Modernizing Management of Money in Retirement

The shift from defined benefit to defined contribution plans left individuals responsible for their own retirement savings with serious consequences for retirement security. Risks that were formerly managed by sophisticated actuaries and professional portfolio managers — and borne by employers — have been transferred to individuals. It’s fair to say that individuals, rather than plan sponsors, now bear all the risks. Compounding the problem, individuals too often are directed to high-cost retail investment products rather than low-cost institutional products available to pension managers, and they lack access to the asset classes that help some pensions and endowments out-perform.

Historically, the retirement industry has focused on helping people accumulate more assets for retirement while they are working. Recently launched Kindur is focused on the distribution phase of retirement. Users complete a series of online questionnaires designed to discover their assets, project retirement spending, and recognize likely income from social security. Helpfully, it incorporates assumptions about healthcare costs into its calculations. 

Like many other robo-advisors, Kindur manages both taxable and tax-deferred assets via portfolio of ETFs which it rebalances from time to time. But it also offers a no-commission fixed annuity for clients looking for at least some guaranteed income they can’t outlive. It sends clients who are drawing down their savings a tax-optimized “retirement paycheck” every month so they will know how much they can spend and can budget accordingly.

Founded in 2016, New York-based Kindur has raised two rounds of capital totaling $11.3 million, both led by Anthemis Group. According to Alexa von Tobel, Founder & Managing Partner of venture fund Inspired Capital which contributed $1 million to the Kindur Series A,: 

“Many Americans who have worked hard to save throughout their careers see retirement as the finish line, not realizing how much planning is then required once retirement begins. Today there are millions of baby boomers already in or just entering retirement with significant assets to last them for several decades if properly managed. This big “IF” is a solvable question, but will require diligence on the part of consumers and existing and new companies coming together to innovate in new ways.”

Rhian Horgan is Kindur’s founder and CEO. The firm has roughly a dozen employees.

Rhian Horgan, CEO and founder of Kindur, photographed in June 2019 for Forbes by Jamel Toppin.

Q.   Rhian, you’ve recently launched to the general public. What have you learned thus far?

A.   The first thing is that our customers truly are engaging digitally. There is a misperception that if you are over 50, you don’t know how to use your phone or computer. But we are seeing customers engaging with us digitally with an average session time of more than 30 minutes. Our customers want to spend a lot of time on research and understanding their options. 

We spent a lot of time designing for our demographic. We know how a 60-year-old wants to engage on the internet. It’s different than, say, how my five- and six-year-old children want to. We continue to look for usability improvements to ensure that the experience is elegant.

Q.   How do you describe Kindur’s services? Are you a digital wealth manager? A digital financial advisor? An insurance agency? All of the above?

A.   I would say as a retirement company. We bring together insurance strategies that solve for longevity, with investment strategies designed for the spend-down phase of life, combined with easy-to-use technology. Our retirement paycheck is the ultimate simplification of retirement income.

Q.   How are you regulated?

A.   We’re an SEC-registered investment advisor and also a licensed life and health insurance agency. We are registered in all 50 states. It took time but we felt it was important to be able to provide a holistic solution for customers everywhere.

Q.   Demographically speaking, who is your target market?

A.   People between the ages of 55 and 70 who are getting ready for or in the early stages of retirement.

Q.   What about psychographically?

A.   They’re excited about how they want to spend their time in retirement. They want to play sports, they want to join a local mahjong group, they want to take classes, they may want to start as second career. They’re really active, physically and mentally. At its core, Kindur is about finding ways to free up their time. We don’t want them to have to read a 300-page book on Social Security.

They also do worry. 50% are afraid of running out of money in retirement. There’s this yin and yang. They’re excited by the potential of retirement but also fearful of the huge responsibility they have to manage their resources. That creates anxiety.

Q.   How do you plan to reach them?

A.   A number of different ways. Through digital channels like Facebook using online content is one way. But also through more traditional efforts such as partnerships and live, in-person events, such as seminars. The goal is to meet our customers where they are in their lives. They’re both online and out in the world. We want to meet them in both places.

The big event for this demographic is that actual retirement decision, whether full retirement or partial retirement. Sometime between 62 and 70 you’re electing Social Security, at 65 you are navigating Medicare. Our goal is to be with you as you are navigating these myriad decisions.

Q.   Do you expect your clients to come from banks? Brokerage firms? Are they working with traditional wealth managers but in need of specialized advice, or are they mostly sophisticated, DIY investors?

A.   Most of our customers do not have a financial advisor. I would describe them as passive DIYers. These are consumers who have made some very smart decisions —they bought a home, they participated in their 401(k) program at work (which perhaps their employer has matched), but these things are on auto-pilot. They are not active traders or really actively engaged with their money. This is the moment when they realize they have 10 different accounts and they need simplification. They need to figure out how to tax-efficiently draw down these accounts. 

Q.   You spent most of your career at a firm known for its sales force. Why take Kindur directly to consumers and without commissions?

A.   Actually, the division I worked in at JP Morgan did not have a commissioned sales force, so I grew up professionally in a zero-commission world which was really important. I’ve seen in my own life how technology can simplify things from grocery shopping and travel to more sophisticated tasks like managing my investments.

It shocks me how much of the investment being made in FinTech and InsurTech is targeted at a younger demographic, when most of the money in the U.S. is held by people over the age of 50 and very little technology is being built to serve them. I saw this gap and I experienced this gap as I was helping my parents with their retirement and I could not find a solution to help them. 

As direct-to-consumer marketers, we are experimenting to see what the right balance is between technology and humans. We have both available. We just don’t have commissions. 

I have a once-in-a-lifetime opportunity to build a company correctly from the start with a fiduciary mindset, and that to me means no commissions. It took me a long time to find a carrier that would deliver an annuity product without commissions. That was a bigger stumbling block than I would have expected.

Q.   Who are the Kindur coaches?

A.   These are licensed financial advisors. Many are CFPs. They’re here to provide a human touch and to answer any questions you might have, and to give our customers confidence as they’re making these decisions. They are based in New York and in Dallas.

Q.   Inertia is one of the strongest forces preventing people from getting their investment lives in order. How do you motivate prospects to take action?

A.   That’s about building trust with the customer and being relevant to their lives. For example, some of our customers are divorced. Navigating Social Security when you are divorced is quite complex. I think about being there to help them navigate those pain points.

I also think about people applying for Medicare who could benefit from a surcharge waiver. A portion of your Medicare premiums are income based. If your income is above a certain level, $175,000, there’s a surcharge. The first surcharge is an extra $750 per person. For a couple that’s $1,500. You might be thinking that this surcharge affects only wealthy people, but the definition of income includes the proceeds from the sale of your home or an inheritance. And, by the way, when Medicare calculates your income it looks back two years, so if you had that much income two years ago you get hit with the surcharge, no matter if your income is lower today. We can help our customers understand the rules and help them complete the paperwork to get the surcharge waived, and that’s a real saving for them.

When I think about meeting them where they are, it means helping them manage these pain points. That’s how we build trust.

Q.   Can people really predict their likely retirement spending accurately? I’m not sure I could do it accurately and I spent a lot of my career in the retirement plan industry.

A.   What we ask people to do is estimate their spending today and then we project what their spending might look like in the future. We don’t ask them what their healthcare costs will be because until you navigate Medicare, you probably have no idea. We look at lifestyle, we look at spending curves over time. There are knowns and unknowns. We think about essential spends — food transportation, housing — those are pretty predictable. The biggest unknown that is unpredictable is long term care.

Q.   People will generally spend more between 65 and 70 than between 90 and 95. Does your model take that into account?

A.   It really depends, right? How much you spend between 90 and 95 will depend on your health. Those could be your most expensive years, if you’re in a nursing home. But you could be really healthy and age in place. We do try to get at lifestyle in our questionnaire and we are looking everything ex- long-term care, because that would require a very different kind of analysis.

Q.   I completed your website questionnaire and saw that your moderate risk portfolio for people ten-years out from retirement is allocated 80% stocks and 20% bonds. How are you determining asset allocations?

A.   At Kindur, we look at the total balance sheet. Target date funds have made managing your retirement funds easier, but there’s a piece of the puzzle that’s been missing, and that’s an understanding of your income in retirement. We look at designing portfolios that take into account not just your assets but your income. 

We would recommend what might look like a more aggressive portfolio if you told us you have substantial income and aren’t relying on that portfolio for income right now. As time goes on and you become more reliant on that portfolio for income, you would see that allocation to equities reduced.

Another reason could be that if you have a pension, we would likely recommend more risk in your portfolio as you head into retirement than we would if you didn’t have a pension. We adjust our asset allocations based on your likely income, because if you have more income, you can afford to take more risk.

Q.   How are portfolios designed specifically for decumulation?

A.  First, as I just mentioned, we factor income into the asset allocation. Pre-retirement, the assumption in the industry is that everyone has some sort of salary and isn’t dependent on income from their portfolio. In retirement, depending on your income from pensions, Social Security, and annuities, you will be more or less reliant on that portfolio.

The second thing we do is help you automate withdrawals from your account. Behind the scenes, you can think of that as pretty sophisticated algorithms doing account sequencing. When I think about my parents, they had ten different accounts, Roth, taxable, tax-deferred, etc. Which accounts do you pull from first? We automate all of that, and also factor in things like RMD compliance.

Q.   Do you plan to introduce active tax management strategies?

A.   Over time, we’ll be introducing a number of different tax strategies. We felt that for this demographic, the place to start was account sequencing.

Q.   How often do you rebalance investment portfolios?

A.   They can be rebalanced as often as daily. The portfolios have guidelines, and, if markets are moving, we’ll be keeping the portfolios within the expected risk parameters on a daily basis.

Q.   Can clients customize your investment recommendations? If I come to you with $1 million in Exxon stock, can I keep it? Or the opposite case? Can you accommodate a preference for socially responsible investing? For example, say I don’t want any Exxon in my portfolios at all.

A.   Today, we don’t offer that level of personalization. If you want to keep that Exxon stock, we’ll manage the rest your portfolio outside of that Exxon stock. For our average customer, most of their wealth is tied up in their home, not in a single security.

Q.   I think it’s fair to say that you are in some ways trying to recreate a traditional pension plan. Will that extend to using some of the illiquid assets classes that are currently unavailable to retail retirement investors, such as, say venture capital, that might outperform?

A.   Not for the demographic we’re focused on. When you get to the point where you’re thinking about those types of investments, you’re typically not worrying about running out of money in retirement. For our target demographic that’s really the concern, and that’s why we use insurance strategies like annuities rather than focusing on less liquid holdings in our portfolios. When you’re looking to pass assets on to the next generation, those strategies become very interesting, but our demographic just wants to stay financially independent in retirement.

Q.   Will Kindur work for me if I only bring a portion of my assets to your platform?

A.   Absolutely. And we can pull all that information together for you and we can be that one place you see everything. We’re happy to manage a portion of the paycheck for you.

Q.   One of the more interesting elements of the Kindur program is the deferred annuity, designed to insure against longevity risk. Tell me how it works.

A.   I think of the fixed annuity as being very similar to a pension. The role of it in the portfolio is to provide you with guaranteed income and to provide you with that hedge against longevity risk. 

This annuity is very plain and simple. You can buy it any day you’d like and activate the income it at any date in the future. We expect our customers will want to activate it five-to-ten years after they buy it. Then that guaranteed income is there for life. You can choose whether you want that income based on your life or if you’re married, based on your joint life. But again, the role is to bring that peace of mind that our customers had with a pension, which is that they knew they weren’t going to run out of money in retirement.

Q.   Should people be concerned about investing in a fixed annuity with interest rates at close to historically low levels?

A.   Think about this in the context of your whole portfolio. Interest rates are low but stock prices are high. Ultimately what I’m looking for is a portfolio outcome for the customer. How do I provide them with some guaranteed income and reduced volatility in their portfolio? Selling stocks to buy bonds or selling stocks to buy an annuity is a way to de-risk and provide some guaranteed income over time. 

Some of our customers may also decide to start today and then ladder in over time. That’s for customers who are more interested in being active in timing their annuity purchases.

Q.   What is Kindur’s approach going to be to long-term care and long-term care insurance?

A.   It’s something that’s very much on our mind. As you know, 70% of Americans will spend time in a nursing home and the average cost of a nursing home is north of $90,000 per year. That blows a hole in most retirement plans, so it’s something we are focused on. To get started in the health space, we’ve been tackling the costs of Medicare, but long-term care is absolutely on the horizon.

Q.   A rule of thumb you hear in the retirement industry has been that you can safely spend 4% of your savings each year without fear of outliving your assets. True? How is Kindur determining how much clients can safely spend in retirement (the amount of the retirement paycheck)?

A.   The 4% rule was very effective in providing retirees with a framework, but the reality is that the rule was created when bond returns were much higher and when inflation looked different that it does today.

The reality is that most Americans are going to have to dip into their principal in retirement. That’s why instead of depending on the 4% rule, at Kindur we think about guaranteed income via an annuity as one way to ensure you don’t run out of money, and also about helping customers understand how to convert their lump sum into cashflow that will match their spending in retirement.

Q.   Are you going to offer estate planning?

A.   For this demographic, estate planning 101 is naming beneficiaries on your accounts to keep them out of probate. For all of our accounts, you name beneficiaries. And, you might be surprised by how many people have an old will or no will at all. 

Many individuals in their 60s and 70s should redo their wills as they no longer have to worry about guardianships for minor children and can instead think about how they want their legacy to be shared.

Q.   As you mentioned, for many, the equity in their home is their single largest asset. Does Kindur have a point of view on reverse mortgages? You’re going to be getting inquiries from reverse mortgage companies, I’m certain.

A.   Our customers say 30% of their wealth is tied up in their homes. I think there are a series of transactions and decisions that people make around their homes in retirement. Typically, in their 60s and early 70s, it’s a lifestyle decision. Where do they want to live? Where is the cost of living lower? If you live in New York, New Jersey, Connecticut, or Massachusetts, you could move to South Carolina and, just on Medicare alone, save yourself $1,500. Then talk about state income taxes and Social Security not being taxed, and the savings really add up. So for most of our customers, it’s a cost-of-living and lifestyle decision.

Later on — and this is where reverse mortgages can come into play — it’s about dealing with the inevitability of a loss of independence in retirement. Atul Gawande, who heads the healthcare venture Haven, which is backed by Berkshire Hathaway, wrote a book called Being Mortal. One of things he talks about is that as countries grow wealthy, individuals move from dying at home to dying in hospitals. But then as they grow wealthier still, they revert to dying at home. I think the analogy I would give you is that my mother saw her mother spend five years in a nursing home with Alzheimer’s, and it terrified her. I think you’re seeing a generation dealing with family members who are spending a lot of time in long-term care with a very low quality of life, and not wanting to live that life. They want to age in place. 

That aging in place movement is where reverse mortgages come into play, because they give people the ability to stay in their homes but also to access funds to pay for some of the inevitable rise in healthcare costs as they age. So, my instinct is that reverse mortgages will play very well into this aging in place phenomenon. 

The actual reverse mortgages themselves — you probably know that there is huge room for improvement in the products currently available.

Q.   What role do children and heirs play with Kindur? Are they involved or included in any way (assuming clients want them to be)? For some, these retirement planning decisions are family decisions. 

A.   One of the things I saw in our user research is that in your 60s — when you may still be supporting children but also have elderly parents to worry about — this can be quite tricky. But when it comes to the actual retirement decision-making, typically, what we see is that if you are married or in a partnership, you are making those decisions with your partner. If you are single, you may have an adult child involved in the conversation.

We have set up our platform so that you and a spouse can do a joint plan and make decisions together. Over time, we expect to build out more functionality that would allow you to bring an adult child into the equation. By solving problems today for people in their 50s and 60s — organizing, rationalizing, consolidating — we believe we will make it that much easier to get adult children involved when the time comes.

Q.   What’s your revenue model? How are you compensated for things like helping people optimize their Social Security payments and figuring out Medicare?

A.   We charge a flat 0.50% per annum on accounts at Kindur. To get you started, we have free planning software, and that is available for any American to use. If you then ask us to manage your retirement paycheck, we charge 50 basis points. We do not charge any commissions. We don’t charge anything for rebalancing. The 50 basis points is a wrap fee covering all costs associated with managing the accounts. 

Q.   Is 50 bp inclusive or exclusive of fees associated with the underlying investments (the ETFs)?

A.   The ETF fees on average were 6 bps, though I think that may have dropped closer to 5 bps recently.

Q.   But you’re not charging for helping people understand Social Security and Medicare?

A.   That is correct. We are not charging for that.

Q.   What capabilities do you plan to unveil next?

A.   Let me think about which secrets I want to let you in on!

One of the most exciting things which we have recently launched is the Kindur Coach. We brought on David Blaylock, the former head of financial planning from a company called LearnVest. We’re really excited to have him help give our customers peace of mind as they navigate these decisions.

Q.   What else would you like people to know about Kindur?

A.   Can I tell you more about our team? I’m really proud of the team. They have decades of experience helping people manage billions of dollars in retirement funds. This is a team that understands the importance of rebalancing, of taxes. We couple that with an amazing group of technologists who have backgrounds in engineering, in digital marketing, and in product design.

One of the core values at Kindur is being human in a world that sees numbers. We’re asking millions of Americans to become experts in things they’re not really comfortable with. Our job in designing this experience is to take that 300-page paper on Social Security and get it down to one page that people will feel comfortable making a decision off of. And, designing for our demographic we think is super important.

Something I think a lot about is building a really diverse team from day one. We think diversity gives us our best chance at doing things differently. Obviously, you have me, a female founder. Half of our initial team is female; our engineering team is 50% female. 

While our company is set up to help all Americans, I would say that the challenge for women in retirement is a little greater than for men because we live longer. We feel, as a company, that it’s really important to engage both men and women in the conversation about retirement and to understand, from a gender perspective, some of the differences. We want to make sure both people are at the table making decisions.

We have a diverse team as far as gender but also in terms of background and the companies we’ve worked for. I think that is our secret sauce.

Q.   I’m surprised some of the larger financial services companies haven’t done what you’re doing already. Why do you think that is?

A.   I think part of the challenge is that to properly solve this modern retirement crisis, you have to be willing to cross a lot of industry silos. You asked me at the beginning how we’re licensed— we’re licensed in the insurance industry, we’re licensed as an RIA, we navigate government benefits. Most large companies have picked one of those silos. Understandably, they want to be experts in that one space. 

Let’s say you’re an asset manager today. The idea of talking on 15 new regulators in order to enter the insurance industry is unlikely. It isn’t that the incumbents don’t understand the problem. It’s a question of structurally dealing with the regulatory requirements.

Q.   Are you hiring?

A.   Yes, we are!

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