Financial Technology Innovator Automates Best Practice Decumulation Services.
BOSTON, September 7 2008 – LifeYield, LLC, a financial technology provider to wealth management firms and advisers, today announced the launch of the company.
Through its LifeYield UMH™ – or Unified Managed Household – LifeYield provides innovative web-based tools that help financial professionals systematize and streamline decumulation activity – the complex and time-consuming process of raising cash from an investment portfolio. Regardless of the type, size, or complexity of a portfolio, LifeYield automates the process wealth advisors must repeatedly go through in selecting which of a client’s assets to sell in providing that client a steady, recurring income. In doing so, LifeYield enables an advisor to look across the entirety of a client’s assets, including a wide range of asset types held in taxable and tax deferred accounts. Clients may be retirees living off retirement nest eggs, beneficiaries of a trust, or others who depend on their assets to generate income. LifeYield’s services empower the wealth advisor, and have been specifically designed to keep him or her as the central figure in the relationship between a client and their financial institution.
“Asset decumulation is a major challenge facing today’s financial professionals,” said Mark W. Hoffman, Chairman and CEO, LifeYield. “While vast resources have been devoted to providing services that maximize asset accumulation, little attention has been paid to technology that automates income distribution strategies to maximize the cash flow from a person’s life savings or trust account. LifeYield provides smart, flexible technology that enables wealth advisors to immediately implement scalable best practice decumulation services.”
LifeYield employs a “premium” income distribution process, which combines a multifaceted tax strategy with risk factors when identifying those assets to sell every period in generating a recurring income. In doing so, LifeYield treats a distribution phase as not just one of asset decumulation, but also as a period where a portfolio should be leveraged in continuing to maximize a client’s net worth. LifeYield’s own research has shown that by using a premium distribution process, versus one that considers just long versus short-term tax gain issues, income over a 30-year period can be improved up to 30%, while bequests can be increased up to 60%.
“The LifeYield UMH™ allows wealth advisors to spend less time on tedious, recurring processes and more time on growing his or her business profitably,” said Paul R. Samuelson, Chief Investment Officer, LifeYield. “Importantly, because of the efficiencies the LifeYield UMH™ allows, clients with lower net worths can now be serviced profitably. This opens a vast source of assets – and corresponding management fees – that can now be accessed by wealth advisors looking to grow their businesses.”
The LifeYield UMH™ features an intuitive graphical user interface, which adapts to a wealth manager’s existing workflow. It includes four service components:
- LifeYield Dashboard™ – Provides a wealth advisor with a quick snapshot of his or her client households including such basic information as portfolio balances. It also indicates which accounts may warrant immediate action, such as households with negative or low net cash balances, or those with suggested trades that need to be released.
- LifeYield Cash Harvester™ – Selects the most appropriate assets to sell for a particular period to generate the required cash flow. It generates the specific trade list.
- LifeYield Payment Modeler™ – Enables a wealth advisor to quickly and accurately forecast cash withdrawal levels that can be sustained throughout a particular time period, including the effects of one-time, or ad hoc, withdrawals.
- LifeYield Reporter™ – Provides multiple, current, client-friendly reports on how a client is doing vis-à-vis his or her goals.
Two related trends are converging to create new opportunities for wealth advisors: an aging US population, and the emergence of the mass affluent. The US Census Bureau has projected that by 2020, more than 50% of Americans will be 65 or older. A 2005 survey by Fidelity Investments indicated that 43% of an advisor’s clients were retired or expected to retire within five years. In addition, Forrester and other industry researchers have noted the emergence of a mass affluent segment that, depending on how it is defined, currently numbers in excess of 29 million households and is anticipated to grow to 35 million households by 2020. This incremental growth alone represents an additional market opportunity of $2.3 trillion in assets. The majority of mass affluent households include preretirees or retirees.
“In addition to an aging US population, other trends are contributing to a new and growing demand for the types of services LifeYield provides,” said Michael P. Benedek, President and Chief Financial Officer, LifeYield. “These include a growing emphasis on advise-based (premium) services, rising complexity of product offerings, and challenges with advisor recruitment that have resulted in constraints on advisor capacity. The LifeYield UMH™ allows wealth advisors profitably to access a client base that typically has been out of reach because of low or negative profit margins.”
Earlier this year, LifeYield secured the services of Boston Research Group to conduct qualitative research among registered investment advisors on the receptivity of the target market to LifeYield’s offering.