Given the current economic situation, conducting a financial planning practice isn't getting easier. With the financial uncertainty of the past several years, investors have become uncomfortable with the "business as usual" planning approach.To some extent, this is good news for planners, as it provides the opportunity to perform more in-depth planning for many clients, as well as providing clients with a more proactive approach to investing and planning. With investor goals undergoing frequent revisions, and the means to achieve those goals also increasingly unstable, clients are increasingly willing to allow you to play a more active part in monitoring their investments on an ongoing basis and suggesting changes when appropriate, not just at an annual or bi-annual planning session.
Each individual client represents a unique planning process. Clients vary greatly in their assets, planning goals, and willingness to take risks, and none of these areas are absolutes - all of them may change over time.
That makes basic analysis a moving target, and almost impossible to define in concrete terms. As a general rule, analysis software and tools fall into several very broad categories, although even a specialized application might be considered basic for a specific client or subset of clients.
In the reviews that follow, we look at a variety of different approaches to tools and applications. Some of these are very directed towards a specific area of planning, while others are more general computational or research tools.
Keep in mind, though, that depending on the makeup of your specific practice and client base, it's very possible that you may be best served with some combination of these (and possibly other) tools.
RETIREMENT PLAN ANALYZER
Brentmark Software does not take the approach of having an integrated suite of modular applications and calculators. Rather, it provides a number of stand-alone tools, each oriented to a specific area of financial and planning analysis. This array of tools includes the PFP Notebook, the Kugler Estate Analyzer, Estate Planning Tools, the Charitable Financial Planner, the Retirement Distributions Planner, the Savings Bond Toolkit, Estate Planning QuickView, and the Retirement Plan Analyzer that we looked at. Prices run from $79 for the Retirement Distributions Planner to $595 for the Retirement Plan Analyzer, so if you need the full spectrum of tools, you could spend a fair amount of money.
The Retirement Plan Analyzer, which was previously known as the Pension & Roth IRA Analyzer, is used to determine the results of strategies for taking distributions from traditional IRAs, Roth IRAs, Roth 401(k)s and other types of qualified retirement plans. The application is capable of calculating up to four alternatives simultaneously, for up to 10 beneficiaries. The software has a State Death Tax Manager for calculating inheritance and estate taxes for all 50 states; can handle nondeductible and additional contributions to retirement plans; and allows you to model the growth of other assets as realized or unrealized capital gains.
While the user interface is somewhat stark, it's easy to understand and navigate. The Retirement Plan Analyzer can produce a nice selection of client reports, complete with graphics, and output them to a printer, PDF, text or word processing file, or to a spreadsheet file for further manipulation.
Brentmark's strategy of providing individual analysis tools is an expensive path if your practice requires a comprehensive planning system. But if you specialize in specific areas of financial planning, the Retirement Plan Analyzer and associated tools from Brentmark could just be the way to go.
Basic financial analysis is a hard thing to pin down. To one planner, a basic approach might mean concentrating on a single aspect of the planning process, such as retirement planning, planning for an education or estate planning. Another planner might consider asset allocation a basic planning function, and yet a third planner might want the whole ball of wax, and consider a comprehensive, yet affordable, planning system as their basic requirement.
EISI takes an approach that this third planner would appreciate. Its NaviPlan products, NaviPlan Standard and NaviPlan Extended, are complete planning systems, and while they might not hit every specific niche that a planner may cover, they do cover the spectrum of planning needs nicely.
NaviPlan Standard is a bit more basic than the Extended Edition, and is priced $500 less. That $500 buys you a more advanced estate-planning module, more advanced income tax planning and estimation, employee stock options, and a few other planning areas in addition to those provided in the Standard Edition.
That doesn't mean that NaviPlan Standard is feature-poor by any means. The application is loaded with financial calculators, a needs analysis, risk analysis, and specific goal-based planning for retirement, education, major purchases, disability and the like. Monte Carlo simulation helps assess potential planning scenarios, and asset allocation is available as either user-defined (included) or by adding Ibbotson's (now Morningstar's) Allocation software. NaviPlan has the ability to import data from Albridge Solutions and several clearinghouses.
We found the software easy to install, and easy to use. The screens are laid out intuitively, and tabs provide logical delineations between tasks. EISI can provide training as well, which helps get you and your staff up to speed quickly, though experienced financial planners should have little, if any, difficulty using the application, especially with the Planning Assistant wizard to walk you through the process. The reports are excellent, and present the findings in a manner that's both impressive and understandable.
EISI provides NaviPlan and its other product line, Profiles, in both desktop format (the versions that we reviewed) and as an online hosted service.
PROFILES PROFESSIONAL/PROFILES FORECASTER
NaviPlan is only one of the planning lines that EISI provides. Several years ago, the company acquired the Profiles planning products, and continues to update and market these, as well as NaviPlan.
In some respects, NaviPlan and Profiles Professional are similar, at least in function. Profiles Professional is a set of integrated planning modules, and provides modules to perform planning for cash flow or specific goals including retirement, education, major purchase, and long-term care and survivor needs. As with NaviPlan (and other comprehensive systems), Profiles Professional allows you to perform basic estate planning functions, as well as income tax analysis, employee stock option impact, and business continuity planning.
Some functions are optional and cost extra. These include an advanced estate planning module, Monte Carlo simulation, the Ibbotson Security Classifier, and content from Forefield. This Forefield content integrates very nicely into the comprehensive plan that is developed, and provides expanded explanations of the content and results presented.
For planners who don't need quite the comprehensiveness of Profiles Professional, Profiles Forecaster provides a more limited feature set and a more affordable price tag. Profiles Forecaster is goal-oriented, and provides planning for retirement, education, long-term-care and disability needs. It eliminates the retirement distribution, retirement scenarios and major purchase goals that are included with the more expensive Profiles Professional.
While it might seem that there is considerable overlap between the different EISI products, each is actually targeted to a fairly specific practice makeup. This variety allows a planning practice to zero in on a planning system that meets their needs, while letting the practice avoid spending extra on features and functions that aren't needed.
Morningstar is well known in the investment and financial planning world. It has a comprehensive product family that encompasses both analysis and research. The Ibbotson product family was acquired several years ago, and offers analysis tools including asset allocation.
The Principia Suite, which we reviewed, is a more comprehensive product. As its name indicates, it provides a suite of capabilities that includes the highly regarded databases of mutual funds, stocks, annuities and other equities that are updated on a monthly basis. These form the core around which the rest of the suite is based. Many of the databases are also offered individually, which can save your firm some money if your practice is restricted to only certain kinds of equities.
While the comprehensive and in-depth databases are at the core of the Principia Suite, they aren't of real value without the ability to extract and distill this data into information that is useful in making decisions. Morningstar provides a number of ways to accomplish this. The database access software offers the ability to pull out data in a wide variety of ways, depending on the constraints and time periods that you specify.
Also included in the suite is the Hypotheticals module, which allows you to do the actual modeling of investment scenarios. The Asset Allocation module is not included as part of the suite, though many planners will want to add this.
One very nice module that's included is Presentations and Education. This is a comprehensive set of PowerPoint presentations, handouts and brochures, which can really help you promote your practice by presenting seminars and will help you educate your current and potential clients in a large number of investment areas.
Installing the Principia Suite is not a particularly quick process. Our review system was contained on six disks, and if you add options the disk count is even higher. Installation did, however, go off without a hitch.
The Principia Suite is not a product that many planners are going to just sit down and use. While experienced planners may be familiar with parts of the Morningstar research databases, others will be best served by setting aside some time for training in order to make the best use of the software.
NUMBERCRUNCHER 2008/FINANCIAL ANALYZER II
Not every financial planner wants to spring for a full-blown planning application. There are many smaller financial planning practices and accountants who offer financial planning as an additional service that may not require a complete system.
Still, financial planning at any level requires a lot of calculation. Years ago, financial calculators from HP and Texas Instruments were big business. These days, they are still available, but many planners tend to turn to their PCs first.
Leimberg & LeClair offers several collections of financial and estate planning tools that perform the calculations required in this type of practice. We looked at NumberCruncher and Financial Analyzer II. Also offered are a QuickView calculator, the Life Settlement Number Cruncher, the Retirement Plan Analyzer, and the Charitable Financial Planner. Each of these contains the appropriate calculators for planning in these specific areas.
NumberCruncher 2008 and Financial Analyzer II are more general-purpose calculation tools. Financial Analyzer II provides more than 75 financial calculations in the areas of annuities, income tax, bond computations, cash flow analysis, depreciation, loans and mortgages.
NumberCruncher 2008 is a more comprehensive (and more expensive) collection of calculators that emphasize estate planning and financial planning computations.
The software installs easily, and when launched presents you with the choice of different types of calculations. On the NumberCruncher tool, you first choose between estate planning and financial planning, and the available calculations for that area are displayed grouped under logical headings. Select the calculation required, and a screen opens up where you can input the required data and see the results.
NumberCruncher 2008 and Financial Analyzer II aren't very fancy. But unless you're putting on a show for your client, you don't need fancy - you need accurate and easy to use. And these two tool collections deliver just that.
Just what constitutes a basic tool really depends on the context of the planning practice. Many financial planning practices have high-level executives as clients. And with these individuals, stock and stock options are a common part of the compensation package.
Figuring out the possibilities and issues with this area of compensation is far from easy. Some of the higher-end comprehensive planning systems provide tools for this task, but in many cases, these functions, even if available, are often very rudimentary.
That's where StockOpter Pro comes in. It's an application that's specifically targeted for dealing with the issues that arise when stock and options are part of a compensation package, and need to be considered in the financial planning process.
StockOpter Pro is an extensive modeling system built on top of Excel. Before you go ballistic over a $1,100-plus spreadsheet template, consider that at its roots, Excel is really a pseudo-programming language for writing mathematical applications. That's what you are doing whenever you construct a complex model in Excel, and it's what Net Worth Strategies did when they constructed the StockOpter Pro application.
Using StockOpter Pro, you can model scenarios that provide the desired outcome for your client in terms of risk exposure in the allocation of company stock in the makeup of the investment portfolio; how and when to exercise options and to what extent; and the impact of selling decisions.
Net Worth also offers StockOpter Insight, not covered in this roundup, which can help you to analyze the portfolio of your client in terms of risk and diversification.
StockOpter Pro installed easily, though you do have to make sure that macros are enabled when the application is run. When you launch StockOpter Pro, you are presented with a menu screen similar to that provided by an application that is not Excel-based. Wizards walk you through the data entry process and provide you with the various choices that the underlying models provide.
StockOpter Pro won't appeal to every planner. But if you have the type of clients that this application is targeted at, or want to add them to your practice, StockOpter Pro is very much worth a look.
ZCALC TOOL BOX SUITE
Rather than a complete financial planning system, Fast-Tax's zCalc is a suite of tools designed to be used in tax and estate planning. It is available as a complete suite, which includes the zCalc Tool Box, the zCalc Function Library, Tool Box Templates, and Presentations, or with a license to just use the zCalc Function Library.
The core of the Tool Box Suite is the Function Library. This is an extensive set of predefined custom functions that supplement those already included as part of Microsoft Excel. Since these functions are specifically oriented towards tax and estate planning, they allow you to construct your own complex spreadsheet models without having to worry about constructing specialized functions, greatly speeding and easing the process. The Function Library contains over 100 of these specialized functions, and they work exactly like many of the Excel functions (such as the present value functions) that you are already familiar with.
Of course, these additional functions are not limited to use in tax and estate planning, though the majority of them are oriented towards those tasks. If you find some of these useful for other tasks, you are able to use them in the same manner as any other Excel function.
Many of these functions are used in the zCalc Tool Box, which is a set of predefined Excel models used to create and analyze tax and estate planning strategies. Each of these models is a stand-alone application that allows you to enter the appropriate data and print reports and graphs. The 20 individual applications are split between Planners and Calculators, each used for a specific planning purpose, such as generating an estate plan or gift tax scenarios.
The nice thing about the Tool Box is that zCalc also provides the same applications as unlocked Tool Box Templates, so you can make your own modifications and customizations to better fit with your specific clients and practice. As with any unlocked spreadsheet template or model, you risk screwing up the logic when you change the model, so unless you are sure of what you are doing, many users will be best served by living with the Tool Box models.
The final component of the suite is Presentations, which is a large set of PowerPoint slides that focus on the types of calculations provided in the suite. These can be used with a client to underscore the work that you will be performing for them, or might even be usefully incorporated into the final reports provided to the client.
The zCalc Tool Box Suite is pretty reasonably priced, but its ultimate value depends on what other (if any) software you have available and are using for planning in these areas. Many of the more comprehensive financial planning applications provide extensive tax and estate planning tools, which in large part duplicate those contained in the Suite. If you can live with the Tool Box Suite as your main planning tool in these areas, it represents an excellent value.
Ted Needleman is senior director of the Technical Services Division of Industry Analysts Inc., an independent market research firm and testing laboratory. He was previously the editor-in-chief of Accounting Technology, and writes frequently on software, hardware and technology-related subjects.
Retirement Plan Analyzer
Price: NaviPlan Standard - $799; Extended - $1,299.
Profiles Professional/Profiles Forecaster
Price: Profiles Professional - $1,049; Forecaster - $599.
Price: Per year - $3,345.
NumberCruncher 2008/Financial Analyzer II
Leimberg & LeClair Inc.
Price: Single user - NumberCruncher, $429; Financial Analyzer II, $129.
Net Worth Strategies Inc.
zCalc Tool Box Suite
Thomson Reuters Fast-Tax
Price: Single user - $445.
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