Financial Planning Rebound?


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A better economy should increase the need for software tools.

by Dave McClure

It might seem that this would be an excellent year for financial planning professionals. Not only is the economy on the rebound, driving small investors back into the markets and freeing up some discretionary income, but the majority of scandals involving brokerages and major corporations are slowly winding down.

Partner Insights

Yet there are problems with financial planning software that are making it difficult for accounting and wealth management practices to participate and serve clients effectively. Among the greatest of these is that financial planning software is not particularly easy to learn or use.

The lack of usability in software is hardly a new issue. In 2003, Forrester Research reported on a major study of applications from 11 different vendors--including SAP, PeopleSoft, Oracle, J.D. Edwards, Microsoft, and Lawson--concluding that several applications required "inordinate patience and expertise," while others just fell flat on the usability issue. This is not a small issue. Even for a typical accounting office, the expense involved in additional training to make software usable to the staff can involve thousands of unbudgeted dollars that could be better spent elsewhere.

In a survey of 35 brokerage houses that offer financial planning, Forrester found that while 80 percent of practices that engaged in financial planning had deployed software to assist in the process, 61 percent used more than one package while another 68 percent offer stand-alone tools in addition to a comprehensive package. But what is most striking in the survey is that only 37 percent of the users who were provided software tools actually used them. The issues keeping the software from being used ranged from poor design and substantial training requirements to difficulties in entering data.

Forrester Research summed up its findings on the usability of business application software by noting, "In a buyer's market, customers should be demanding better usability."

Software vendors have not been idle in addressing these issues. In the past three years, there has been a notable shift in the approach taken in financial planning software, from a show-and-tell sales orientation to a more holistic approach based on goal analysis and asset management.

For 2004, we examine seven software packages that are in wide use, and that are making transitions that will help them to meet the usability issue head-on.

Advisor Platform

AdvisorPlatform, a Web-based system designed to enhance the client/advisor relationship through financial planning and services, has shown steady improvement both in its offerings and in its storage capacity for data.

AdvisorPlatform 3.0

eMoney Advisor
Paoli, PA.
(888) 362-8482
Pricing: Variable.

The AdvisorPlatform does an effective job of melding the functions of service, client collaboration, financial planning, and portfolio management without sacrificing the quality of the planning tools. The company was founded in June 2000 by financial advisor Edmond J. Walters.

An update to the platform, scheduled for the current quarter, will implement dozens of incremental upgrades that will streamline the system by combining and enhancing elements of the Web site (including the Fact Finder data input module) and strengthening other core modules. Version 3.5 will also add new and stronger what-if scenarios in the Planning Center, and the ability to develop, store, and compare multiple planning scenarios.

Client data is entered via a Fact Finder system that queries the client about family, property, investments, businesses, insurance, income, expenses, savings, retirement goals, risk tolerance, and debt instruments, as well as questions related to business and estate issues. This data is used by a Planning Center that addresses trusts, partnerships, disability needs, education, effects of inflation, life expectancy, and taxable versus deferred-investment vehicles. The site then generates comprehensive reports including asset allocation, investment performance, stock options, cash flow, net worth analysis, estate observation, gifting analysis, and comparative analysis. All of the reports are customizable and transportable to MS Word.

The robust Client Financial Home Page lets clients monitor their financial status by providing daily balance updates from anywhere at any time. Advisors and clients also can access an online "vault" for storing all their legal, investment, and insurance documents, such as wills, deeds, and policies.

Each accounting firm gets its own branded system on the eMoney server. Integrated seamlessly with the accounting firm's own corporate Web site or intranet, this branded financial planning site constantly tracks the client's asset base and updates account information in real time. Asset allocation views for individual, aggregated, taxable, and tax-deferred allocations allow the accountant to make more effective tax and growth recommendations.

Because it is so highly customized, pricing varies with each enterprise. On average within an enterprise sale, advisors pay between $800 and $1,000 per seat license and $150 to $250 per client. This cost includes technology set-up and training, initial marketing materials, and 20 MB of storage on the site's electronic vault.

eMoney Advisor, one of the more powerful financial planning systems available, offers advanced features with an attractive interface and easy navigation. Its Web orientation makes the program more flexible and accessible than PC-based solutions, and its emphasis on the client relationship builds a solid foundation for enhanced wealth management revenues for the firm.

MasterPlan 2003

MasterPlan 2003, a stable and robust financial planning software package, helped define the financial planning industry over the past 19 years and now enjoys a strong and loyal customer base.

MasterPlan 2003

MasterPlan Financial Software
Vacaville, CA.
(707) 451-8985
Pricing: $1,995 (stand-alone version); $1,245 (network version).

One of the signs of very stable software is that it changes little from one year to the next, and MasterPlan shows that level of stability. New since the software was reviewed last year are an update for the 2003 tax laws, enhancement of the research materials available from MasterPlanner's Web site, and the addition of Web conferencing for technical support and sales.

The tightly integrated modules feature one-time data entry and integrated calculations, with the data neatly configured to leave a clear audit trail. By design, the program is geared toward analysis rather than sales, so the forecasting and simulation capabilities are slightly less robust than in some other packages. On the other hand, the lifetime planning horizon of 99 years, flexibility in user-designed reports through the MasterPlan Report Writer, and an unlimited number of user-defined and pre-defined assets and liabilities make this one of the most flexible financial planning packages available.

MasterPlan's functional areas of analysis include retirement needs analysis; education funding analysis; real estate analysis; cash flow; tax planning; capital needs analysis; disability needs analysis; estate and trust planning; business valuation; asset allocation; budgeting; and what-if scenarios. The inclusion of a what-if scenario function easily handles the buying, selling, and re-financing of assets. In addition, the software has strong tax planning capabilities--calculating for each year of a projection whether the tax was Table Tax or AMT. This is helpful in calculating where the unescalated AMT threshold looms, according to the plan's CPI assumptions.

The report engine is also highly flexible. Reports can be a summary only, a graphical presentation, or an all-text presentation for clients who want to get directly to the nuts and bolts of the plan. And all reports can be exported to Microsoft Word for additional flexibility in the presentation of client data.

MasterPlan is highly valued by accounting firms for its utilitarian approach and a presentation style that favors client service over sales. Priced favorably at the mid-range of the market, it nonetheless covers a wide range of planning subjects with a minimum of complexity.

Methuselah Suite

Methuselah, a more recent entry into the financial planning field, debuted ten years ago to address the needs of firms for a solid sales and presentation tool that addresses retirement planning, estate and trust planning, education funding, life insurance/disability needs, distribution planning, long-term care planning, and debt/liability management.

Methuselah Suite

Unger Software
New York, NY.
Pricing: $49 per month (Bronze); $89 per month (Gold); $129 per month (Platinum).

Built as a subscription-based service, Methuselah can function either as a PC desktop or online Web product. There are three levels of subscription offered: Bronze at $49 per month; Gold at $89 per month; and Platinum at $129 per month. Corporate and volume discounts are available.

The Bronze level offers 10 basic modules for capital needs analysis, disability needs analysis, college planning, rapid need analysis templates, needs- goal-based analysis, distribution planning for retirement, for data entry, long-term care analysis, and debt/liability consolidation analysis. The Gold level adds another nine modules for such areas as cash flow analysis, tax planning, estate planning, employee stock options, and customizable reports. The Platinum level expands Methuselah further, bringing into play trust and estate planning for business owners.

Unger Software has also added the Portfolio Pathfinder asset allocation capabilities to Methuselah, building on capabilities to evaluate how combinations of assets will work to achieve financial goals. Unlike other asset allocation programs, Portfolio Pathfinder does not rely on the traditional risk analysis method of asset allocation. Rather, it combines Modern Portfolio Theory and Monte Carlo Simulation to advance the comparison and selection of portfolios.

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