While these are certainly difficult times, we feel that independent, unbiased financial advice has never been more needed than it is today.  We even got a call yesterday from a local small business reporter asking about how many more people have been coming to Boulevard R.

A recent FPA/Ameriprise study conducted by Harris Interactive points out the value of financial planning.  What was particularly interesting to us, was that 84% of Americans with $50K and above don’t see the value in financial planning or don’t think that they can afford it.  Of the 9% of Americans who have received a comprehensive financial plan, they were overwhelmingly more confident about their future and their financial security when compared with those who don’t have a plan (though this was before the $700B bailout plan and the collapse of AIG and Wamu).

Anyone can help people invest their savings, but where can consumers go to get actionable financial advice that they can trust?  I think that trust is actually at the heart of the current financial crisis.  No one trusts what financial services companies are telling them.  One day they announce that they’re financially sound and the next day they blow up.

This is a resounding failure of leadership both from inside the financial services industry and the agencies who are tasked with oversight (though my guess is that many of the agencies have seen their regulatory powers stripped over time or have had less than pro-active leadership running them).  The financial services industry was already steadily losing consumer confidence (except for independent financial advisors) and after what’s happened in the last few months, that’s going to turn into a precipitous decline.

I’m certainly not an economics major, but I wonder why the federal government doesn’t take some of that $700 billion and send out an army of auditors to review all the accounting books of financial services companies and then publicize their findings so that we can restore some transparency and trust in the marketplace.

Part of what we’re trying to accomplish with Boulevard R is to restore some of the trust that’s been eroded by a lack of openness and advocacy on behalf of consumer’s best interests.   At our core, Boulevard R demonstrates that independent, unbiased financial advice which doesn’t have an ax to grind can help all Americans- not just the rich who have typically been the only ones who either can afford it or qualify for this kind of advice.

There is still a lot that Boulevard R can do to make the planning process more effective (some of it’s on our development plan and the rest we hoping to hear from you after Oct. 14th), but we feel that our solution goes much farther than anything we’ve seen and really helps consumers with some real expert guidance based on who they are and what’s important to them.

In July we attended the annual conference for FPA’s NexGen, which is a group of all-star younger planners who are particularly passionate about making financial planning accessible for all Americans.  Because of the business model that the financial services industry has adopted, almost none of the the 20 and 30-something planners can have their peers as clients, even though these are the people who often times need guidance the most.

The conference underscored for us that financial planning done right is truly a noble profession- one centered around service that can have a dramatically positive impact on the lives of people who typically don’t have the expertise to understand how all the  complexity behind planning.  The planning relationship is really about trust and that’s something that Boulevard R strives to accomplish through transparency and best practices.  The NexGen folks inspired us to build something that uses technology to dramatically scale and increase the productivity of advice delivery in a way that is independent, actionable and personalized.  Many of the NexGeners are already making major contributions to the content on Boulevard R.

What we’ll be launching next week at Finovate 2008 will be the result of our 6 month quiet period.  Not only have we developed a platform to create high-level, comprehensive financial plans which we call Roadmaps, but we’ll also be rolling out an online dashboard that offers some real utility by helping consumers consolidate their financial life without having to give up the passwords to their accounts, while  breaking down Goals and Ways to Protect Yourself just like an independent financial planner would.  In fact, all the content has been developed by Certified Financial Planners™, which is the financial planning credential that is the most rigorous and difficult to earn.

At Finovate 2008, we’ll also be announcing a partnership with a major financial services company dedicated to helping small businesses get the advice they need to weather the economic storm.

At FinovateStartup we launched our new approach: creating personalized financial plans prepared by independent Certified Financial Planners™ to help non-wealthy consumers reach their financial goals. We figured that the rich had enough people fighting with each other to serve them, but that those with less than $500,000 in investable assets didn’t have a lot of options when it came to unbiased financial advice.

Since then, we’ve been getting some positive reviews about how we’re approaching financial planning. Not only from financial planners who are frustrated with an industry business model that relegates them to serving only wealthy clients, but analysts are also interested in what we’re up to.

Here’s what a senior analyst from Aite Group wrote in his assessment of how Boulevard R stacked up within the category of companies we presented with at FinovateStartup:

“Investment analysis/planning.
By my count, there were eight firms that fell into this category, including Boulevard R, Zecco, Cake Financial, Motley Fool CAPS, Invesra, Money Pools, Trade King, and Vestopia.

My take:
…I’ll tell you who I’ll be watching in this space: Boulevard R. While they offer an assessment approach not too unlike the Wells Fargo and ING approach I criticized here, what distinguishes Boulevard R’s approach from the big firms was the apparent level of detail in the plan that’s produced (I say apparent because they flipped through the screens too quickly, which was understandable given the time constraints)…“

We’ve also been getting a bit of press from InvestmentNews and TheStreet.com:

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080512/REG/218681369/1046

http://www.thestreet.com/story/10418059/2/get-your-computer-to-build-your-financial-future.html

We’re now turning our focus to improving the online dashboard so that consumers can get expert advice on how to complete their Next Steps and reach their financial goals. If you have any thoughts on how we can make Boulevard R better for you, we’d love to hear from you. You can email us at support@boulevardr.com

Who knows what kind of situations we’ll find ourselves in at the end of life? It’s partly this uncertainty that makes it difficult to motivate to plan for retirement. I should plan to live to 90, but what happens if I only make it to 80, or just 70? I can always keep working if it looks like my health is going to carry well into old age, right?

A study by McKinsey points to the fact that of those presently retired, 40% were forced into retirement. The two main causes of these premature retirements: disability and layoffs. An early retirement can put a serious crimp in quality of life later on. Fortunately, there are still some social and community services for older people to ensure that they can get the most basic care.

Retirement planning is tricky because we all want to hope for the best and it’s an event that is sufficiently far enough away that we can tell ourselves that there will be plenty of time to deal with this later. It’s also complex and not clear to most on where you should start your planning. The more money saved now, though, could be mean tens or hundreds of thousands of dollars extra in retirement. And that could have a major impact on how you live your life in your later years. Worse case scenario if you over-save, you’ll have money to leave behind so that others may benefit from you hard work. That’s not so bad.

I had coffee last week with someone and he started talking about Boulevard R’s calculations.  He assumed that we were counting the equity in his house as an asset that could be counted toward his retirement.  Lots of Americans are counting on the recent gains in the housing market to fund their retirement.  Unfortunately, your home is not something that you want to bank on.

First of all, you have to live somewhere, unless you plan on selling your home and spending the rest of your life living on a tropical beach in a tent (doesn’t sound half-bad, though it might be hard to fit all your furniture inside).  Second, you’re not going to get nearly as much money out of your house as might think.

Randy laid out the math nicely in an earlier blog post.

There are a lot of expenses when it comes to tapping the equity in your home.  Naturally, banks and other lenders are particularly good at getting more of your assets into their pockets.  Up until recently, I believe that the market capitalization of financial services companies included in the S&P 500 accounted for over 20% of its total value.  It’s quite rare for any sector to be so dominant and it’s a position that financials have held for multiple years.

So soon, Boulevard R is going to be implementing a new feature to allow users to count the equity in their home (though we don’t recommend it and urge consumers to beware of reverse mortgages, at least until they become a more reputable financial transaction without so many hidden fees or with such poor conditions).  The stark reality is that for many Americans, they’ve saved so little they’re going to need to tap into all the assets they can.

One more reason to do all you can to get on track now, even if that means delaying retirement a bit.  Just don’t get stuck in the trap that you can just work forever.  According to McKinsey, 40% of current retirees were forced to stop working earlier than they had planned, primarily through either layoffs or becoming disabled on the job.

There are a lot of downers when it comes to retirement.  There’s hope though- if you understand where you stand, become better informed and start to make incremental changes now, you’ll be able to navigate to a secure retirement.

Boulevard R is continually refining our calculations so that they’re increasingly accurate and customized. We’re using a cost of living index by zip codes now and are fine tuning the impact of buying a home (like any independent financial advisor worth their salt would tell you, you shouldn’t count on the equity in your home as part of your nest egg because you have to live somewhere)).

In the process of coming up with our own algorithm and testing lots of other tools to see how they approach retirement planning calculations, I think the different types of planning calcs can be roughly grouped into the following categories:

1. Hi, meet our sales rep
2. Hi, we’re here to help (meet our sales rep)
3. Hi, we’re here to help (and they really are)
4. Get out the your tax returns from the last 3 years
5. You like multimedia? Have I got a site for you!
6. You like meaningless calculations? Step right up!

Let’s start at the top and explore #1 a bit more. Fidelity’s myPlan tool is a classic example of this. It gives you a quick and easy calculation, coupled with voice over and sliders. The user interface is very friendly and engaging, but the problem is that it generally comes up with an unrealistic number, because so many of the big impact assumptions are hard wired into the tool itself (like the replacement rate for income). Since you realize that this point that saving $1.2 million is a daunting proposition, talking to a Fidelity rep might be an increasingly attractive proposition. Many of the tools made by financial services companies fall into this group, principally because they’re more aligned with their own interests than those of their customers.

#2 is a more subtle variation on the first approach. It tries to help, sometimes valiantly, but in the end the goal is to provide an array of options, one of which (guess which one) is more attractive than the others. Nationwide does a nice job with this on their Retireability Check. They have a lot of good information about how to choose a financial advisor. But guess what- Nationwide is not in the business of generating leads for non-associated financial advisors.

Financial Engines is a good example of #3. Tools built by a Nobel Prize winning economist. They really set out to create tools to help consumers make good investment decisions. The problem is that most people don’t what to use them. They’re not particularly engaging and you’re totally isolated from anyone else who uses the tool. No collective wisdom, no tips or advice, just modeling with a pretty bland interface. When it comes to picking good mutual funds, they make it pretty easy, though it’d be interested to see how the top mutual funds perform against index funds.

We live in a society where most Americans have received very little in the way of education on personal finances. Research by Annamaria Lusardi and Olivia S. Mitchell (Financial Literacy and Planning: Implications for Retirement Wellbeing. University of Michigan Retirement Research Center, 2005) discovered the following about American’s financial literacy:

1. One out of three Americans could not answer this question correctly: Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, less than $102?
2. One out of two could not answer this question correctly: “Buying a single company stock usually provides a safer return than a stock mutual fund.”

Regardless of one’s financial literacy, the nonprofit Employee Benefit Research Institute found that just doing a retirement needs calculation is enough to motivate more than half of those who do one to start saving more. Realizing that there is a considerable anxiety among consumers when it comes to retirement and that many people (particularly parents) are concerned about how those who are close to them are saving for retirement, we created a new feature to help give the gift of financial education.

http://www.boulevardr.com/br/gift/landing.jsf

Boulevard R wants to help facilitate a discussion around one of the most sensitive issues there is: saving for retirement. To help get retirement planing on the radar for those close to you, we help you kickstart someone else’s plan (just fill in basic information like age, gender, marital status and profession) and then offer a gift (optional) if they complete a retirement calculation. You can give money towards an IRA, iTunes songs or create your own gift.

In the long run, a little reward now can pay huge dividends later for those close to you if they start to save a bit more for a secure retirement. And it also makes us feel like we’re doing our job.

Kristen, who covers the retirement planning and investing beat, wrote up a thoughtful piece on what we’re up to. She did a great job of accurately depicting our approach to planning, as well as a laying out what’s coming down the pipe.

The angle she took by including the mental health aspect of what Boulevard R is about was an interesting emphasis. The reality is that a lot of Americans are pretty stressed out about retirement. Even if they’re doing a good job, they’re constantly hearing that it’s never good enough. Boulevard R tries to go beyond what existing retirement calculators offer, by customizing your calculation (using Bureau of Labor Statistics, Census and IRS data), so the amount you need to save on an ongoing basis is reflective of what your life situation is, as well as your expectations for retirement.

We can all do more to prepare, but how about just making sure that we have our basics covered and then go from there? In an age where the safety nets are fraying and we have to depend on ourselves (and our own judgment on saving and investing, while providing for those who depend on us), if Boulevard R can remove some of the stresses inherent in personal finance, while motivating people to do the best that they can to prepare for life after work, then we’ll have done something special.

At the end of last week, I was talking on the phone with someone who has been using the site (we love to hear what you think about Boulevard R and how we can make it better- you can call us at (888) 412-5837) and they mentioned that the impact health care costs were having on their retirement plan was much more significant than they had anticipated. Today, I met with one of the independent financial advisors on our team and heard something similar- health care costs can blindside consumers in retirement. There is actually a Medigap insurance coverage window once you retire, and if you miss it, later on insurance companies can legally refuse to provide you with insurance.

Something else to consider, if you’re thinking about retiring early (before you turn 65), you’ll need to get some health coverage (a lot of consumers think their company is going to cover their health care expenses in retirement, but companies are increasingly cutting back on these benefits, since it is such a large expense). A basic way to calculate how much this will cost is: $1,500/year for basic coverage and increase that number by 10% for each additional year. And that number is probably if you’ve been going to the farmer’s market a lot and exercising regularly.

So if you’re not already doing it, maybe it’s time indulge in some fresh produce or get on a regular exercise plan (didn’t we just do our new years resolutions?), since another important part of planning for retirement is considering your quality of life for when you don’t have to work any more. Poor health can not only contribute to poor quality of life, but it can also be very expensive. If you miss your Medigap insurance window or don’t insure properly, and you develop a chronic health condition, you could be on the hook for tens of thousands of dollars. Conversely, you may have saved enough, but are unable to travel or do the things you enjoy the most because of poor health. Any way you cut it, in the long term it will pay dividends to spend a little more time taking care of yourself now. As it was said to me while traveling on a train in India “Health is wealth.” Well said indeed.

A lot of people don’t want to put themselves in the position of receiving potentially bad news. Life is hard enough already, so why risk ruining a perfectly good day by a self-inflicted reality check? Maybe, though, the news is good (or at least not as bad as you thought it might be). You may find out that you’re on track to have enough saved to get you to 85 and if you take action now, you’ll be able to afford a 3-week vacation to Europe every two years.

One of the issues we’ve wrestled with here at Boulevard R, is how to constructively return results that are both highly accurate and inspire you to continue (whether improvement means you’ll be able to retire at 59 instead of 65 or that you’ll be on track to have enough money to cover your basic needs in retirement until you’re 87). Retirement is such a delicate issue, since it’s both complex and emotionally charged (a big and sometimes feared unknown).

Another thing we’re trying to figure out is what makes people come to the site? Since we don’t have a lot in the way of PR driving traffic, what makes them click on the search link for Boulevard R? It might just come down to the fact that they’re curious. Curious people who want an answer and some help figuring out what Gallup cites as by far the biggest financial concern for Americans. We think curiosity is a good thing- and so does Seth Godin:

Have any insights about stepping on the scale and why you would or would not want to? Please let us know!

The great thing about doing a financial services startup is that you learn so much more about personal finance and best practices.  Boulevard R has been very fortuante to have a couple of great independent financial advisors informing the calculation process.  Another benefit is that through interacting with users and researching the pain in planning for retirement, you get a much better understanding of the issues consumers find challenging and where they would like assistance.

The personal downside of doing a personal finance startup (at least a downside based on how we’re funding the venture) is that now I understand the real opportunity cost of my lost income, since we’re paying ourselves so little.   Since my background is in consumer rights, not personal finance, many of the retirement planning issues we’re addressing are relatively new to me (fortunately we have a great team to create the backend financial model and run tests on them to verify their accuracy).  Saving for retirement and the impact of different financial decisions can be quite complex, but from a calculation standpoint, I’ve really come to appreciate the value of the fundamentals, like how you want to front-load the planning effort when you’re younger to make best use of compound interest.

I wish I could both salt some money away for retirement, as well as make sure Boulevard R stays alive, but right now it’s one or the other.  I guess the success of Boulevard R is my retirement plan.

So instead of having a secure job that pays well and is mildly interesting, I get to do something that I know will ultimately help millions of Americans and address the most pressing personal financial issue of our time.  Low pay and no benefits aren’t a bad trade-off for creative license and getting to do something you’re passionate about.

I’d be really interested in finding out how the startup and small business community perceive the sacrifices they have to make when starting a venture.

Nearly all the online tools you’ve ever used have assumptions hard-wired into the calculation that do not allow for adjustments and forecast on a linear basis (assuming the same rate of return year in and year out).  Our approach is based on best practices and is effectively the process you would get if you sat down with an independent financial advisor, so we take into account your income, number of kids, cost of living and also run 1,000 Monte Carlo simulations based on historical market return (which also changes the results, because we run a new calculation with Monte Carlo simulations every time you adjust a variable).  In short, Boulevard R’s engine tries to more realistically simulate all the impacts on retirement calculations (and there are many) than any other tool available and that makes it more sensitive to smaller adjustments.

Boulevard R’s approach to planning for retirement is a lot like sailing from San Francisco to Maui.  You don’t set your course, kick back and then assume you’ll be in Maui in 2 weeks (this is the approach most online planners take).  You have to make course corrections along the way.  One of the the great aspects of the tool is that it models the impacts of different financial decisions or events, so that consumers can make more educated financial decisions.

Boulevard R makes a realistic forecast based on the many different factors, but if you tweak some of them- inflation, for example - you’re going to get a drastically different result, since that % is compounded over many years.

We’re continually working to customize our calculation and improve the user experience to help consumers reach a secure retirement.  Success for us is helping consumers who are not on track to get on track and for those who are on track, we want to help them retire even sooner.  As we talk with users we continue to learn.  We appreciate that there may be better ways to return results, particularly for those who might end up in the “red” and we’re working on ways to do this effectively so that we don’t mislead people and at the same time motivate them to look at some changes they can make to improve their situation.  While we also want to return results that inspire hope, we also have an obligation to be realistic.  If we were just calculating what people need to retire, and not considering their financial goals like buying a home or saving for college, their finances would look a lot better.  But the reality is that those goals have a very significant impact on retirement, since they represent a real opportunity cost.  That’s something that most retirement calculators won’t tell you.

Please keep the feedback coming- support@boulevardr.com

“Only 14 percent of mass affluent consumers cited their bank as their
primary provider of retirement savings, compared to 53 percent for
investment and brokerage firms. Additionally, banks captured just 18
percent of 401(k) rollovers to an IRA compared with 67 percent for
investment and brokerage firms in the past year.”

However, it’s not like consumers aren’t planning for retirement. The study points out:

“…the mass affluent are clearly engaged in
retirement planning. A majority (59 percent) cite saving for retirement as
their top financial priority, followed by paying bills (cited by 34 percent
as a top priority). Nearly all (89 percent) report having done some form of
retirement planning.”

The study goes on to say that banks are now getting punished for being focused on transactions instead of advisory focused and that consumers do not consider them the go-to source for financial advice. Given that most bankers are not trained as advisors, who do banks then make the transition to a model that is more focused on customized solutions? For banks in wealthy areas, they can build out a wealth management team, but what about banks that don’t have enough customers with over $500k in investable assets?

At Boulevard R, we’re focused on delivering actionable, customized advice to consumers who don’t qualify for wealth management services. These are the people that no one has yet figured out how to reach . While investing is important for these folks, we’re more interested in helping them save for retirement and then make investment decisions that aligned with their risk profile and what they want to do in retirement. We feel a mix of a non-threatening interface, actionable advice and community generated tips on how to get on track for retirement will be a great start.

The article briefly discussed the scarcity of qualified financial advisors and then provided a first person account (from the perspective of a newly minted planner) of how the planner profession had an aggressive emphasis on sales and branding.  In essence, the article said that in the planner job market, sales skills are more than it is  a strong grasp of fiancial planning.  While knowing how to attract and retain clients is important, the ability to move product shouldn’t take precedent over the knowledge of appropriate client solutions.

It’s not like consumers haven’t noticed.  Nearly 70% of investors feel that “financial advisors and advisory firms put their own interests ahead of their clients” (Annual Securities Industry Association Investor Survey). Given this statistic, the interests of consumers and the interests of their providers seem seriously out of alignment. A recent study put out by BAI advocates that banks need to focus on establishing a dialogue with customers around their plan for retirement. While this is an important first step, a dialogue that doesn’t result in a retirement plan with the consumer firmly in the driver’s seat is insufficient. Planners need to act as customer advocates, not product advocates.

New startups, like Cake Financial, are beginning to recognize that there is a significant opportunity in providing unbiased advice to consumers while leveraging the knowledge of it’s users. Similarly, Boulevard R is developing features that will deliver the customized advice that consumers need to get on track for retirement- including experts who can respond to technical questions, as well as peers who are coming up with creative ways to save for retirement.

This sort of alignment (or common sense) with what consumers are looking for, will ultimately benefit everyone involved. Even though financial services is a conservative industry, we hope that providers start to think more creatively about how they can best serve their customer’s needs so that they can drive that 70% down towards 0%.

The opportunity to address the larger market, not the millionaires, is what is really significant in Boulevard R’s model.  Retirement is such a concerning issue for so many people that  if we can provide them with effective, customized tools and the support they need, we’ll be successful.

Marriette, you have good instincts. While saving for retirement should always be a priority, one of the most effective ways to “earn” a good return on your money is to pay down your debt. When you consider that the long run returns of the stock market are somewhere in the vicinity of 10-11% per year pre-tax, a realistic after tax return expectation is closer to 8%. If you are paying interest on debt, other than the mortgage on your house, at a rate above 8% you actually will get a better “return” paying off the loan as opposed to investing the money in stocks. It’s easy to think of your student loans or credit card debt as just a payment, but a good part of that payment is interest. If you can’t earn more on your investments after tax than you are paying in interest on your loan then your priority should be to pay off the loan.

There is an exception though (isn’t there always) when it comes to most people’s 401k savings. If your employer offers a match for a portion of your savings then that’s a gift to you that you do not want to miss. Think of it this way, if your employer matches your 401k contribution up to $5,000 then your $5,000 savings just got a 100% return! I sincerely hope that a 100% return beats the interest rate on even your worst loan.

So good work Marriette and keep whittling away at your debt. The beauty of that is as you begin to eliminate debt you’ll have fewer payments and more free savings to make the rest of the debt go away even faster. It may not feel like you’re making progress at first but you’ll be surprised how quickly you’ll get ahead if you just keep it up.

Just like in the real world, the “Innovation” in our heading has a big “I” and a small “i.”

Curve-jumping, paradigm-shifting innovation belongs to the big “I.” Incremental change and tweaking belongs to the small “i.” They each have their place and deserve recognition, but here are Boulevard R, we’re more interested in the former. That’s mostly because we’re trying to do something that hasn’t been pulled off effectively online- financial planning. There is quite a list of companies who have gone the route of offering online financial advice to consumers, but only to be forced into other markets- Financial Engines (does mostly asset management now), AdviceAmerica (does mostly software for planners now), OneHarbor (sold to a large financial services company in order to re-coup investor’s money).
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It’s National Save for Retirement Week! Who knew? In an effort to promote the idea that saving for retirement is important for everyone, regardless of income, the Senate and the House have declared this National Save for Retirement Week. So in doing our bit to promote this idea I want to look at one of the biggest stumbling blocks that people have to planning their finances in general and saving for retirement in particular, feeling too intimidated or overwhelmed at the idea of learning something new.
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Yesterday’s Chicago Tribune reported that more and more cash-strapped Americans are borrowing or taking hardship withdrawals from their 401k’s. There are numerous reasons why someone may consider doing this: paying a down payment on a first home, unexpected medical expenses, prevention of foreclosure on an existing home, paying off creditors, etc. However, except in truly desperate instances this is a very bad idea, for a number of reasons.
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