United
Income—which launched Monday with backing from Morningstar Inc. MORN 0.88% and eBay Inc.
founder Pierre Omidyar —has a “core focus on people ages 50 to 70 who are
approaching retirement or are already retired,” says Chief Executive Matt
Fellowes, whose resume includes a stint as Morningstar’s chief innovation
officer. “Eighty percent of investible assets are held by people 50 and over.”
While most robo advisory
services help investors figure out how much to save for goals
including buying a home and retirement, United Income also aims to assist
retirees with turning their assets into a steady stream of income in
retirement.
The
Washington, D.C. startup offers advice on when to claim Social Security, which
Medicare plans to buy, and how to manage withdrawals from brokerage accounts,
tax-deferred retirement accounts, and tax-free Roth retirement-savings accounts
to minimize taxes. The service can also automate the required minimum
distributions the Internal Revenue Service requires people age 70 1/2 and older
to take annually from their IRAs and 401(k)s.
The company
developed many of its services with a team that includes former officials at
government agencies, including the Centers for Medicare and Medicaid Services
and the Social Security Administration, who have a knowledge of the rules
governing programs for older Americans, says Mr. Fellowes.
Like most
robo advisory services, United Income allows clients to choose to work with a
human adviser—via phone, email or videoconferencing—for an extra fee.
Investors
who don’t want to pay can still get free financial plans and advice on when to
claim Social Security.
For 0.50% of
the client’s account balance a year, United Income offers an automated
web-based service that provides ongoing financial planning, a monthly
retirement paycheck, and services including tax-loss harvesting, a strategy of
selling investments that have gone down in price to book losses than may offset
taxable gains on other holdings.
For 0.80%,
investors can get unlimited access to a financial planner and a so-called
concierge adviser who can handle tasks including consolidating retirement
accounts and enrolling clients in Social Security and Medicare. Concierges are
also trained to help clients figure out how they want to spend their time and
can identify specific opportunities for volunteer work, travel and second
careers, says Mr. Fellowes. They can also assist in end-of-life planning by
making referrals to in-home care and hospice services.
United
Income’s advisory fees are generally higher than the 0.3% to 0.5% that is
typical of many established
robo-type services. The firm discounts its fees for investors with
accounts worth $500,000 or more. (There is no minimum investment required to
get a financial plan; for investment management services, the minimum is
$10,000.)
Like most
rivals, United Income invests clients’ money in low-cost exchange-traded funds
from companies including Vanguard Group, BlackRock
Inc., and Charles Schwab Corp.
(Those ETFs add 0.10% to 0.25% to the advisory fees investors pay.)
When
designing portfolios, the company includes the value of a clients’ Social
Security as a bondlike holding. As a result, United Income’s algorithm
typically recommends that clients invest a higher portion of their investible
wealth in stocks than is the case for advisory services that don’t take Social
Security’s guaranteed income into account, says Mr. Fellowes.
The firm also
generally recommends that clients invest the money they need to cover essential
expenses, such as food, shelter and health care, more conservatively than money
set aside for luxuries or inheritances.
United
Income is jumping into the robo field at a time when it is becoming
increasingly crowded and dominated by large financial companies with
established brand names, including Vanguard, which manages more than $83
billion in its Personal Advisor Services, and Schwab, which manages close to
$20 billion in its Intelligent Portfolios.
Still,
United Income is targeting an older segment of the broader market. Vanguard
says 85% of its clients are over age 50 and roughly half are over 65. Industry
pioneer Betterment Inc. of New York says more than 30% of its assets are held
by clients who are over 50.
Mr. Fellowes
is familiar with the financial-services industry. In 2009, he founded
HelloWallet, a mobile service employees can use to budget and maximize employee
benefits. In 2014, he sold the company to Morningstar for $52.5 million.
(Earlier this year, Morningstar sold the company to KeyBank for an undisclosed
sum.)
United Income
has more than $200 million in assets under management from clients it signed on
while testing its service. The company currently employs 20 people, including
four financial advisers, and has raised $5.8 million, including $2 million from
Morningstar. The rest is from Mr. Omidyar and Mr. Fellowes and his family’s
business, Fellowes Brands, says Mr. Fellowes.
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