The Evolution of Financial Planning Software

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"Monte Carlo may come back and say this [investment strategy] has an 80% probability of success, which is deemed to be very acceptable. But that means 20% of the time it fails, and failure with that kind of probability testing means the client went broke. That's not good news to a retiree. I mean you wouldn't get on a flight that has an 80% probability of reaching its destination." - Phil Lubinski

On this episode of Inside the Mind of an Actuary, I interview Phil Lubinski who is a retirement planning expert. He co-developed a financial planning software called Income Conductor. Phil began his career educating his clients through seminars and to this day still continues to host a webinar series. So, even though the technology platform has changed, the education remains the same.

Phil developed a software program in the early days using Lotus 1-2-3 to enhance his retirement planning approach with clients. That took hold in his office and also with the larger company that he worked with, such that they wanted to roll it out throughout all of their planner's offices.

Fast forward many years to today and this has evolved into a modern software program called Income Conductor. It's based on a strategy that has been foundational for Phil's retirement planning throughout his career, which is a segmented or bucketed approach. This means that time horizons are created across an individual's retirement and then the advisor can create separate portfolios for different periods in their retirement. For example, in the early years of retirement, the client may want to be more conservative to be able to withstand volatility for a period of time versus in the longer term where they can hold the investments through drops in the markets.

This next generation software monitors the tracking of clients performance against their goals and automates the loading of the actual portfolio performance data into the system. During times of market turmoil like we are seeing today, clients can continue to stick with the strategy by holding the investments that have dropped in value, knowing that they have a segment of conservative assets designed to produce income, even if at a lower level over the near-term. The software also creates a spending curve to monitor the client's spending as it changes over time. Retirement spending can be volatile too.

In the video, Phil shares a story of a client he worked with in the early days, who eventually passed away over 30 years later. It's gratifying to see the plan play out as expected through different market cycles.

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