Startup Genivity will give the bank’s high-net-worth clients a 360-degree view of the way their wealth lines up with their health. Other advisors are welcome to play.
A few weeks ago, BMO Wealth Management teamed up with a Chicago startup that disrupts one of the most nebulous aspects of the financial planning process: medical underwriting and healthcare costs.
The start-up is Genivity. They’ve won financial technology awards for their innovative Big Data
calculators that project lifespan, quality of life and healthcare costs based on a given investor’s choices.
Once the tools get incorporated into BMO’s customer service platform, the bank’s advisors will have the ability to have a statistically informed conversation with clients about longevity that goes well beyond the often arcane underwriting calculations that currently drive long-term planning.
What’s exciting is that it isn’t an exclusive relationship. Other advisors can sign up to bring the technology to their practices as well.
Imagine the value of being able to counsel clients who get a life-shortening diagnosis. You can provide more realistic models of how far the money will stretch under various scenarios and help them make informed choices.
You can also resolve angst around soaring healthcare costs once and for all. The app provides a sense of how many years someone needs to plan for and how heavy the real medical burden will be based on behavior and other factors.
From there, likely scenarios emerge that can then be planned around through allocating funds for likely expenses, insurance and so on.
Genivity calls it HALO, the Health Analysis and Longevity Optimizer. Obviously their background is on the medical side. They’re interested in nudging people toward better medical outcomes: longer lives and improved quality of life.
But integrating those insights into a financial planning process allows a true “life planning” orientation to evolve beyond what’s historically been a somewhat fuzzy zone.
Previously a lot of the estimates that went into healthcare cost calculations were arbitrary. Longevity targets for weighing the risk of running out of money in retirement were largely canned numbers without much flex for lifestyle or known health issues.
According to those simple models, someone who exercises constantly and eats the best food available would need to fund exactly the same number of years in retirement as another client who makes less health-driven choices, or one with a hereditary degenerative illness.
A conventional Monte Carlo simulation would give all three similar odds for a successful retirement, even though one will likely live a lot longer than either of the others and so would need to stretch the assets over that extended period.
From what I can see, the HALO app also allows clients to test behavioral changes in order to optimize for longevity or other user-supplied goals. There’s a retirement planning undertone here as well. If you have a realistic sense of how long you’ll be healthy, you know better how long you’ll be able to work into old age.
Client won’t live to age 100? Don’t optimize the retirement plan around that end date and free up the assets for other financial priorities.
Long-term care and other end-of-life cost areas can also become integral parts of the plan that advisors can discuss with clients, and not just off-the-map questions clients need to address on their own or with medical professionals.
By the way, bringing the primary care physician into the advisory team is a compelling proposition. Healthier clients tend to be happier clients, and if that entails working with the doctor, it’s a mutual win.
While I suspect that there are HIPAA disclosure hurdles to leap there, it’s probably nothing the right paperwork can’t address. The client volunteers all the information. The advisor only sees what’s necessary.
Either way, this is a potential revolution in the making, tearing down the fences that once separated wealth advisors from health discussions. All affluent people have been trained to get nervous around the cost of medical attention. This gives advisors a way to address that angst and even plan around it.
Genivity runs demonstrations for advisors looking to add HALO to their practice. BMO is rolling it out in the Chicago suburbs and Florida before contemplating a wider launch.
This is the future.
