal when they retire instead of you know kind of uh enjoying what they

21:25

could yeah couple couple thoughts come to mind you know Justin you and I have talked about

21:32

this a fair amount and when we're dealing with probability of

21:38

success we all have a version of success in our mind and as success relates to

21:45

scoring 100% is Success right like it's ingrained in us at a

21:51

very young age to strive for A's or whatever grades

21:56

they use now I don't know they grade kids these days but you know we we strive for A's we

22:01

strive for 100% And so if if we're scoring a person's

22:09

financial success in retirement they naturally as high

22:15

performers High Achievers successful individuals and folks that we work with as retirees they're striving to get a

22:22

100 what they don't realize is that's actually not optimal and when we I'll I'll ask a

22:29

question specific to you know money to leave behind errors and the most common answer no matter a person's net worth

22:36

our minimum is a million we work I've got $50 million clients but the the the

22:42

moral of the story is what's left would you get what you get and don't throw a fit and so the challenge with that 100%

22:49

score is you're going to leave a lot behind and once you can convey the message that there is going to be a very

22:56

very large nest egg at end of plan end of life it does change their tune they

23:01

start to rethink it a little bit but that's where the guard rails come into play and we start to focus more on

23:08

spending capacity and what are your true goals in retirement and that's where

23:13

I'll ask a question um just about you tell me about a few of your Fondest

23:19

Memories well when you think about memories memories are usually um you know Vacations or time with family

23:26

they're more sentimental in nature um and so as we think about those memories

23:32

that starts to recreate success in our clients's minds and they start to focus

23:39

Less on the score and they start to think about the memories that they want to create and how do you create those

23:45

memories well you need to turn your hard- earned assets into income because oftentimes to create those experiences

23:51

it it costs money to do so and so that's the go- go years where you're reaping the fruits of your labor and the regret

23:58

Zone let's let's help Let's help our clients understand how much they truly

24:03

can spend and what their assets support from a spinning capacity

24:09

perspective I've heard that a lot that you know in order to overcome the the

24:15

anxiety at retirement um because that the the worry is running out of money

24:20

like you got to Shi them to something you got to give them something give them a goal right and that idea of like hey

24:25

what are the times in your life that have been most meaningful most fulfilling um is a is a really you know

24:32

great way to do that um and then the other thing i' I've I've heard it really

24:37

I mean basically what you're saying is you can't show them probability of success because it is you will want the

24:43

score to be 100 and and whether they know it or not that's going to mean they'll end up in the regret Zone um so

24:51

you know typically what we've heard advisor say andan I'd be be curious how you do this with clients is talking

24:58

about and I'll even pull up a a dashboard here just to uh show what this looks like how do you talk about

25:05

spending capacity adjustments guard rails you know in a way that just avoids

25:11

this whole probability of success score idea and this was actually a a very big

25:20

Improvement in my ability to I'd say keep retirees calm during rough Seas or

25:26

or tough times you know probability Suess inherently you know if you see it

25:31

change especially when you work with people who are very in tune with their plan their finances and who pay very

25:37

close attention to that probability success number if they see it change

25:42

that's automatically going to cause some amount of fear and uncertainty and even

25:48

if it changes by 1% right it's still a change um and introducing the spending

25:54

capacity and then the protection side of it you know by adding in the guard rails

25:59

instead of making it a a qualitative thing where your number you know your probability sucess has changed but we

26:05

don't really know what that means as far as you know what what kind of changes what kind of adjustments does a retire

26:11

need to make if any uh to keep the plan on course the guard rails are definitive

26:17

right they're those clients can look at those and say this is where we need to

26:23

consider making some changes to protect myself so you know you could use a million different medic fors and say you

26:29

know we we set off a course we're flying a plane and you know if the plane had a

26:35

72% or an 83% chance of being successful that would scare you right if you knew

26:41

that that was your probability of having a successful flight where if you say these are the altitudes we need to stay

26:47

between and if we're veering towards these other altitudes we need to make a course correction uh to make sure that

26:53

we make it safely that's a lot easier and there's a lot of different ways you can tailor that to your individual

26:59

industry you know I use nuclear themes a lot when I'm talking about it but it really just takes the uncertainty out of

27:05

the conversation that probability excess tends to breed and um it just you know I

27:11

don't know Justin do you want me to jump in and just talk about my experience sure okay so in 2020 uh during Co the

27:19

market drop I was using probability of success and we all know there was definitely some changes in the meters

27:25

even if they were small right just depending on the individual client but it was a very for me as an adviser very

27:31

reactive type of situation where I was responding to clients worries about

27:37

changes in their probability of success during that event and then fast forward to 2022 I'm now exclusively using uh

27:44

guard rails and things like that and the market downturn was really it was just a much different experience for my clients

27:52

and for me as an adviser and allowed me to be proactive and you know do webinars and MTH um rather than have a lot of

27:59

individual communication so the efficiency was was just much better and it was a completely different experience

28:05

you know two I won't say similar Market downturns but a down Market's a down Market but two completely different

28:10

experiences and outcomes using one method over the

28:16

other I like that term you used um and kind of referred to here you had meter

28:22

Watchers right people watching the meter 0 and I mean

28:29

I've definitely heard that story especially about 2022 and you can see this is just a you know a stress test of

28:34

a of a plan and it's got 2020 and 2022 in it um where our probability success

28:40

might have gone from you know in this case 90 to 60 or 55 or something I I don't know in this case back in 2020

28:46

maybe it wasn't as big although it was really quick and so you had these meter

28:52

Watchers and you said I mean those big swings I can get it why somebody would be confused or upset or whatever you

28:59

said I mean people were even if it was off by a couple points you know a score feels like it's a final score like you

29:04

you already got your score um so were you what was the experience of your

29:10

clients who were meter Watchers when you said you know what um we're going to talk about balancing risk we're going to

29:18

talk about keeping you on track we're going to talk about guard rails forget about that score

29:23

thing just a lot more um Cal uh which was you know the Cal for them Cal for me

29:29

right um I was able to be proactive and reach out and say hey just remember during events like this guard rails are

29:36

the key and they could look at their current location in their plan and

29:42

Justin you want to um maximize like where you click on the plan for income increase so we can see kind of where you

29:48

plot on the guard rails this is a great visual for a client in that during any

29:53

type of event they know where they're at and they know where their next increase would be they know where their potential

29:59

decrease would be and if they're staying within there then they really you know

30:04

especially during 2022 I didn't really have many clients even come close to a lower guard rail and looking at this

30:12

visual versus seeing your meter change right if you will your probability

30:17

success really just you know allowed them to know I know exactly where I'm at I know if we get to a particular level

30:24

we'll have to make a change and most importantly that change is already predefined you can see that the the um

30:31

recommended pay decrease is plotted right there on the right right at $900 so and most clients look at the whatever

30:39

the projected decrease would be and say overall that's really not a large part portion of my income it's a reasonable

30:45

amount to protect myself and my family it's just overall just a much better experience for for me for the

30:53

clients and you know that that just led to I'd say a lot more confidence in my

31:00

clients in me and also a lot more confidence in me and his advisor knowing that I'm you know guiding them in the

31:06

correct direction yeah and for those go ahead add to that Justin

31:13

um I I heard this this formula recently and it goes to the effect of

31:20

Happiness equals reality minus

31:26

expectations so how is that relevant to guard rails versus probability success

31:33

probability success clients have their identity tied up in this score how many

31:40

of us have you know biannual

31:45

reviews uh wealth plan strategy sessions call it what you want to call it where you revisit the probability success and

31:52

that score changed and if score goes up that's great they're now identifying as a 95

31:58

if the score goes down they still identify as a 95 and there's question marks why is that score less well the

32:05

happiness factor is failed because they had an expectation and the reality now

32:12

is a lesser score therefore their satisfaction their happiness is lower whereas the guard rails are

32:19

incredable and very helpful because it sets an expectation and therefore the reality in

32:27

the expect is is much easier to track and to follow because here it is as we have

32:33

fluctuations in the market Andor a portfolio fluctuates accordingly we have

32:38

these predetermined identified dollar amounts asset figures

32:45

and in turn we have a marriage between the balance and the income and so the

32:51

expectation is very very clearcut which is why I think more than

32:57

likely Ryan you have less um you know less question marks and you're actually

33:03

able to be more proactive now because we're not Fielding the calls that we were Fielding before because someone

33:09

logged in to their their probability success plan and their their score was down um and so it allows us to free up

33:16

our time and there's actually a scalability factor that comes into play

33:22

so so as advisers now our practices become more scalable because we can actually serve more clients uh in a

33:28

proactive nature versus being reactive and it taking up you more of our time

33:33

than we'd maybe anticipated yeah I've heard that I've

33:38

heard um some talk about what happens in a practice when you know there's a market downturn 90s are going to you

33:46

know in in in 2022 I heard a lot that went into 60s or 50s um and that that is

33:53

that causes all this work in the in the um in the practice for you and your team

34:00

um Fielding calls and then I've also heard where clients really insist know we need to rework my plan now right like

34:07

let's get that score back up because they're in score competition or I love what you said uh expectation minus

34:12

reality that's so expectations set the expectations right um did either of you

34:17

have that experience maybe in 2022 or 2020 and what kinds of things are clients kind of forcing you to do if

34:23

you're using probability success well in 2020 it was uh like just

34:30

like you said Justin let's let's get this score back up and I don't care what it takes um you know so let's make

34:37

adjustments and let's let's change spending and let's do all these maybe kind of knee-jerk and drastic things uh

34:43

to to get back to to where it was especially if you work any any advisers out there that work with a like a

34:50

tight-knit group of clients or like clients maybe from like one company or one industry or anything they talk and

34:56

they share their scores right they share their probability of success and there is a comparison in there so if you have

35:02

one client talking to another and they say Well mine's 93 and mine's 95 and that that adds a whole another layer of

35:08

complexity on there and um just the experience of of of I said very reactive

35:16

with probability success rather than with guard rails it's very

35:22

proactive and you said Ryan I think you said in 22 you were able to kind of just do some like group uh webinars and

35:30

things instead of kind of Fielding uh the you know everything's on fire uh

35:36

phone calls what what sorts of things would you cover there I really just cover the the market um you know in in

35:44

different you know different areas just market economy and then I would move into the history of the market just to

35:51

kind of reiterate and remind people that these things typically come out just fine and long term it's great to stay

35:57

invested and so so just some pretty generic investing Concepts and then I would always at the end so it was the

36:03

most fresh in everyone's mind and say and I would cover the guard rails not any persons in particular because this

36:08

webinar was in Mass but cover the guardrail concept and encourage everybody to go look at their guard

36:14

rails and to see where they're at and look at the potential spending cut if it were to happen and it's just super

36:22

efficient to be able to do that to all of your clients at once and it's not like I'm trying to avoid talking to any

36:29

clients individually that is by no means but if I want to talk to them I'd rather talk to them about the next great thing

36:35

that we're going to do or or the next you know module in their financial planning that we're going to work on rather than trying to convince them

36:42

individually each that everything's going to be okay with this market downturn so um yeah scalability

36:47

efficiency all those just increase drastically being able to get ahead of the game with something like

36:54

this Ryan I think he said something really powerful and it sounded like maybe your clients have have competition

37:01

amongst each other and they're striving you they're in similar Social Circles what have you um and and they're

37:07

striving who has the best score and so I think that that just goes back to a really really young age right

37:14

we all we all probably remember when we first graduated college we wanted to

37:19

build up our neste and we wanted to save money and I remember my first goal was I

37:25

wanted to to to have $10,000 set aside right and then you build up that That

37:30

Rainy Day Nest Egg um and then you start saving into your investment accounts and you're always you're always kind of

37:35

striving for a number but the reason we strive for that number is when we do

37:41

reach that Pinnacle when we do reach retirement it's so we can enjoy the fruits of our labor and that's much more

37:49

in relation to satisfaction of life and less about the balances in our

37:56

accounts and that goes back to the spending capacity and so that's where we spend the majority of our time in

38:04

conversation but there's a psychological Challenge and it it it does take time um

38:09

and it's not just a one conversation and done but there's a comfortability that that occurs where clients will get more

38:17

comfortable with their ability to spend more uh based on this guardrail system

38:23

than what they may be originally uh through a retirement plan that was probability success and what spending

38:30

capacity they felt was was appropriate with that probability

38:35

success so are there uh you know ways that you talk about spending capacity

38:41

with clients that just really you know ring true with them um you know what

38:48

what were I think a lot of people on this webinar are probably wondering like I'm used to talking about it with

38:54

probability of success how do I make the shift you know and and each person's language might be a little bit different

39:00

but but what are some things that really work with with your

39:06

clients either one of you sure

39:13

yeah I'm sure like most folks on this call in our minds we make it into a

39:21

really big deal and we come up with all these objections and what would what I would

39:28

was thinking was okay I've worked with you know these these senior leaders for X number of years been focused on

39:34

probability of success and you know we've we've helped them be very successful helped them uh with their

39:42

Deferred Comp their restricted shares and improve their score so they can live the life that they had dreamt and

39:49

deserved and here now I'm going to Pivot completely and it's gonna it's going to go terrible the reality is

39:58

there's almost a sire relief that we're no longer focused on a

40:03

score and and we're now focused on the quality of life that we're going to live

40:09

and the income that they're going to have in retirement and and the the goals they're going to be able to fulfill with

40:15

that income the memories that they're going to be able to make um so I I ask them point

40:20

blank when I when I do the comparison you know when we've done probability versus when we switch to guard rails how

40:27

does does this feel you know is which one do you prefer in inevitably it is guard rails

40:36

because it's happiness equals reality minus expectations it's just there's there's a crystal clear understanding

40:42

and there's a definitive um

40:48

expectation I think we've had go ahead Ryan yeah I just wanted to add that um

40:54

so I did in the early days of Incorporation income lab um like a true

41:00

engineer I did some AB testing uh just to and and some you know client feedback

41:05

and things like that and it was for retirees and soon to be retirees uh they just said that it

41:11

painted a very clear picture of their ability to spend where probability

41:17

sucess of success did not um probability success was very subjective and very you

41:23

know just not and working with people who need to be you know especially engineer type

41:29

analytical type they want defined answers and probability of Success is Not A Defined answer it's a range it's a

41:36

you know it's a it's exactly what it what it it's achieving what it's meant to do but it's not the ideal situation

41:43

for a client that is already going into one of the biggest life changes that

41:48

they'll ever have right going from working however many hours a day a week

41:53

to not working right going from being an accumulator to a de accumulator going

41:59

from being a sa to a spender all those things it's a big life change and the ability to alleviate as much anxiety and

42:05

uncertainty during that transition really does make the retiree

42:11

I've seen much more confident much more in tune with their plan

42:17

and makes them comfortable with spending at a higher level when I believe they

42:22

otherwise would not yeah yeah I feel like that's the uh you

42:28

know you'll see in the in the Press you know things about a a retirement crisis and for part of the population a large

42:34

part of the population there there's a crisis of not being able to spend enough because they don't have enough resources

42:39

for most people who have a financial adviser what I've heard is it's the opposite the opposite problem it's the

42:45

um it's the not having not being able to spend not feeling they have the permission to spend um and and that's

42:53

the that's the real not you're you're trying to crack um it sounds like both of you have a a good uh a good jump on

43:01

that we've got um a couple questions that are coming in I'm sure we'll have some others um but I wanted to uh

43:08

address some of these one somebody was asking uh Monte Carlo can be run with guard rails why are we do as competitors

43:15

I think I think we've been really careful with our wording here but just to make it clearer what I what the problem is here

43:23

is probability of success which is not the same thing as Monte Carlo um it is a

43:29

way to report Monte Carlo or really any simulation results so you can do a whole

43:36

bunch of simulations how you talk about or how you use those results is what we're talking about so using a single

43:42

score uh which is probability of success is one of the problems that we're identifying here and maybe a way to look

43:49

at this you know I I showed the uh you know that that bell curve before but if

43:54

you just kind of look at it on a on a number line here um risk of of under

44:00

spending is probability of success like they're the same thing um and so um what

44:07

we're saying is you're you're getting only half the picture yeah there there is a risk of overspending as well and

44:14

that's the one most people care about and worry about um but the risk of under spending um is a is a problem as well

44:22

the best Guess level is the one that balances these two best guess by the way

44:28

doesn't mean best advice um so often people will uh Target a spending level

44:36

that is not at 5050 right it'll be to the left it'll be in the under spending

44:41

Zone but not so pegged to the left that uh you know that that uh your clients

44:46

are uh likely to not not hit their goals um so I think that's hopefully that that

44:51

clears up I know that was that was one that had a lot of uh a lot of up votes

44:56

um let me see uh we've had a few questions about like if there's any place you use

45:04

Mone Carlo well sorry probability of success because Monte Carlo I mean you can use Monte Carlo in income lab right

45:10

uh is there have you just basically gotten rid of probability success from your practice or are there places where you still feel it

45:18

works I do still um use it for and which is a very low population of our

45:25

clientele our this is a retirement planning firm uh so most are with that so probability success would be more for

45:32

I'd say a younger person just getting starting started in Saving because it

45:37

does show you know very good the impact of okay if we do X Y and Z how much is

45:44

it going to move the meter even though they don't really know how they're not so let's say they're just getting started and investing they don't really

45:49

understand a lot of the concepts it's really easy to see when your meter moves from 20% to 30 to 50 to 100 or or so and

45:56

so yes I do still use it for that but um for retirees uh exclusively income

46:03

lab yeah I I I feel as if that

46:08

probability success is for the accumulation phase it's appropriate for the accumulation phase then once you get

46:14

about five years pre-retirement through end of life decumulation seems to be the focus income replacement tax efficiency

46:21

is a huge it's on it's on our clients's minds um and that's definitely a big

46:27

differentiation Point uh with with our practice as we think about our competitors uh here here in De Mo Iowa

46:35

and taxes are are on the top of people's mind they really are and one phrase we'll use or I'll use is you know I'm

46:43

comfortable paying my fair share but I don't want to tip the government and that's that's what the tax Center allows

46:49

us to do right and I know this is more about guard rails but it's all interrelated and when you think about

46:55

decumulation when you think about income when you think about a person's spending capacity we want to try to limit their

47:02

taxes the best we can and so um you know conversation for another day but that's where where the tax Center comes into

47:08

play yeah I want to um add on to that Jason I agree with you 100% that if

47:13

there's two the two most effective marketing and client acquisition tools

47:19

that I have are being able to show people guard rails and spending plans

47:24

versus probability access kind of show them those four slides and to show them

47:30

the tax lab and income lab hands

47:35

down so this in particular kind of the yeah the tax efficiency it sounds like

47:41

what you're able to do by not having a score focus is you're shifting

47:47

to you know the how are we going to do this like let let's get it's it's no longer about measuring yourself and you

47:54

know am I doing well enough like hey we planned we've done what we can do now we've got what we've got let's go do

48:01

this right and how we're going to do it best right so I mean there really aren't scores here yeah I mean I guess you

48:07

could view tax savings as a score but hey nobody's going to worry about a lot of tax savings um so it's no longer

48:14

about the well if you do that that's really dangerous it's about how are we going to do this

48:21

exactly let's see what other questions we've got here um we had a few questions I think for you Ryan on the regret Zone

48:29

um piece and kind of talking about you know long-term care or um I can probably

48:37

address this one on sequence of return risk but can you address kind of that later in life um you know possibly

48:44

having higher spending and and do people you know ask that question and how do you how do you uh account for that here

48:50

this that's a a great point that needs to be you know definitely looked at addressed and but what I say is there's

48:57

other ways for us to plan for long-term care right we can either look at the insurance route and and look at that we

49:03

can come up with you know maybe using a home equity plan or something like that but then there's also just building in

49:09

maybe a false floor into the plan where we say instead of focusing on all this

49:14

under spending in the beginning to have money for long-term care later let's just build our zero so the assets that

49:22

we're kind of shooting for you know let's so let's say instead of you know trying to spend down to zero and bounce

49:27

that last check we set our false zero at 200,000 and that's our our parachute to

49:34

pull if we do have a long-term care event and if you don't end up using it then that is just more money that will

49:39

go to the Next Generation or we can adjust it at any time through your life and you can easily accomplish that an

49:45

income lad using the Legacy feature it's pretty much the same thing uh so yes and we do talk about that and we everybody

49:52

gets a long-term care plan but it doesn't necessarily mean that they need to underspend early just to save money

49:58

for that there's other ways that we like to plan for it yeah and I think um this

50:04

make kind of get at um this the the concept of kind of

50:10

holistic planning here um like all of that would be included in kind of where

50:17

this graph begins right so if you're trying to if you have a million dollars and you're trying to leave a million

50:22

dollars well the the that all these income levels are going to be lower than if trying to leave zero right if you're

50:28

trying to leave zero they'll all be higher so all of that really needs to be taken into account the same thing somebody asked a question about uh

50:35

sequence of return risk if you're invested more in equities or or more in bonds or or if your portfolio is a

50:41

bigger part of your income versus a smaller part that is also going to have a big effect on what you're telling

50:47

clients their spending capacity is and where their guard rails are right if you're not depending heavily on your portfolio you're going to have really

50:52

wide guard rips right if you're depending heavily on the portfolio and it's you know a portfolio with a lot of

50:58

volatility they might be narrower so the the key is I think when you have those

51:04

parts of a plan whether it's long-term care Legacy goals um you know worries about um sequence of returns included in

51:11

the plan instead of kind of saying oh I'll sort of do an after the fact put my hand on the scale like just just include

51:18

it in the plan and and and you'll get it there so maybe another way of saying that is this whole underspending

51:23

overspending thing that includes the IDE whatever ever your sequence of return risk is whatever your inflation risk is

51:29

whatever your mortality risk is all that should be included in am I overspending or under spending at any given point um

51:36

it's not a separate um question all right

51:44

um Taylor have you been uh if you've been monitoring the uh the Q&A are there some other uh um so there is a couple

51:53

questions for Ryan uh with right Capital using right capital and using it for younger clients we got

51:59

one in advance and one now so if you're I know that you said your businesses

52:04

people who are in retirement or near retirement um and maybe Jason has some

52:09

insight on this but using it for someone in their 40s and if you're using it with right Capital um can you address how you

52:16

use it for younger clients at all I um I typically don't use um it for

52:25

younger clients I Jason I don't know if you you kind of mentioned that the fiveyear out is very appropriate and I I

52:31

agree with that it's a great time to start looking at just that shifted mentality but

52:39

um okay and then there's another question here about uh how do you know if income is actually enough many plans

52:46

have withdrawals with major events that are not just monthly cash flowed yeah so um another concept that I

52:54

you know there's a lot of different ways to do that is you could look at in easy ways like what is their current bring

53:00

home from their salary and bonuses and things like that and then equate that to what their spending capacity is an

53:06

income lab to see if it's enough right that's a really you know easy but you know we we need to dive deeper but it's

53:12

a really easy way to to just start somewhere right um also there's other ways to achieve that like for a lot of

53:19

my retirees I'll create a slush fund so it's a it's a portion of funds that do

53:25

not go into the calculation with income lab so income lab is meant to give them

53:31

their spending capacity on a month-to-month and a year-to-year basis that slush fund is available for them to

53:37

reach into and pull larger amounts of money or to be more flexible if

53:42

something breaks around the house or they want to take a large vacation and take the whole family or do all of those

53:48

things and it doesn't affect the calculations in income lab because it's disregarded but with the you know the

53:55

understanding that if the slush fund is spent and the market is not great to us we may not be able to replenish it so it

54:01

is used sparingly right but that creates the flexibility to be able to reach in and fix things around the house or deal

54:07

with unexpected expenses and things like that and that way income lab is telling you okay here's what your paycheck is

54:13

going to be your slush fund is now your savings that you can reach in and do things other than that

54:19

with Jason do you want to add anything or we can move on to the next question yeah we'll typically I mean it

54:28

if you're anything like me there's always unexpected expenses right like that's just that's

54:34

life there are always unexpected expenses I depending on the dollar

54:39

amount um but you you can actually model uh you know those those unexpected

54:45

expenses you know every few years uh you know you're going to need to take a larger distribution I just modeled one

54:52

uh yesterday you know they're thinking about uh buying a house so what's the impact to our spending capacity if we

54:58

pay cash versus Finance um you know so there's there's a number of modeling that you can do what I found is most

55:07

most of our clients are not taking a distribution as large as their

55:14

spinning capacity might indicate we're in that process of moving

55:20

from the probability of success to guard rails that process is super simple that

55:26

process is is really you know been done but part of the process then after

55:31

you've moved to guard rails is actually helping clients get comfortable with the

55:37

spending capacity and the income the size of distribution they're eligible for compared to what they had been

55:44

getting when we were focused on probability success does that make

55:50

sense this can be a little you know jarring for people who are used to a software that depends

55:57

on the what do you want to spend answer um but in in income lifeb you actually

56:04

don't need any expenses in the plan and and and if you didn't have any expenses in the plan it would basically say well

56:09

you can spend this you didn't tell us how you're going to spend it so you got a surplus so this plan even though it

56:16

has Roth conversions and big taxes and stuff it's got a $38,000 surplus for

56:21

2024 now it's up to you and the client to figure out is that does that mean this plan is a little too aggressive on

56:27

the income we don't need all that or you know having a little buffer like living within your means is it's good and as

56:32

you say Jason I mean if you need a new roof this year well hopefully it's not 40 Grand but you know maybe 105 right so

56:39

um that could be a a good good reason to have that what also happens

56:48

is you know we'll have clients that don't take the pay raise so let's say we hit the top guard round and they're

56:55

eligible for a pay raise raise they don't take the pay raise um and then that just gives them

57:01

that much more cushion right before they would potentially have to endure a down

57:06

market and hit the lower guard rail and in turn that allows them to take some ad

57:11

hoc one-off distributions without without much impact if any to the to the plan

57:18

right yeah same here um we do the same thing and then if a client says that you

57:24

know when we show them their spending capacity they wow that's way too much money um I say well all right great well

57:29

let's figure out what you want to take and then let's let's make a plan for the rest are there philanthropic goals you

57:35

want to meet do you want to Roth convert more to to leave more to yourself or the Next Generation taxfree you know there's

57:41

there's a lot of other that's a that's a whole another conversation starter of what are the other goals we can help

57:48

people achieve if they do have to where they want to spend less than what they can spend right right um I think we had

57:56

one more question that maybe we have time for real quick here uh at what point in a market downturn do you begin

58:02

making reductions in distributions and when does it come back to normal so I

58:07

think there's sort of a you know a theoretical answer to that which is you know we go back to this and just say

58:14

when when the risk of continuing to do the same thing when you're in the over spending Zone typically far into the

58:20

overspending Zone that's when you would make the adjustment and that's where the guardrails are set the red guardrail is

58:26

going to be in the overspending zone it's not going to be you know in here because if my you know risk of under

58:34

spending my probability of success goes from 75 you know or 100 to to 70 I'm

58:39

still deep in the UND spending Zone that would be make no sense whatsoever to make an adjustment here we got to do it

58:45

when we're over here um I don't know if either of you have actually you know had a client have to adjust but but how have

58:52

you dealt with that I've not had a client had to make

58:57

an adjustment on the downside um only on the upside which is a pleasant conversation yeah um it also that having

59:06

downside guard rails also can communicate what the effects are of overspending like if you have somebody

59:12

that is taking a certain amount of monthly but then they want to take a large amount out to gift to the kids or

59:18

to do something with you say well we don't necessarily need to change your spending but it is driving you much

59:23

closer to a guard rail uh and then it's much more likely that you're going to have to make that downside adjustment uh

59:29

earlier than you would have you know than or at all than you normally would have but um luckily no during both

59:36

downturns I have not had a client hit a downside guard

59:42

row all right we are we are at the end of time but we have something big to

59:47

talk about I know that we have gone a little over time for those who can stay we do have something big that we want to

59:53

tackle here um so we are launching a new um Master Class series that Justin will

1:00:01

be pulling up here and going over with Jason juwel but first while he pulls that up Ryan and Jason thank you so much

1:00:07

for attending and being a voice today it was a great webinar and we have many

1:00:13

questions left so I will share those with you as well um so with that Justin

1:00:19

um and Jason will have a six-part master class series starting April 9th it's

1:00:26

coming uh in your emails and it was sent out in the registration email for this as well so uh Justin do you want to go

1:00:34

over this with Jason yeah so um we've had a lot of demand from um you know advisers to dive

1:00:41

deep into practice management and the concepts behind uh the retirement

1:00:47

planning and tax planning in income lab so this is an every two week um webinar

1:00:54

series starting April 9 there is one spot between the 7th and the 28th where there's a 3-we gap um but otherwise is

1:01:01

every two weeks it's an hour and the plan is to cover both um you know theory

1:01:07

and practice and to have takeaways that you can actually you know use in some way in your practice so actual things

1:01:14

that we'll get you in in email whether that's you know marketing ideas or um

1:01:20

you know kind of talk tracks and and things like that examples and so on so

1:01:26

we're really excited about this these are um I think at the same time as our

1:01:31

as our normal webinars so if you're able to make these uh you'll probably be able to make this as well uh and we will be

1:01:37

uh announcing these uh you know really soon via email and social media and so

1:01:43

on yeah they some of them are at the beginning of the month like next month which is uh April 9th so please uh look

1:01:51

for our follow-up email we will have a recording of This webinar tomorrow a link to register for this webinar and

1:01:58

there was a question about providing the slides I don't know is that something that we uh yeah I

1:02:04

can I think we're gonna try to get out some of those especially the slides I went over at the

1:02:09

beginning and we will get some of those slides out as well so thank you all for joining and uh thank you Ryan and Jason

1:02:17

again we truly appreciate it always a blast pleas take care see you in a few

1:02:23

weeks have a good one by

1:02:30

black