Pension clients concerned about running out of money in retirement may be helped by a new planning tool, which has been developed to maintain an individual's income levels.
According to Nick May, the founder and technical director of Okinawa Zest, the producer of EvolveMyRetirement.com, the tool aims to help clients avoid drawing down too much capital, while aiming to help them achieve their stated goals within their risk tolerance.
Mr May said: "The company’s business model is not to compete with financial advisers, but to form partnerships with them over time.
"Our mission is to promote a greater understanding of the complexities inherent in retirement planning, and the need to consult a qualified financial adviser. We’re therefore providing our tool free of charge to the public."
EvolveMyRetirement.com uses the Monte Carlo Simulation to handle volatility and uncertainty, and has a built-in optimisation engine based on a proprietary Genetic Algorithm. The tool treats life expectancy as uncertain, and uses mortality tables published by the Office for National Statistics.
However, Mr May said despite all the "sophistication under the hood, the user interface is simple and intuitive".
Users signing up only need to enter their information once, and the system remembers it for the future.
However Neil Adams, head of pensions planning for Drewberry, said he found the time it took to enter data (at least 20 minutes) and then a further 10 minutes for the programme to "chug through 10,000 Monte Carlo simulations" was quite time-consuming.
Although he said the conclusions were "immaculately presented", the pensions advisers found them confusing.
"At our third attempt we were still trying to figure out how to adjust the pension drawdown level in the assumption – which is pretty central to any retirement planning exercise," he said.
As an analogy, you can think of EvolveMyRetirement as a financial Sat Nav, but not a financial self-driving car. Nick May"With this in mind, the ‘strategies’ that this system takes pains to generate don’t really offer much to the visitor. It’s difficult to imagine that the average millennial pension saver will take the time required to get the most out of this offering, which then points them to a financial adviser.
"From our perspective this rather falls between two stools. It falls short of what might be counted as ‘robo advice’ or online guidance but it’s far too complicated to be much use as ‘spread sheet’ type tool that gathers up assets and liabilities."
Mr May was keen to point out this was not attempting to be robo-advice, however.
He said: "Despite the current buzz about robo-advice, and despite the sophistication of the underlying technology, EvolveMyRetirement is not attempting to be a robo-adviser.
"When it generates an optimised strategy for a user, it estimates a ‘safe’ level of discretionary spending (depending upon personal risk tolerance). It also proposes various high-level decisions that, if implemented sensibly, should support the user’s stated goals."
The reason the site points people to a financial advisers, according to Mr May, is that: "One would need to be an expert to actually implement those high-level decisions" which are produced by the tool.
He added: "As an analogy, you can think of EvolveMyRetirement as a financial Sat Nav, but not a financial self-driving car.
"Provided you know how to drive a car, a Sat Nav will guide you to your destination. It tells you where to turn off, but not how to turn the steering wheel or whether or not you need to indicate, brake or push the gas.
"The business model of EvolveMyRetirement is to direct users into the arms of financial advisers. At the moment this is merely a strong encouragement on the website. In the next phase of development, features will be added to allow users’ plans to be shared with IFAs, or for IFAs to create plans on behalf of their clients.
"I have already engaged with IFAs who are excited about what the tool can do, and have expressed a strong interest in such features. In the current release, collaboration can still be achieved by IFAs and clients sharing login details."
simoney.kyriakou@ft.com
