United Income: Moving with the times

Matt Fellowes of United Income explains how the company is using technology to provide financial advice and services for people of older generations.

Life insurance and financial planning during later life can be a tricky bridge to cross. Matt Fellowes spoke to Efma about how the company works to meet the needs of older generations and the role that technology and data is playing.

What would you identify as the key topics and challenges prevalent in the financial services industry at the moment?

The first challenge to mention is the ‘Fangs’ – Facebook, Alphabet, Netflix and Google. These represent an existential threat to financial services. While financial service companies own the distribution, the ‘Fangs’ own the ‘eyeballs’ so to speak. They’re really miles ahead of financial services companies on the technology side of things. The only things keeping those ‘barbarians at the gate’ are regulations. Take those away and these major technology companies will quickly turn these ‘eyeballs’ into financial services customers. In addition, those companies have really been interested in thinking through how they could operate in a more regulated environment.

The second big threat is complacency. For all the talk about the challenge of disruption from the financial technology companies that has emerged in recent years, it’s also true that that challenge has occurred against the backdrop of record profits, soaring market capitalisation, and massive consolidations that are increasing the efficiencies of financial services companies.

There are also very cheap fintech companies that can be acquired to help enable incremental progress. But I don’t see a credible fintech threat out there in the market today – it’s really more additive or ‘pump and dump’ companies. But the core tenet of the technologists is to test and learn. As long as they’re given the time and capital to test and learn, eventually someone is going to come up with a credible threat to the existing infrastructure.

The third is longevity. The customer base of financial services companies is increasingly getting older, but attention is focusing more and more on younger generations. That disconnect between where assets and revenue are, and where the focus of a company is, is creating a chasm which is going to prove increasingly challenging to banks. They’ve got good customers that are massive revenue generating assets, but they are all too often overlooked. The demographic aging of the global population is another challenge for businesses that often goes underreported.

Can you tell me about the work United Income does and the services it provides?

United Income is focused on that aforementioned aging population. It’s focused on individuals who are approaching, transitioning to or in retirement. We provide a number of services to that population.

The first is basic money management. One of the services we provide is a retirement pay cheque, which aggregates all the different sources of income that show up when you retire into a single pay cheque which replicates effectively what you received during your working life.

The second is financial planning. That’s focused on the unique issues faced by people when they’re in retirement. From things like the sequencing of which accounts they withdraw from to thinking about how they’ll plan for and optimise requests, to non-profits and heirs, to other things like state planning issues.

The third set of services is around investment management. In general, the investment management of folks that have retired is out of date and reflects a bygone era where we didn’t have technology to personalise investment strategies. Today we do, so for instance we create personalise estimates of what people are likely to spend. To date, the industry has generally relied on rule of thumb assumptions, which just creates really wrong investment strategies for that population.

The fourth is concierge services, specifically to address non-financial but financially important issues that affect people as they retire. That includes end-of-life signing, so things like hospice care or in-house care, to more fun things like trying to figure out what to do with your time in retirement.

These four sets of services are provided through a software platform and by financial advisors. It’s a hybrid offering.

How does United Income use software and technology to deliver these services to customers?

Technology and data are fundamental to what we do because we solve problems that have not been solvable in the past, and in doing so create a money management approach that our research shows extends the life of money as effectively as life is being extended for people.

In the last 100 years, 30 years has been added to the average human life, and in the next 20 years another ten years is expected to be added to the average human life. This means there’s a pressing need to figure out how to extend the life of money effectively, so that it extends alongside human life.

We solve this problem through data and technology. As an example, ever since the late 1990s, investment management firms have been trying to forecast expected changes to the market in the future, and to take those potential changes into account when it comes to decision making. We not only do that, but use technology to simulate potential changes to your life that could affect your financial health and outcomes in the future. That includes things like how your health will change, how your spending on health will change, how your childcare costs will change, and how your living expenses will change. We also consider what are the possible dates you’ll retire, and at what dates you might claim certain public benefits like social security for example.

We simulate millions of potential market and life outcomes, which allows us to much more ably plan for potential things that may happen to you in the future and affect how you make decisions today. Data allows us to position people to succeed in more potential futures than what they can do currently. That is a core part of what we’re doing, and it is entirely reliant on technology.

We’re also using data and technology to really personalise money management in a way that hasn’t been possible in the past. One way we do that is by creating personalised longevity estimates. As we’re living longer, it becomes more important to figure out when you’re going to die, or when you’re likely to die, because that’s going to affect how much you’re going to spend. This becomes much more important in a world where we’re living longer and longer.

Too many people are using assumption and applying that generally to an entire gender or age group. This has been the case since the life insurance industry first came about in the mid-18th century. But with data and technology today, we can create a much more accurate probability estimate for the longevity of an individual. We will also forecast spending trends for individuals.

Most financial services today are siloed, inside the bank and marketplace, and so you have to go to one source for investment, one for financial planning, and one for basic money management for example. That creates a massive amount of inefficiency – both in terms of time and in the provision of advice. Using technology, we can fuse together a holistic, one stop, smarter and faster experience from the consumer point of view.

What does the future hold for United Income?

Our vision is to be that holistic, one stop platform for people that are in retirement, where all financial service needs can be met.

We’ve started with basic money management, financial planning, investment management, and some life services. In the future, we’ll be adding more of these services, in order to fulfil this vision of becoming a one-stop platform.

You’ll also see very rapid innovation from us. Because this area of the market has been fairly well left alone, there are a lot of blue sky opportunities to innovate with products and services. As an example, our retirement pay cheque service is a simple idea, but it affects most people in retirement and there’s not a credible service in the market today. That’s an example, and there will be many more innovations from us in the market in the future.

And finally, we have been approached by around 50 different institutional investors, so we have some decisions to make around who to work with moving forward.