Matt Wolniewicz is the President of Income America, and he holds a board advisory role with Prime Capital Investment Advisors. A 25-year veteran of the financial services industry, he previously served as President of Fi360 and a Senior Executive at Morningstar. His new role with Income America is a really interesting one because it brings together several industry leaders to create a target date solution that provides a guaranteed lifetime income.
In this episode, Matt shares how his experience with his father’s retirement laid the groundwork for his passion to bring guaranteed income to all Americans. Listen in as he shares how he is working to do that through his role at Income America, the importance of fiduciary advice and the future of fiduciary, retirement plan fees, conflicts of interest in the industry, fintech, and more.
“The average investor still doesn’t understand that their advisor is not required to be a fiduciary.” - Matt Wolniewicz
“We need people to save more, and we need them to save more today.” - Matt Wolniewicz
“If you do the right thing, no matter what period you measure yourself in, you will end up on the high side of what you’re looking to do.” - Matt Wolniewicz
Josh Itzoe: Welcome to episode number 14 of the Fiduciary U™ podcast. My guest today is Matt Wolniewicz, who was recently named President of Income America as well as holding a board advisory role for Prime Capital Investment Advisors. Matt is a 25-year veteran in the financial services industry. He was previously President of FI360 before they sold to Broadridge and seeing that transaction through and he was also a Senior Exec at Morningstar before that. Matt's new gig at Income America was recently announced and it's really interesting bringing together several industry leaders to create a series of target date portfolios that provide guaranteed lifetime income.
On today's episode, Matt and I cover a whole host of different topics, including the importance of fiduciary advice, retirement plan fees, conflicts of interest, Fintech in the wealth and ERISA space and how his experience with his dad's retirement laid the groundwork for his passion to deliver guaranteed income to Americans. And so, with that introduction, I hope you enjoy this episode of the Fiduciary U™ podcast with Matt Wolniewicz.
Matt, welcome to the Fiduciary U™ podcast. Thanks so much for being a guest today.
Matt Wolniewicz: Thanks for having me, Josh. I look forward to the conversation.
Josh Itzoe: Likewise, I think we're going to touch on a lot of really cool topics today. So, you've had a really, I think, neat, interesting, varied career within the financial services industry. And I'm just going to recount really quickly.
Matt Wolniewicz: Thanks.
Josh Itzoe: You're welcome. And I think it's a really, I think you've been able to see the industry from a lot of different perspectives. You've recently, most recently too, before your new gig, you were a President at FI360. Before that, you were at Morningstar, obviously oversaw the transaction of FI360 getting bought by Broadridge. And more recently, have become President of Income America and also, a board adviser to Prime Capital Investment Advisors. And so, I do think you've seen things from a lot of different angles.
Can you just maybe tell listeners a little bit about that may not be familiar, a little bit about kind of your background and your journey and from Morningstar to a Fintech provider, if you will, to now more on the asset management side?
Matt Wolniewicz: Yeah, sure, Josh. I mean, it's been really interesting and I've been so lucky and blessed to really enjoy each step that I've made. My time at Morningstar couldn't have been any neater, because I was able to really learn and tap into all the thought leadership that they had. And at the end of the day, Morningstar believes in making the end investor successful. And that's a part of me that I always had before and that's a part of me that lives on until this day.
And it really has helped inform me as I've thought about the solutions that we could bring to market because in my eyes, if the advisors and the institutions that serve them do the right thing for the end investor, everybody wins. I mean, what better outcome could there be to have successful investors that are happy with the advice that they received from their advisors. And then if the institutions that serve the advisors can create innovative solutions that at the end of the day are there to protect the end investor? That's just a great outcome. So, my time at Morningstar was wonderful. I have lots and lots of friends there.
Actually, the hardest decision that I ever personally made in my life to leave. I remember the day that I had the conversation, I literally bawled like a baby. I thought they were going to call an ambulance to come get me because I just couldn't imagine life without that. But getting the opportunity to move to FI360 was really the opportunity of a lifetime. And what really drew interest to me there was the fact that FI had a really sterling reputation and they did something that was really phenomenal for advisors and their focus is really on the advisor there.
And so, I just believed in what they were doing and that was helping empower advisors to deliver fiduciary advice to the end investors. I mentioned at Morningstar, I really developed my passion for the end investor, so getting a chance to go into FI. And at the time that I joined it, it was about 20 people. And over the course of seven years, we expanded our focus not only from the end advisor, but really to the institutions that served them and spent a lot of time talking with the broker dealers in the asset management community about how they can best equip their advisors.
And it's, it was amazing to me to watch the transformation, because when I moved to FI, I think that was back in '14 or '13, the F word to the end investor, it wasn't in the forefront of their mind. But by the time that we had transitioned the company to Broadridge, that was really one of the leading indicators out there and see Schwab do some commercials where they talked about asking your advisor if they're a fiduciary, it's amazing, literally amazing how the pendulum had swung over time. And so, I feel like at FI it was great for me personally and professionally. Again, I left a lot of friends there.
I didn't cry quite as hard as I did when I left Morningstar, but I'm excited now, Josh, to be working with income America and helping provide some really innovative solutions that are going to help advisors and the end investors. So, it's amazing how fast time flies. And like I said, I've been really lucky and I have a lot of friends in this space, so I really enjoy what I do every single day.
Josh Itzoe: That's awesome. And we're going to talk a little bit about Income America a little bit later in the show, really doing some interesting things that that breaking new ground, I would say, so.
Matt Wolniewicz: Well, thanks.
Josh Itzoe: You mentioned just a moment ago when you were talking about Morningstar and this kind of idea of creating a good outcome for investors. And you were describing fiduciary-based advice, right? And that really FI 360, and I think I got my AIF in, I want to say 2006, really, probably early on. I'm not even sure when the company started, but it was early on. We started Greenspring Advisors at the end of 2004 as a fee-only RIA, fully embracing the fiduciary standard.
And it's funny, the F word has become, in some cases, more of I think, a marketing term, right? That's what everybody kind of talks about is, I would say that it's easy to be a fiduciary, but it's hard to be an effective one. Being a fiduciary, you're just, it's contractual, but being a-
Matt Wolniewicz: That's right.
Josh Itzoe: But being a really good one is it's the difference between the do-it-yourself homeowner who has great tools, but doesn't know what to do with them versus the master crafts man, if you will. What do you think the future of fiduciary looks like in our industry? I think in many cases, if you look at CPA firms or CPAs or you look at attorneys, I think they're viewed much more as professionals than those of us in the financial services industries, in a lot of cases. And I think part of that is it's compensation-related, right? When there are conflicts of interest from a compensation standpoint, I think that is what is the difference between when you're viewed as and I don't think sales is a dirty word at all, but when you're viewed as more of a kind of a sales and distribution, career versus an actual profession.
When I think what fiduciary does is it eliminates a lot of those compensation conflicts and helps to elevate the industry as a profession, not just as more of a distribution or marketing environment. What do you think of the future of fiduciary given that you, for seven years, led an organization that was really trying to promote the concept of what it means to be a fiduciary?
Matt Wolniewicz: Yeah, well, Josh, I've got a bunch of thoughts on that. I mean, first of all, Blaine Akin from FI has written a lot on the topic of the professionalization of advice. But I mean, I think, again and I want to peel it back to the end investor level and today, the average investor still doesn't understand that their advisor is not required to be a fiduciary. That at the end of the day that is more shocking to me than almost anything else. I think that the end investor just thinks that much like their CPA or their lawyer that the advice that they receive is fiduciary, and we all know that that just isn't the case.
And it's funny when you think about an attorney being able to charge $500, $600, $700 an hour for the work that they perform. And you're right, the average person says, "Okay, that's how much it is. You know it's worth it. I'm going to pay for it for the expertise." But on the other hand, their relationship with their financial advisor, that's what's going to set them up for life. And I don't think that there's any relationship that's more important than they have with their financial advisor, but if that advisor, and again, listen. Personally, I've got an issue with anybody being able to use the fact that there are "financial advisor" because again, title alone is pretty misleading.
But if that advisor is conflicted and they have different sources of income when you talk about sales and distribution, I mean, that's where I have issues with it. And so, if they can make a lot more money by putting somebody into a product, that just isn't right at the end of the day. So, as I mentioned in the intro, slowly, people are becoming more aware of what a fiduciary is. And maybe later, we can touch on regulation best interest, but did that help or hurt, you could argue either side of the case. But if people think that somebody is operating in their best interest and yet, they're not a fiduciary, those standards are much different.
And it's pretty nuanced than the average investor in general has no idea how much they're paying, much less the difference between that, but those are really important things. I mean, I see as we look into the future, the ability for the average American to get fiduciary advice. That's one of the things that will help solve the retirement savings crisis that we have today. Because you touched that, and I think at the end of the day, it's all about trust. And if the average investor is uncertain or they don't really trust who they're working with, they're not going to be all in on it. And that's something that we need, as everybody knows, we need people to save more and we need them to save more today.
So, I think that the fiduciary advice is paramount to the end investor, but it's also interesting, Josh. And I mean, this better than anybody else, with an RIA having that fiduciary duty by default, if you just look across the landscape, and you think about the mega trends in the space, the fact that more and more advisors are attracted to the RIA model, there's got to be something in there besides just being able to run your own business. So, again, I think about doing the right thing for the investor.
The other thing that I believe is that the firms that really embrace fiduciary and live it top to bottom, they're the ones that are going to win. And so over time, if you're a shop that is conflicted by nature between the products that you sell and the share class that you use, I just think that over time, those shops that are really fiduciary in nature, they are absolutely going to outperform and outgrow. And at the end of the day, I think that they're going to gobble them up those that aren't. It's not going to happen today or tomorrow. But I believe that that's a trend that already exist. The train has left the station on that and I think it's just going to accelerate over time.
Josh Itzoe: Yeah, I mean, I think if you look at and I haven't looked at the data that recently, but a few years ago and I think it's continued to accelerate and obviously, I started my career at a big wire house firm and before we struck out on our own. And if you just look at the growth of the RIA channel, in that model, in general, over the past 10 or 15 years, has just—tremendous market share, growth wise relative to, I think that more conflicted model. Even from a wire house perspective, I think they've maybe been trading clients back and forth with one another.
But obviously, advisors and assets in a free market system, it's going to move to the best solution. And I think you bring up an interesting point about the firms that embrace what it means to be a fiduciary. It's not just good marketing speak, right? It emanates from this essentially this others focused mentality. And I think, I remember my days in the wire houses and Matt, I met some great people there. I worked with some great people. But that conflicted model, I think what one of the challenges is in that model, you are an adversary to your clients, right?
First and foremost, you need to look out for the best interests of the firm and then, most people, it's probably their practice and then their firm and then great clients.
Matt Wolniewicz: That's right.
Josh Itzoe: It's not that they don't want to do what's right for clients, but the game is just set up in a way that makes it hard to be able to do that. And I think the fiduciary model, what it does is you move from adversary to advocate. And there's something powerful in building that relationship with a client when you can advocate for them and really be kind of like the century up on the watchtower and make sure that the marketplace is treating your clients fairly.
And my dad used to always say to me, he's like, "Operate in the light." People like to live in the dark because they don't want their misdeeds to be seen. But if you just walk in the light and operate in the light, you don't ever have to make excuses. You don't ever have to make excuses for what you do. And so, I do think it's an interesting, I feel like in some ways fiduciary has been, it kind of feels like it's old hat, but I still think there's, we need as an industry. We shouldn't be talking about this conversation of what it means to be a fiduciary as being compared to not be a fiduciary, so.
Matt Wolniewicz: I agree, Josh. The other, the other stat that always surprises me and if you think about the number of financial advisors that are out there, the number. I've seen all different kinds of numbers 300,000, 600,000, who's licensed and who isn't, and there's a lot of debate about that. But even if you just say that there's 300,000 and there's 80,000 CFPs. So, what is that? That's less than a third that carry that designation.
At FI, we had around 13,000 or 14,000 AIFs and so, again, that's even a smaller percentage. And that's why I think that, over time, the difference and really, as the end consumer begins to understand what fiduciary means, I just think that that's one of those trends that is never going to go back in the box. And it's not that if you work at a wire, it's not that you're not a fiduciary or you don't do the right thing, but yeah, I mean, that firm is interested in making money. That's why they exist.
And so, it was interesting several years ago when the asset management arm of those firms split off and they became pure broker dealers, and then they got rid of their fund business. It almost seems like in some ways today, though, in some of those shops with managed accounts and model portfolios that it's moving back the other way.
And again, at the end of the day, as long as the investor knows and understands, like you talked about shining the light on there, there's nothing wrong with that as long as they're told about it. But if it's buried in disclosures, that's not doing anybody any good, because we all know that the individual investor never is going to read any of that. So, those are some of the other issues that by doing the right thing for people, it really does make a difference.
Josh Itzoe: Yeah, absolutely. Yeah, you can with disclosure, I've always said that the difference between disclosure and transparency, disclosure is data and information but it lacks what I would consider to be context, right? And transparency is really around taking data and information and then wrapping it in context. And I actually in 2009, spoke at the FI360 conference. And I had the very last session of the entire, not too many people, I think I had maybe 100 people—yeah, right, exactly. Everybody had, it was packed on the airplanes where everybody was flying home and didn't go to the sort of last session. But I talked about fee transparency and that transparency as an advisor is actually, it is your friend, right? It's not something to fear. It's something you embrace because if you can control that dialogue, it's just naturally where people feel like I think there's a lot of confusion is it's the compensation piece. And most people may not admit, I totally don't understand what the fees are, because most people want to seem smarter than they actually are.
But deep down they're very, whether it's a plan sponsor or retirement committee and member, an individual investor, I still don't think we've had done a great job as an industry. And I think there's a lot of room to have straightforward, meaningful, plain English, clear conversations around compensation and fees. And not just providing, "Hey, here's my disclosure document. I can be fully compliant and still totally confusing."
Matt Wolniewicz: Yeah. That's right.
Josh Itzoe: And so, I think we need to do a better job with those conversations. You mentioned that-
Matt Wolniewicz: Hey, Josh, let me interrupt you for one second, real quick because I think you brought up an interesting point. When you talk about fee transparency, the flight from active management and the fees there to ETFs, right? I think that a lot of investors, they may not really understand it, but they've migrated to ETFs because they hear that it's cheaper, right? And the expense ratio is fairly easy to understand. They probably don't understand the share class, but on the advisor comp side, I bet that most of them have no idea how much their advisor makes, especially if they're not in an RIA model, where it's pretty simple and straightforward.
And so again, you think about confusion at the end investor level, that's something else, that's a trend that I believe is common. I hear a lot of advisors talk about fee compression and yet, at FI on the retirement side, we had a lot of great data. And at the end of the day, it is value. If you add value to your customer, they are willing to pay for that. Just like they would as we talked about with like I just had my taxes done. It was expensive, but it was worth it. And so, some of that is a self-perpetuating cycle. But I believe that advisor comp is something that more end investors will become more in tuned with. And I really think that will be good for the industry once that happens.
Josh Itzoe: Yeah. It's so funny, a lot of advisors even going back again to fiduciary and I know what the deal on fiduciary role when that was a first years ago when so many of these things have been fits and starts and two steps forward and one step back. And I actually think if everyone's held to a fiduciary standard, I actually think that's a great thing. I don't fear that because at that point we can stop talking about, are you or aren't you a fiduciary? Because that doesn't really matter.
Now, we can start talking about, "Well, who's delivering the value?" And value is not quantitative value, I think it's very subjective. Prices is quantitative...
Matt Wolniewicz: Agreed.
Josh Itzoe: ... but value is subjective. So, I'm in agreement with you. And I do think, and it's hard to say this as an advisor, but I do think the advisory world and I think very much the record keeping world is still really inefficient from a pricing perspective. We look at that the markets and we look at obviously you mentioned it, right? The rise to and Morningstar, it was obviously a huge perpetuator in a good way of bringing transparency and context around, what do investments—
Matt Wolniewicz: That's right. Yeah.
Josh Itzoe: And now, I can go out and we've seen, I think, markets have become very efficient. And you've seen this huge shift from active to passive over the past 15 years and towards costs and low cost. I still think that the advisory and the record keeping on the 401k side market, it's an inefficient model, because there's not a lot of transparency.
Matt Wolniewicz: No.
Josh Itzoe: You can't go on Morningstar, and say, "Well, what does so and so charge for their advisory fee?" So, I agree with you at some point. I don't think it's going to be immediate, but I do think as more technology and I want to actually shift to this. I think it's more technology and tools and Fintech start to democratize that type of information. Ultimately, I mean, we've seen in other industry. You've seen it in the car industry with true car and now, I can go negotiate a car and walk into a dealership and feel like there's more of a level playing field because I'm not in an information disadvantage.
From a Fintech perspective, so let's talk about that because I do think technology is kind of the enabler of democratizing information. Couple of things, why do you think that Fintech, and I've said this on podcast before is, I feel like the wealth management side of the business gets that they're the cool kids and they get all the cool toys, and they've gotten really powerful Fintech tools at their disposal. I feel like in the 401K ERISA world, where most of the listeners of this podcast kind of hang out, I still feel like we're playing like with slinkies and Frisbees in the backyard. And the other side of the business gets all the cool stuff. Why don't you think that is? And what do you think the future of Fintech within the retirement space is going to look like?
Matt Wolniewicz: Yeah. That's a great question. And I think that, I've got some pretty strong opinions there. I mean, it's almost like, Josh, FI started back in the ERISA space long before there was a lot of thought there. And the reason that they entered that market was because there was enough legislation and case law to begin to construct the designation and the prudent practices. However, that's also intimidating to people. And it's interesting to see, just in general, the number of advisors that are really focused on wealth versus retirement.
I mean, you know better than I do, but my feeling is that a lot of people will stay away from the retirement plan side, because they're straight up afraid of the legal ramifications. And not only that, their OSJ or their supervisor may not want them to play in there, because there is a greater chance for liability at the firm. So, the community that's formed around really providing innovative solutions to the retirement side, it's less, right?
And again, if we talk about stats, 300,000 advisors, I've seen stats that say about 100,000 have a plan, but then once you get into those specialists, those that depends on how you define it, but five or 10 more, that that universe shrinks even more to 30,000 or 40,000. So, I think part of it is, the other thing that I think in the Fintech space is, on the wealth management side, a lot of that is more end investor facing. And so, I think that those end investors are just used to having an app on their phone that they can go to and they have a higher expectation from a net asset base that there's more money on the wealth management side, it's more profitable for a practice. And so, I think that advisors are more willing to spend there.
But the other thing on the retirement side is, again, it is case law, government regulation, industry best practices. So, I think that it takes a special commitment to that space as a technology provider. FI made the transition from creating the AI F and the designation and then in '07 or '08... oh, to answer your question. FI was founded in '99. I think the first designation came around '01, so you were definitely at the head of class. But the toolkit for advisors-
Josh Itzoe: At least I've been head of the class in something in my life. That's actually, I appreciate that.
Matt Wolniewicz: There you go. The toolkit didn't come until '07 or '08, so almost 10 years later. And that simply came about because advisors said, "Hey, the practices are great. How do I implement that into my practice on a day-to-day basis?" So, I think that there's some intimidation from the tech providers. They know that there's a lot of case law and regulation. They really don't know how they're going to fit in there. And so, for us, we made a really big financial commitment to update our software and then ended up paying off in the end, but it was a big capital spend to get in there.
So, I think that there is a lot of opportunity for pure Fintech plays in the retirement plan side of the business, simply because there hasn't been a lot of innovation. The other thing, and you mentioned it, Josh, with record keepers that information is pretty disparate in its proprietary. And so, one of the things that we did at FI is we helped create a repository for all the assets that practices had. So, irrespective of the record keeper that it was at, we brought it into one spot and normalized the data. That was a huge, huge, huge undertaking, because each record keeper has their own proprietary system and really, nothing ties it out together.
So, again, when I think about innovation and investment, there's a lot of ground to cover and there's a lot of good things that I think can and will happen in that space. However, even if you think about the robo advisors, right? All of that was really focused on the wealth management side. So, I just don't feel like there's been a lot of investment in innovative technology or innovative solutions in the retirement plan space.
Josh Itzoe: Yeah. You bring up a really interesting point as well. And as I kind of played this forward a little bit and having a firm that has both, a large wealth practice and a large retirement practice. There would be custodians if you think about on the, and most of these custodians, the Schwabs and the Fidelities, let's just they are, the two big two, two of the biggest RIA wealth management custodians, right?
Matt Wolniewicz: Yep.
Josh Itzoe: And what they're trying to do is enable RIAs, right? That's they're trying to be partners to RIAs and so, they've opened up on that side of the business, they've opened up their data and technology, right? They've opened up their data...
Matt Wolniewicz: Yep. That's right.
Josh Itzoe: ... to a lot of Fintech providers. So, if it's an Orion or a Tamarack, they can get billed hooks into that data and daily, that information is going to flow back and forth. And so, that flow of information and that data and that integration has really enabled those Fintech tools for wealth management advisors. It's very different in what we see, and you mentioned it, the proprietary. I think you were meaning less about maybe the proprietary information, but the proprietary system where they're locking it down. So, there's not like one standards based, call it API or PIPE or whatnot that you can hook into every one's a custom build. And quite frankly, a lot of the record keepers like they don't want to give their data up.
Matt Wolniewicz: No.
Josh Itzoe: We saw that at Morningstar product file accounts a few years ago. We've tried to implement that to aggregate into 401K plans and it was constantly breaking, because the record keepers were changing interfaces and security protocols. And I think with the rise of probably cyber security and some of those risks, it might be going backwards instead of forward. So, maybe that's another reason why on the ERISA side, there's the regulation piece, but there's also getting access to the data in terms of record keepers being willing to give it up and two, having to build kind of one-off custom integrations for everything is tough. Is that fair?
Matt Wolniewicz: Yeah. And that's a good point, Josh, because even when I think about my friends at Morningstar, they still have great solutions on the wealth management side, but they really don't have anything on the ERISA space. And the other trend that we saw was really this convergence between wealth and retirement. And while I think that that's just in its beginning stages, because as an advisor, if you're working on the plan, there is a reluctance to begin to work with some of the high net worth individuals just because you don't want that perceived conflict of interest.
And so, I find that firms buy one set of technology for the wealth side, another set of technology for the retirement side, and they don't really communicate. And so, and again, I'm not a practicing advisor, but I'm sure that there's got to be some frustrations there because wouldn't it be great to show your clients everything in one simple format?
Josh Itzoe: Yeah. Technology is powerful and there's so much promise, but the devil is always in the details, right? You get the technology, but there are two things I think that go into it. One, you have to implement it well and I don't think a lot of firms quite frankly, probably we always think, we think we're better than we are, but probably don't implement it as well as they could. But the real thing is in user adoption, the behavior piece, right? You can have the best technology in the world, but if can't get your users to, use it or whatnot that that will change. Management is really tough.
But yeah, you're right. I mean, it's partly because it's the wealth and the retirement. They are totally, like there's maybe a little bit of overlap around maybe you can resource share around investment philosophy or research. But they're two totally different businesses requiring two totally different sets of tools, if you will. And I mean, we've seen this, not a lot of, they're just different businesses.
In some cases, it's like you're roommates. You live under the same roof, but one of you has a job that you'd travel all around the country and you're only home, four days a month and the other one goes to the office every single day. And so, you kind of see each other and whatnot, but it's you live kind of different lives.
Matt Wolniewicz: Hey, Josh, just one other thing. You brought up an interesting point. I mean, one of the challenges of being a Fintech provider, because we had a great solution at FI was that as we came out with enhancements, your typical user who bought the tool to do something, they don't really understand it. And so, we made a really big investment in our client engagement specialists, because it was key to us to make sure that people knew the enhancements that we brought out. But in absence of that, it's pretty hard to change behavior. And so I feel like the average casual user kind of misses out on some of the enhancements. And listen, it's like that with a lot of software that you buy, but that's another challenge on the Fintech side.
Josh Itzoe: No, that is a really interesting point. Do you think that Fintech providers, in some ways, make technology too complex? There's desire, there's too much feature, too many features, too much functionality, it's hard to use and people get overwhelmed. Do you think Fintech providers would maybe be better to kind of think about how to maybe build simpler experiences instead of more complex ones?
Matt Wolniewicz: Well, your question is awesome because this topic applies to both the wealth and the retirement side. I used to love to listen to Jud Bergman from Investment Talk, because he talked about at the end of the day, in the Fintech space, what wins? Is it the point solution that does something exceptionally well, but you need to combine that with other solutions to make it work or is it this big, all-in-one solution. And clearly, investment is going down the road of trying to build the all-in-one.
What I see though there, Josh, is when you're trying to do something like that, you may be surface deep okay in a lot of areas, but you're not great in any one. And so, when you think about the end user interface, I think it's really hard for Fintech solutions, especially in the ERISA space to be really focused on doing something great. And again, I think a lot of maybe came out of the academic world and they try and apply them and they don't exactly fit and so, then they're messing with different pieces. I think that that's a really hard way to do it.
I think development has to be at the practicing advisor level to really understand what the challenges are and to make it easy for that practice to implement because then they're going to use it. And then it's simply a matter of how much can you do. And I would argue that you can do some things really good. But like at FI, we were really focused on investment due diligence and that's where we stopped. We didn't build a rebalancing tool, we didn't build something to invest because again, once you begin to do that the complexity of the tool just grows and grows. So, I think that there's a lot of great minds out there, I think there's a lot of great technology out there, there's a lot of need, but I believe that at least in the short term, these point solutions are going to rule the day.
Josh Itzoe: Yeah, I would call those edge cases, right? I like to woodwork and so, I've got a shop in my backyard and my shed and I come from a family of master craftsmen. Unfortunately, those genes kind of skipped me, but I like to tinker. And it's I just don't have a Swiss Army knife. And that's not the only tool that I have in my shed, right? I have lots of different tools and on certain projects, I use my table saw and I use my jaw press over and over and over again or I use my compound motor saw. But in other cases, there are tools that I may only use once out of every five projects, but when I need that tool, it's like a force multiplier for me. It provides a lot of... it does exactly what it's supposed to.
On the wealth side, interestingly enough, there's a whole list of plans has really, it's a tech platform that has, they do like tax planning and some really cool tax planning and it's blown up in the wealth space. But it just, it's not a full blown. It does a couple of things really, really well and really, really quickly. And the adoption, it's more of an edge case, it's not trying to be all things to all people. And I think the future for Fintech is more niche kind of solutions education. It's like you said and instead of trying to be all things to all people, really focusing on doing some very niche specific jobs, but doing it really, really well.
Let's talk about the transition that you had and we talked, we mentioned, I think you left FI3 swap Broadridge last summer. And you joined, I guess as a board advisor, to prime capital in October and have taken over as President of Income America. So, maybe talk a little bit about how that come about. And then this new, by the time the show is launched, you'll have announced Income America. We're recording right now and it hasn't even gone public yet. So, why don't you then talk a little bit about what you're trying to do as part of Income America and it's pretty interesting. It's actually very interesting. And so, maybe you can talk a little bit about what your strategy and what your goals are with new solution, new business?
Matt Wolniewicz: Sure. I got to tell a personal story, though, real quick, because it got me thinking when you were talking earlier. My dad retired back in '08 and so, at that time, and I think, he was early. It was probably the first quarter, right? So, at that time, it was actually a pretty good time to get started because I don't think that the crash started until maybe late summer, I don't really remember. But when he retired-
Josh Itzoe: Right around October 1 is when things started to go haywire.
Matt Wolniewicz: Okay. So, he went in the first quarter. He felt pretty good about where he was. He a pension from an employer and then he'd done a pretty good job with his 401K. And he had worked with somebody at a wire house for a really long time and he asked me to come with him. And so I went with him, and he's like, "Feel free to ask anything you want. You can be as tough on him as you want. He's a friend of mine." I'm like, "Okay, dad." And so, we sat down in the big conference room. And I looked at Jim in the eye, and I said, "Hey, Jim, will you tell me about your philosophy on asset allocation for my dad's portfolio as he transitions?"
And literally, he went white. He started sweating. Sweat literally started to pour down his face. He said, "I'll be right back." He left. He came back about, and my dad's like, "Settle down. You can't do that." He left and he came back and he put down like 100-page deck. And he's like, "This is it. You can read it. This is our philosophy." And I said, "No, no, Jim. What's your philosophy?" And so, we left and my dad's like, "Why are you so hard on him?" I'm like, "Listen, Pop. You saved your whole life. You're moving into retirement, you and mom have some things you want to do. We got to make sure that you got enough money."
And he switched advisors and then as the market began to crater, he literally called me, Josh, for almost two years every single day at the close. And he asked me one question, "What should I do?" And my advice to him always was, "Pop, if you need the money, right now, we've got to do something. Do you need the money right now?" "No." I'm like, "Then dad, you just, you got to wait, and you got to let it play out."
He was in a good balanced portfolio, but the panic that he had was not how much more he was going to make, he'd accepted where he was. His panic, Josh, not having enough to live on and that was something that that just really meant a lot to me. And so, again, I mentioned that I always cared about the end investor. And it was really important to me.
The other thing that's interesting is between my time at FI and Morningstar, I've literally been in thousands of advisor offices and in probably almost every home office of the asset managers and most of the broker dealers. And so, when you walk in the door, you just begin to get a feel for who they are as you talk to them and really learn their philosophy, not what's printed on the website, you learn about them. So-
Josh Itzoe: Did you have to read the 100-page deck?
Matt Wolniewicz: No, I didn't even take it. I left it there. But at Morningstar, I met somebody who's become a really close personal friend of mine, Scott D'Angelo, who has always been a retirement and a plan focused advisor. And so I got to know him at Morningstar when I was at FI. He's big into the fiduciary movement. We became even tighter. And so, about four years ago, he started talking to me about an idea that he had to help bring some retirement income and some guarantees to participants who were in plans.
And so, it's pretty long before its time. I listened to him. I thought it was interesting. I thought there was no way he was going to pull it off because he was trying to bring together some traditional competitors to really do the right thing. And as we all know, that doesn't always equate to making a lot of money. So, I thought, "Yeah, all right, Scott. God bless you. And we'll see how it goes."
About two years ago, it started to get a little bit more traction, and he was having some meetings. Over the summer, when I decided I was looking for a new challenge, something else to do, Scott started really talking to me about a solution that he was going to bring to market. And so, late in the fall, I agreed to one, really join Prime Cap as a board advisor to help them think through strategy. And then as the solution got closer and closer, I decided that it was really a perfect fit for me, because at the end of the day, it was built from the bottom up, having the end investor in mind. And so, it was a really nice fit for me.
Josh Itzoe: That's great. That's great. And so, and Scott, is he the founder of Prime Capital?
Matt Wolniewicz: Yeah. He's not necessarily the founder, but he's the Chairman of the board for the firm. And Prime Capital is actually a consultant on the product because it really has six different partners: American Century, Lincoln, Nationwide, SS&C/DST, Wilshire, and Wilmington Trust. So, it's really a consortium.
Josh Itzoe: Got it. So, like you said bringing together some, I don't want to call it strange bedfellows, but there's a win in being able to bring together kind of competitors and kind of maybe a spirit of whether it's collaboration or coopetition. But so talk a little bit about, again, because this is going to be new, so what's the vision for Income America? What are you trying to do? You mentioned to provide some in-plan guarantees in retirement plans for participants. So, what are you guys trying to build and accomplish?
Matt Wolniewicz: Yeah. I mean, really, at the end of the day, it's to provide a simple solution for guaranteed retirement income. I mean, that's the simplest way. There's a lot of different ways that people can do it out of plan through annuities and there's some ways that they can do it in plan. But those are all pretty complex, Josh. Some of the retail stuff is really expensive.
And so, at the end of the day, the mission of the group was to create a simple product that the participant, end investor could understand, that the advisor could understand and just as importantly, that the plan sponsor can understand. Because as from years of working with them, depending on the size of the firm and who's on the Investment Committee, typically there's just not a lot of sophistication there. Those sponsors have other jobs. And so, we wanted to create something that was really simple for all of them to understand.
Josh Itzoe: And so, it's a combination, the way you had kind of explained it when we were just chatting about it ahead of time, is it's really a combination of a target date, strategy, QDIA strategy plus guarantees, but there's a portability element. So, maybe you could just describe what the solution, what it is and how it works.
Matt Wolniewicz: Yeah, I'd be happy to. So, the way that it's structured is it uses American Century's glide path. So, it is a CIT and it is a target data at the beginning. So, as the participant and it is a 338 solution, so it's QDIA friendly. So, as the participant ages, the glide path is going to change with the allocation. Depending on the plan demographics at a certain point, typically age 50, there's the ability to move into a guaranteed income structure. And so, the way that it works is it leverages American Century's glide path.
For the manager due diligence and selection that's performed by Wilshire, there's actually 17 different strategies from, I think, eight different companies, so it's really best in breed. It's open architecture, there is no proprietary nature to it. And then the way that Lincoln and Nationwide fit into it is they are both stable value providers, but in addition to that, they're the insurance wrappers. So, it's a GLWB that's wrapped on top of the participation's market value. So, that's the greater of other contributions plus market appreciation, but it can be never less than their actual contributions.
And then at age 55, there's a step up. So, the benefit is going to lock into whatever the market value is. And it's really simple. The payoff is 5% for life. So, if the market tanks, they're still going to receive 5%. If there's massive market appreciation and that the end participant wants to pull the money out and do something else, they can do so. There's no surrender fees. There's no reason not to do that. So, it's really a unique opportunity.
The other thing, and you mentioned it, is about the portability. Because we all know that Americans aren't at one job for 50 years and getting the gold watch. They move and do other things. So, as a participant moves and takes on a new job, as long as Income America is available in that plan and with that record keeper, they can fully move whatever amount of savings that they've accumulated. So, the nonproprietary nature is probably one of the things that most attracted me to this. So SS&C/DST is the technology provider that allows the CIT to be portable. And then Wilmington Trust is ultimately the custodian and they take on the 338 responsibilities.
So, again, it's participant level, you can have security knowing that you're going to get 5% life. If you're an advisor, you've got a fully ERISA compatible solution. And really, the same thing is a planned sponsor. You know that your employees are getting the best of a target-based solution, and you've provided them with some lifetime income. It's interesting. There's been lots of talk, Josh, about, participant's desire for lifetime income.
And when we have events like we did in March of this year, like for me personally at home, it seems like every day I get invited to go out to a free steak dinner and hear about a solution to bring guarantee, right? We both know what that's all about. So, yeah, so this is much different, because it's advisor, it's advisor sold to the plan sponsor, and yet it brings the benefit to the end participant.
Josh Itzoe: And so just so to kind of understand the pieces, so, you've got Wilmington is the 338 and then it's not American Century product, it's just your Century licensing their glide path research to build the glide path at the start date. And then you've got Wilshire, who is actually, are they selecting the managers or they just doing the due diligence on the managers that fill out the glide path? What's the relationship between Wilshire and Wilmington? How are they-
Matt Wolniewicz: Yep, Wilshire is doing-
Josh Itzoe: How do they play?
Matt Wolniewicz: Wilshire is doing the manager due diligence and screening on the insurance providers, the stable value providers, and the underlying managers. And then Wilmington is the 338 that sits on top of that. So, I mean, it's different because it's multi manager, it's multi insured, and it's multi-fiduciary. Those are all in addition to being nonproprietary and portable and simple, and institutionally priced. So, those are all things that are really different about it.
Josh Itzoe: Yeah. It's interesting, the portability piece. And being able to let's say, that you had a participant, and they were in it, and they switched jobs, and they said, "You know what? I don't want to roll it over." Are they locked in from that perspective or can they can their money or they're locked in? If they just said, "You know what? I just hired a financial advisor and I'm just going to roll it out?" Do they lose all those guarantees?
Matt Wolniewicz: That's a great question. Well, I guess, there's one or two things. One, could they leave it in plan? Yes, I believe that they could. If they wanted to roll it out at launch, there's not a live RIA functionality, but that is functionality that we're calling day two that we're starting to work on, so that if they wanted to roll it to an IRA and keep the guarantee, they can do so.
The only nuance there might be can the investments be exactly the same and will the fees be the same? Because one of the reasons why the fee so low is, is it's done at the group level. But those are two things that I don't know. But I would think that technically, they should be allowed to leave it in that plan.
Josh Itzoe: I guess, that they leave it in plan. I mean, I guess the real question a lot of times with and it's funny, you mentioned, the annuities and annuity, especially like a fee-only fiduciary advisor is generally a dirty word. Though, I will say I think things like immediate annuities definitely have a place, but there's so many whether it's, equity indexed annuities, which are just, I'm just going to say it, they're racket.
It was funny, when I started working on the wire house, a good buddy of mine, he said, "You always know the worst the product is the higher commission it pays because the harder it is to sell," right? So, and they had lock up periods. That's one of the tough things with annuities, right? You get kind of locked in and that's—
Matt Wolniewicz: That's right.
Josh Itzoe: And it sounds like what you guys have designed with this is, you may not be able to keep the guarantee, let's say if you leave, but you're not going to get penalized.
Matt Wolniewicz: That's right.
Josh Itzoe: You're not going to get locked in and I think that-
Matt Wolniewicz: No. You're going to have your market value, that's right.
Josh Itzoe: Yeah, yeah. And so, let's say if somebody is in the target date and they get to age 50, more age 55, they have to elect, do they have to elect the guarantee? Let's just say, they say, "You know what? I'm going to work for another 20 years and I'm good and I don't want to elect it yet." Can they still just stay in the target date?”
Matt Wolniewicz: They could. And I guess the only nuance to that would be if the plan sponsor sets up in the plan docs that as QDIA at age 50, you're going into it, then they're not going to have the opportunity to do it. But otherwise, yes, you're right. Because again, it can act as a QDIA or it can sit along with an existing QDIA and just be used for the population that's 50 year over so or it could be on there as just an option. It really depends on the plan design.
Josh Itzoe: Yeah. It's interesting. Several episodes ago, I had a chance to interview Michael Doshier from T. Rowe Price and we were just talking about, you had 20 years ago, especially, I started my career in the late '90s and you had kind of the huge proliferation of 401K menus, right? In the '80s and early '90s, you had small menus. And then in the late '90s-
Matt Wolniewicz: Yeah, there's 300 actions.
Josh Itzoe: Yeah, this expansion. And then you saw it coming back. And I think, I know I'm a big advocate for when you look at just the data and the research is that, there is very much a powerful paralysis by analysis that you need, too few options isn't good, but too many options actually has a negative impact on investor behavior.
But we talked about, and I think this is the innovation moving forward, and you kind of alluded to it, is that it doesn't need to be kind of like a binary either or. The older I get, the more I see that so much in life, it's not an either or, it's a both and it creates flexibility and a framework. And this idea of tiered menus within 401K plans and so, being able to potentially engineer that, "Hey, we have this solution that maybe it sits alongside and maybe we only open it up for people at age 50, potentially.
Maybe there's a set of solutions and investments that are only available once somebody kind of trips the wire leading to a certain point. And how do you, that I think that's the next evolution from a menu design perspective is, it's not just a target date fund and some asset class funds that may be there's these different tiers that are meant to target and isolate different populations. And I think more and more, especially large plan sponsors, and Michael and I had talked about this, is that there seems to be a preference years ago and when I, probably five years ago, most companies once people got to retirement, it was like, "Hey, let's just give you your assets and let's get out."
Matt Wolniewicz: Later, yeah.
Josh Itzoe: It's, "Later. Let's get you out." And there seems to be a growing appetite for by plan sponsors, especially in the large market, to have participants stay in plan post separation. And to do that, how do you begin to bring solutions that normally, you could only get outside of a plan? How do you bring that in plan and that sounds like what Income America in many ways, what you're trying to accomplish is bring some of those solutions that are maybe better designed, but cost efficient. But bring them into a plan, as opposed to forcing a participant to go work with Jim, like your dad did and throw them to the wolves, if that makes sense.
Matt Wolniewicz: Yeah. I mean, two quick thoughts there, right? One is you're right, the sponsors do seem to be more maternalistic toward their employees, right? And, again, if you're going to roll out, to this, the flyer that I got yesterday was, "Bring all your RIAs in or IRAs," right? So better than having to buy a retail annuity, you can do it in the plan and the buying power is so much better.
But for me personally, I had to fill out a survey the other day. I moved to a different age block, right? I just, I turned 55 in December. And so, the way that I thought about my financial future at 45, was much different than I do at 55. And so, Josh, to your point about creating these different buckets, whether they're age based or income based or whatever it might be, yeah, I think that that's part of the future.
Josh Itzoe: Yeah, absolutely. Well, so as we wrap up, and I've really enjoyed this discussion.
Matt Wolniewicz: Me, too.
Josh Itzoe: That one of the goals of this podcast is to make ERISA fiduciary smarter. And so, one of the questions that I asked each guest, at the end of the show is, "If you had one piece of advice for ERISA fiduciaries, whether that's an advisor, whether that's a retirement plan, committee member, what would it be?"
Matt Wolniewicz: I found a great quote in a book that I really like. It reads like this, "As a fiduciary, you have the power to change the course of people's lives and future generations through the choices you make." Does that sound familiar, Josh? I think-
Josh Itzoe: JD Carlson from Retireholics has been given me grief when he was on my show and then I was on his show, and then on LinkedIn, he constantly gives me grief about the fact that I referenced, that I might have written a book that's far too much. And so by design, I have not tried to visit that on this show, but I think that was a quote at the end of a book that might have been familiar.
Matt Wolniewicz: Yeah. And so, I always think fiduciary, I equate that to doing the right thing. And I just believe in life that if you do the right thing, no matter what period you kind of measure yourself over, you're going to end up on the high side of whatever you're looking to do. So, that's kind of the way that I looked at it.
And it's funny, you mentioned my buddy, JD. I just sent him a shirt the other day, I was on vacation and I was down in Florida and sent him a Ron Jons surf shops. But I had to check with him to make sure that that was still cool. And he said, "Yeah."
Josh Itzoe: That was still cool?
Matt Wolniewicz: So, that was good. Yeah.
Josh Itzoe: Did he say yes? Did he say yes, that was-
Matt Wolniewicz: He did.
Josh Itzoe: That's funny. I've had a good time recently. We've had some good banter back and forth, he and I. So, the fact that you referenced my book, I think means that I did not bring that up proactively. So, the last couple of minutes, I want to ask you a couple of things. One is just where can people go to stay connected with you to learn more about what you're doing, what you're up to, if they want to reach out to you if they want to learn about Income America? We'll put it in the show notes. But where can people go to stay connected with you?
Matt Wolniewicz: I'm pretty active on social media, so @mwalno, M-W-A-L-N-O. I always have a stream of thoughts up there. I'm not quite as active on LinkedIn, but I'm there. The Income America website, it's pretty simple. It's incomeamerica.com and my email address is even more simple. It's firstname.lastname@example.org. So, I'm always happy to chat and always looking for new ideas. So, people should feel free to reach out to me any way that they feel comfortable.
Josh Itzoe: That's awesome. Well, thank you so much for being on the show and loved your insights. And I really appreciate all the things you've done throughout your career. And...
Matt Wolniewicz: Well, thanks, Josh.
Josh Itzoe: ... admire that and really helping to promote this idea of what it means to be a fiduciary. Like I said, we shouldn't even have to talk about this, but the fact is we do. But as you mentioned, if it's really about doing what's best for the people that we serve, if you take that approach over time, everybody's going to win. So, thank you for all the things you've done over the years to try to promote that, that mindset. And as you continue to do it in this new gig that you've embarked upon. So, thank you.
Matt Wolniewicz: Sounds good, Josh. I enjoyed the conversation. Have a great day.
Josh Itzoe: You, too.
Thanks for listening to this episode with Matt Wolniewicz from Income America. If you'd like more information and learn more, go to fiduciaryu.com. We've got some great resources there for you, including each episode along with show notes, articles, free tools and online courses. And make sure to sign up on the site, so we can stay connected. I'd love to help you stay in the know about what's happening in the world of corporate retirement plans. And if you've got questions you'd like me to answer, topics you'd like me to discuss, guess you think would be a good fit for the show or any other feedback, I'd love to hear from you.
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Greenspring Advisors is a registered investment advisor. The opinions I express on the show are my own and do not reflect the opinions of my guests or the companies they work for. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information and content presented on the show is for educational purposes only, and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk, and unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation, or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. And past performance is not indicative of future performance.