Home CompaniesB2B How Good Is Your Retirement Advisor? This Score Will Tell You

How Good Is Your Retirement Advisor? This Score Will Tell You

by Muriel Vega

You’ve seen the headlines — Americans are falling behind on retirement savings, with one recent survey signaling that only 12 percent have stocked away what they will need for their twilight years.

But even if you bring in an outside expert to help make sure you’re prepared, how can you judge the quality of your chosen investment professional’s decisions over time?

Similar to a FICO score, business intelligence platform Veriphy Analytics offers a verification ratio for the U.S. retirement industry to evaluate the overall wellness of your plan and what factors are affecting its growth.

“We’re going to be able to bring significant transparency and accountability where it currently doesn’t exist,” says the startup’s CEO Al Otto. “The retirement plan advisor industry has gone through a period of commoditization. While fees are transparent, skills of those advisors are not currently measured.”

“On a global scale, this is a $17 billion addressable market.”

About three years ago, Otto and co-founder Mark McCoy, each of whom have 30+ years of financial experience, were both replaced by their biggest clients in favor of lower-priced advisors. Otto says that he was troubled by the fact that there was no true way of knowing who was more skilled.

“Your might [have lower rates] than somebody else, but if you’re producing really bad outcomes, I would submit that that’s not reasonable,” says Otto.

The Veriphy ratio quantifies the quality of investment decisions made by a investment firm and how close their actual returns are compared to their benchmark.

“It’s very important, we believe, to make sure that your plan is running well. We use seven-year periods because most seven-year periods have a market correction in them,” he says. “You want to understand how your investments performed when the market goes down because a market correction has a significant impact on your future retirement dollars.”

When investing, a benchmark standard signals the performance of an investment manager and their portfolio. If a firm’s decisions produce more returns than their benchmark, they will receive a healthy Veriphy ratio.

“We measure your return relative to the plan’s benchmark and then look at how much risk did you take to get that return. The risk and return go into our Veriphy ratio calculation,” says Otto.

He shares that they’re tackling the B2B market first, selling to the investment consultant or advisor, while the high-level plan data is publicly available for analysis. The platform can be accessed by the firm or consultant’s clients so they can see whether their investment advisor’s ratio is where they’d like it to be.

The advisory firm can, in turn, use the reports to provide evidence of skill to prospective clients. The SaaS platform offers a yearly subscription plan paid by the investment advisor and provides quarterly updates on the health of their plans.

“If I’ve defaulted on my mortgage or have 27 late payments, that’s a fact that your FICO score shows. Why should I loan you money? It’s the same thing if you’re paying an advisor and it becomes very clear that they have not been giving you good advice,” says Otto.

Otto attributes the efficiency of their technology platform to their technology advisor, and former Women in Technology president, Vicki Hamilton. “Mark and I have really good domain expertise, but to have a true, a technology strategist and someone of her caliber in our team, we’re very lucky.”

The Atlanta-based startup, an ATDC Accelerate company and Queen City Fintech accelerator alum, was a featured Startup Showcase company at Venture Atlanta this week and is ramping up to raise $1 million in seed funding.

“We just think that excellence is what you should be striving for, and understand that it’s not just about low fees. We’re talking about trying to help heal the U.S. retirement system.”

You may also like