Let's face it - the economy is in bad shape. Investment houses are going out of business, banks are failing, and many investments have lost an incredible amount of value.If anything good has come out of this financial mess, it might be that it underscores the fact that financial planning and investment strategies almost always have some element of risk, and that the process has to be a dynamic one, with strategies changing as needs and risk aversion on the part of the investor change.

Even with the economic downturn in recent years, many investors have developed a blasé attitude about their investment portfolio. If it consists strictly of guaranteed-return instruments, they probably aren't worrying too much. For the rest of us, and most of your financial planning clients, watching our 401(k)s and other investments lose much of their value is incentive enough to rethink where we put our money.

For many financial planners, this bust may be a boon if it gets your clients into your office so that you and they can re-evaluate goals and investigate possible alternative strategies and the risk potential associated with each investment path.

Even if the current economy doesn't provide this wake-up call to your clients, a yearly financial planning "tune-up" is a win-win scenario for both you and your clients. Financial planning goals are not static, and priorities can shift between long- and short-term goals.

One important task, whether performed for an existing client, or when making up a plan for a new client, is how the investment is actually going to be made. What mix of financial instruments provides the best return given the client's appetite for risk? This part of the financial-planning process is called asset allocation, and unless you deal with only one type of investment vehicle or solely with pre-packaged plans, is not a particularly easy thing to do.


All investing is a balancing act between risk and return. The financial planner's part in the process is to determine the investor's risk aversion and then try and match the investment vehicles that provide the highest rate of return within the client's risk constraints.

This process is a mix of art and science. The science behind choosing the asset mix to meet a client's goals is mathematics, primarily predictive statistical techniques that include trend analysis (such as multiple regression), randomization statistical modeling techniques such as Monte Carlo, and risk/return analysis.

One of the most widely used methods of analysis is the Efficient Frontier (or Markowitz Frontier). This technique plots the risk of the assets under consideration against an axis of expected return. The line along the upper edge of this plot is the Efficient Frontier and will contain the assets that provide the best return for a given risk. Most of the asset allocation applications covered here use this mathematical technique, or a similar one, to present investment vehicles for a client's consideration.

No computer program can look in a client's eyes, or listen to their voice, and accurately gauge whether they are over or understating their degree of willingness or aversion to taking an investment risk. Nor can that computer application convince a panicked investor that taking a trip to Las Vegas with the remainder of their retirement funds is a realistic method of recovering the funds' lost value.


Software is a big help not only in creating a financial plan for a client, but in doing the research and analysis. We tested a half-dozen financial-planning tools that perform asset allocation.

Many of these are modular parts of a more comprehensive planning and research system offered by the vendor. Some vendors, such as Morningstar, provide both the research data and the analysis tools. Others provide only the tools, and require that you either subscribe to a service, or enter the historical and current data yourself. If you already are using a research service, you may want to take this into consideration when selecting an asset allocation application.


Financial-planning software is a great stride forward. Just input the answers to some questions and out pops an impressive and comprehensive financial plan brimming with colorful charts and graphs. There's nothing wrong with this approach, and using the software as a black-box system is one of the more compelling reasons for buying the application.

At the same time, it's in your and your clients' best interest to have at least some knowledge of the underlying processes that are taking place and why those particular techniques and models are being used. The vendor's Web sites generally have a fairly comprehensive explanation of the planning model being used, and there are numerous Web sites where you can brush up on the mathematical and statistical approaches.


We tested six asset allocation applications, some Web-based, others designed to be run in-house. On the in-house applications, we performed our testing on a generic desktop configured as a typical office PC and containing a 3GHz Pentium 4, 1GB of RAM, and a 160GB hard disk. For the Web-based applications, we used a typical laptop configuration that you might take with you to a client - a Lenovo ThinkPad X61 and a Sprint Broadband USB card.

Keep in mind that most of the asset allocation applications perform a fair amount of number-crunching, especially if you are running them in-house. While none of the vendors state that their applications are multi-threaded or make better use of multiple-core CPUs, in general, a more powerful PC will be preferable for this kind of application.

Our testing consisted of using sample clients provided by the vendors for training purposes, changing goals and risk factors, and investigating the different modeling and report options the application provided.


As with many of the asset allocation applications we looked at, AdvisorVision Investment Planning Edition is a subset of a more comprehensive system - in this case, WealthVision. The AdvisorVision set of tools is targeted more at financial planners than large institutions, though AdviceAmerica has products for this market as well. Depending on the makeup of your practice, AdvisorVision is available in several editions, with the Investment Planning Edition the most reasonably priced.

We tested the Investment Planning Edition. This includes asset allocation, portfolio construction and Monte Carlo simulation. The cost is $500 per month, which does not include any of the research services, which are priced à la carte. Other editions include the Retirement Income Edition with tools for retirement analysis, and the $1,500-per-month Comprehensive Planning Edition, which encompasses both the Investment Planning and Retirement Planning Editions.

These solutions are available as a software-as-a-service hosted application. We tested the Investment Planning Edition using a Broadband wireless card with our laptop, and found the response time to be quite rapid. As with any online-based application, we recommend a broadband Internet connection over dial-up, if one is available.

Using AdvisorVision is simple. Screens are nicely laid out and easy to understand and navigate. The process is similar to most of the applications we've seen - a short questionnaire on risk acceptance/avoidance, then access to whichever databases you have subscribed to to select investment vehicles that meet your client's risk criteria.

Once you have made your selections, you can run a Monte Carlo simulation to see where each falls on the Efficient Frontier curve. Select the vehicles that you feel are best for your client (or create multiple investment scenarios) and you can print out a comprehensive and attractive plan.

Some smaller practices, or those with very limited areas of consulting, will probably be able to get away with the Investment Planning Edition that we tested. Many practices, however, will be better off with

the more expensive Retirement Planning or Comprehensive systems. AdviceAmerica offers all of the AdvisorVision plans on a monthly basis as well as by annual subscription, so you can add another edition should you retain a client who would benefit from more varied planning scenarios. With the ability to add capability and new databases as your practice grows, AdvisorVision is an attractive base for a financial planning practice that intends to expand.


In prior years, Cheshire Software offered a modular financial planning system, one component of which was the Asset Allocation Planner. It was affordable, but pretty basic by itself.

This year, Cheshire has updated its software into a single integrated planner called the Cheshire Wealth Manager. At a reasonable price, it includes pretty much all of the planning and modeling functions offered by the prior Financial Planning System, with the advantage of a single, easy-to-navigate application.

Installation was quick and easy, and once installed, the application flow is simple to follow, as task choices are arrayed vertically Explorer-style in the leftmost pane of the screen. You can import a client's current portfolio using either Albridge Solutions, Schwab Portfolio Center or a .CSV file. Once imported or entered by hand, you can find asset classes using the ticker symbol.

From there, building a portfolio that lies on the Efficient Frontier curve is a matter of establishing the client's risk and return criteria, and setting goals and desired returns. When possible portfolios have been constructed, Cheshire Wealth Manager lets you run Monte Carlo simulations, and create reports with easy-to-understand graphs and charts.

For the money, Cheshire Wealth Builder looks like a good choice for a smaller financial planning practice. We have the same major criticism of this version as we did the last - there is no automatic link between the planning application and any of the more popular research databases, so data entry can be a bit of a pain. Still, for many small or midsized practices, Cheshire's Wealth Manager will provide an affordable and easy-to-use solution.


As with Cheshire's Wealth Manager, Money Tree's Total Planning Suite is more an integrated financial planning application than strictly asset allocation, though it does perform this process as part of the overall planning scenario. The Total Planning Suite consists of Easy Money (a goal-based planning system) and Golden Years (a retirement planner). Neither of these sets of planning reports is particularly targeted to the process of asset allocation.

Nor is there much of a mechanism for inputting current and historical performance data from the standard research databases, such as Morningstar's mutual fund database. You can import from Albridge Solutions and Microsoft Outlook, but other data has to be either hand-entered or entered by cut and paste.

Once you have gotten some data into the system, and have selected an investment mix, the Total Planning Suite does provide Monte Carlo simulation to help you model possible solutions and strategies. There's an easy-to-understand risk questionnaire and the software does provide you with very attractive and comprehensive reports that you won't feel hesitant about giving to your clients.

Still, if sophisticated asset allocation is what you are looking for, you'll probably need to look elsewhere.


Morningstar is probably best known for its research databases of mutual funds, stocks and other investment vehicles. The vendor also offers a number of analysis products as well, including the Ibbotson Encor system and Principia.

Principia is an in-house research and planning system made up of eight database modules covering different types of investments, as well as several specialized analysis modules including defined-contribution plans and the module we reviewed, asset allocation. An additional optional module on presentations and education is designed to allow the financial planner to offer seminars, and contains PowerPoint presentations and other ancillary material for this purpose.

Keep in mind that while many financial planners will use Principia as a tool to construct client plans, its main focus is on research. Each module is a separate database that addresses a specific type of investment vehicle and contains tools that let you construct histories, import current portfolios, and construct models using the optional hypotheticals module. Each individual module provides extensive graphing and reporting capability.

The Principia Asset Allocation module helps tie these modules together to produce a strategic plan for the client. Once you've selected potential investments using the research databases, you can use the Asset Allocation module to conduct a risk analysis, generate an Efficient Frontier graph, and run a Monte Carlo simulation on a proposed portfolio. When you are satisfied with the plan, print it out and present it to the client. The report can even contain an appendix that lists disclosures and presents the assumptions used.

Principia was easy to get up and running once we realized that one or more of the database modules had to be installed first. Menus are easy to navigate, and the software is simple to use and learn, though there are tutorials available if you or your staff wishes to use them.


SunGard is very well known in the financial planning world, mostly for its high-end institutional products. The AllocationMaster is the application that was formerly sold as the Frontier Analytics product, and is also a component of some of SunGard's higher-end financial-planning systems.

AllocationMaster is an in-house application that is updated on a quarterly basis. This updating is necessary because the application also includes an asset class database and a historical database with up to 45 years of more than 100 market indexes. Unlike several of the other asset allocation applications we tested, this particular SunGard product does not tie into databases such as Morningstar to allow you to select specific investment vehicles.

Rather, it works on asset classes, and builds a portfolio of a mix of asset classes designed to produce the desired returns within the constraints of acceptable risk. This analysis uses the Efficient Frontier model. Once an acceptable asset mix has been constructed, you can use the AssetFinder to look up specific ticker symbols for mutual funds and equities.

Setting up AllocationMaster is simple and menu-driven. So is the process of performing risk analysis and asset class allocation. SunGard has always impressed us in the past with its comprehensive risk questionnaire, which can be given to a client before a face-to-face meeting. AllocationMaster's risk questionnaire is also comprehensive, and is also a great way to educate your client on risk considerations.

SunGard's AllocationMaster is probably not as good a choice for a general financial planning practice as some of the other tools reviewed here. Because it focuses on asset classes, it would best serve a planner who deals in packaged investments in a number of different asset classes.


Many of the applications tested for this roundup are designed for small to midsized financial planning practices. AllocationAdvisor, and its parent product StyleAdvisor, are targeted towards those practices that are attuned more to wealth management than financial planning. The difference is subtle in places, but those practices will have more big-bucks clients who expect constant monitoring of their investments, with ongoing modeling and allocation assessment.

Of course, a large number of this type of client will be handled by institutional managers using one of the very high-end tools from SunGard, AdviceAmerica or similar vendors. Zephyr's StyleAdvisor and AllocationAdvisor let a somewhat smaller planning practice offer similar services.

Of course, this capability doesn't come cheap. Zephyr would rather quote prices on a case-by-case basis, but figures that getting started with AllocationAdvisor will run in the area of $5,000 or more, and, depending what options and research databases you go for, can easily exceed twice that. The base cost includes a lot, though, including subscriptions to Morningstar's mutual fund research database, as well as Zephyr's own index database. Unlimited technical support is included, as is a spot at the annual user conference.

The basic operational flow is pretty much the same as in all asset allocation applications. The first step is to perform a client risk assessment to build the risk/return constraints, then set goals with the client for long- and short-term return requirements. Having done this, the next steps are to pick possible investment vehicles and model portfolio performance.

Most of the asset allocation applications that we looked at use a modeling technique called the Markowitz mean-variance optimization approach to calculate the values along the Efficient Frontier. Zephyr has stated its intention to replace the Markowitz model in AllocationAdvisor with the Black-Litterman model, which will allow you to add your own estimates of expected return.

Installing and operating AllocationAdvisor was simple and quick. As you might expect from a high-end application, there is plenty of online help, and training is also available from Zephyr if you need to bring staff up to speed quickly.

High-end clients often want to see all of the figures and computations behind the advice. AllocationAdvisor can produce a multitude of knock-out charts, graphs and tables for those clients who want them.

Zephyr's StyleAdvisor and AllocationAdvisor are targeted and priced for the high-end financial advisor. If your practice fits this description, or if you expect it soon will, Zephyr's applications are well worth a look.

Ted Needleman, a former editor of Accounting Technology, is a consultant and freelance writer based in Stony Point, N.Y.

Vendor Information



Fremont, Calif.

(510) 742-4220


Pricing: AdvisorVision (Comprehensive Planning Edition) - $1500 annually,
$150/month;  AdvisorVision (Investment Planning Edition) - $500 annually, $50/month

Cheshire Wealth Manager

Cheshire Software Inc.

Newton Highlands, Mass.

(800) 734-6734


Pricing: $900 per year. Optional security info service - $170 per year.

Total Planning Suite

Money Tree Software

Corvallis, Ore.

(877) 421-9815


Pricing: $2,000. Planning modules separate.

Morningstar Principia

Asset Allocation



(866) 705-5551


Pricing: $995, plus one or more optional databases at $675-$1,220.


SunGard Expert Solutions

Irvine, Calif.

(949) 743-6363


Pricing: Single-user initial license - $495.

Zephyr AllocationAdvisor

Zephyr Associates Inc.

Zephyr Cove, Nev.

(775) 588-0654


Pricing: Single user - starts at $5,000.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access