by Steven Levey
Financial planners encounter many different questions in their day-to-day operations, and are looking for tools that can help with the start of a practice, compliance with regulations, ways to communicate information, and overall practice management.
Do I register? How do I get licensed? What licenses do I need? Then there are questions from clients on retirement, estate planning, marriage and divorce.
Below are some stand-alone products that can help both new and seasoned practitioners in their operations.
Split-Up v. 5.01
The two founders of Split-Up.com Inc. were partners in the company that developed TaxCut. There are four products for financial professionals, including Split-Up Professional Pension Evaluator, Professional Edition, Professional Deluxe Edition, and Office Pack.
Pension Evaluator is designed to estimate what a defined-benefit pension plan is worth. Calculations include estimation of the monthly benefit based upon company statistics. Features include what-if scenarios for salary increases, early or late retirement ages, and changes in interest rates. Professional Edition includes a suite of four products: Financial Advisor Professional Edition, Divorce Calculators, Child Support Guideline Calculators, and Arrears Calculators. The Professional Deluxe Edition combines the two prior products, Pension Evaluator and Professional Edition, at a savings. The Office Pack includes everything in the Professional Deluxe Edition, plus CD software to distribute to clients and an enhanced listing on the Split-Up Professional Directory.
Vendor InformationSplit-Up v. 5.01
Text Library System v. 2.12.11
J&L Retirement & Financial Software Professional
The program has tabs for start, clients, info, advisor, calculator, support, pensions, and arrears. The start tab reveals instructions for the other tabs. The client tab allows the professional to access an existing client or create a new one. Info allows the planner to input client name, address, date of birth, and date of marriage, among other vital statistics.Clicking on the advisor tab provides input for goals & assumptions, children, wages & assumptions, living expenses, goals, homes, investments, debts, cars, furniture, IRA, 401(k), pension, Social Security, life insurance, tax filing status, and results. Results shows graphs and tables for gross income, annual expenses, annual taxes, income taxes after five to 20 years, income after expenses, gross cumulative expenses, marital assets, division of marital assets, separate assets by category, and built-in gain.
The calculator section includes income & tax, property division, alimony division, sale of home, and alimony recapture. The income & tax category allows the planner to enter income on a cash flow or income tax basis. A continue button on the bottom of the screen produces a report to show the income and taxes associated with each party.
The property division worksheet uses total, husband, and wife columns. Enter the data in total, then an amount for either husband or wife, and the program calculates the difference. The report generated indicates the percentage of change and amount necessary to affect desired changes.
The alimony buyout is an alimony vs. property settlement calculator. Data required include the husband’s and wife’s highest federal and state tax bracket, paying in a lump sum, or monthly. Answers will appear to questions such as making a single payment in lieu of a series of payments, or if the wife receives monthly alimony for ten years, if it is better, tax-wise, to label it child support.
The sale of home area addresses the timing, costs, and division of sale proceeds. A most interesting tab is the last one for alimony recapture. Tax authorities look for alimony disguised as property settlements after the third year into an agreement. The exposure can actually be calculated and identified using this section.
There are customized support calculators for California, New York, Massachusetts, Pennsylvania and Florida. Pensions can be calculated for split-up using either the GATT or PBGC methods.
A final feature of the Office Pack is a listing on www.divorcesoftware.com as a service provider in a number of categories, such as attorney, mediator, accountant, forensic accountant, financial planner or psychologist. A potential customer can locate a professional according to category, state, county and zip code.
Most planners could use a tax projection planner and develop their own spreadsheets to create divorce models. The obvious trade off is the time and effort involved, against the cost of the program.
Investment Scenario Generator
Brentmark Software continues to introduce new personal financial planning programs. Investment Scenario Generator calculates the optimum balance between fixed-rate investments for income and investments in stocks for growth.
ISG claims to have a unique, mathematically precise and individualized approach to retirement planning. Instead of allocating solely on investor risk tolerance, the actual income required is factored in on a short- and long-term basis. Using the program allows the planner to allocate investments to create an optimal balance between interest-bearing obligations and equities.
Other features allow development of a wealth accumulation plan, analysis of mortgages, preparation of income schedules, inculcation adjustments, and benchmarking. The program also directs the user to the Web site of the author, www.isgplanning.com, for further discussion on the methodology.
Input of data is straightforward, starting with beginning capital, annual income, payment period, scenario years, inflation rate, and minimum cash/IBOs. If any of these areas are unknown, such as beginning capital, the program will solve for the one unknown.
There are checkboxes for using custom income, using wealth accumulation, using dividend inflation, and using multiple allocations. There are also toggle buttons for allocating investments, calculating annual income, calculating beginning capital, and estimating cash/IBO returns, as well as a wealth accumulation schedule, and multiple allocations.
Calculating annual income reveals the maximum annual income available from the scenario and the option to have it preserve or consume capital. Estimating cash/IBO returns simulates a laddered-bond portfolio with input for the period desired. The custom
income and wealth accumulation schedules allow for input by year, including indexed amounts. An additional feature is "fill," which can enter amounts for cash/IBOs, stocks, or other investments. Multiple allocations are easily handled by adding the year in which the change will take place.
Well-marked headers are placed at the middle of the screen that show cash/IBOs, blue chip stocks, growth stocks, total capital, effective growth, and desired yearly income. There is also an indicator that shows calculated ending capital or an indicator that cash/IBOs have dropped below the entered minimum. Change any of these variables and a recalculate button pops up. By pushing the allocate investments button, the planner is allowed to allocate to the nearest 1, 2, 3, 4 or 5 percent. Two color graphs are available, including investment scenario and investment allocation. Eight reports are easy to compile and print along with the graphs. The program comes with a well-illustrated 178-page instruction book.
Text Library System
Financial Planning Consultants Inc.
Text Library System was first introduced in 1983 as a tool to organize articles and letters for financial planners.
It is now a client relationship program with over 750 techniques and 5,000 pages of text. Imagine being able to have 276 letters for correspondence with prospects, clients and businesses. You also get the ability to edit these letters, tailoring them to your own preferences and style, and the ability to add your original correspondence so that it is easily indexed for retrieval.
Outside vendors and third parties can also receive any of 80 service letters to help support the client’s financial affairs and accelerate plan implementation. There are also 38 easy-to-edit agendas for individual clients, prospects, business owners and group presentations, with pre-formatted notes. The planner can also access over 1,000 articles on financial subjects arranged in 19 menus.
The program has colored tabs for checklists, objectives, attitudes, assumptions, letters, service letters, articles, agendas, notes, and practice management. A click on the checklists tab reveals 20 tabs ranging from insurance topics to employee benefits. A further click on employee benefits shows 30 letters available, from "use appreciated stock" to "exercise options" to "consider changing your flexible benefits election." After making a selection, such as "file claim" for filing a claim for medical benefits, a document immediately pops up. The document can then be filled in on computer or printed out and filled in by hand.
Similar results are possible from the objectives, assumptions, and attitudes tabs, which allow the planner to assemble the client’s significant personal objectives, and prepare a summary of the critical assumptions and investment attitudes to be used in preparing the client’s plan.
The master implementation tab has 750 personal financial planning techniques. The practice management and due diligence tabs have a critical tool to increase the frequency of client communications and document them for professional liability protection.
There are also client management modules available for purchase, including ones for synchronization with Outlook, marketing, estate planning, compliance, seminar marketing, business records, business planning and e-mail marketing. Countless hours can be saved by the documents that can be generated, which are easily customizable.
WealthWhen is an Excel 2000- or 2002-based retirement program that lets the planner build and create alternate scenarios from inputting assets & liabilities, income & expenses, income tax data, retirement plans, stock plans, and investments. WealthWhen employs a multi-dimensional financial analysis engine with an intuitive, easy-to-use interface with a detailed help system.
Once there is a base case and any number of variations as scenarios, the reports & charts section can be used to detail any scenario or compare all of your scenarios to one another. WealthWhen uses a few basic conventions throughout the user interface to help indicate where values originate. All WealthWhen values are either entered by you, or projected by WealthWhen’s long-term model. The program reveals the words "from model" or "user-supplied" so the planner knows the source of the data.
As it is constantly updating as data is entered, WealthWhen can project input boxes that have not yet been filled in. For example, after you enter in your sources of income from 2002, WealthWhen will automatically project your sources of income for years 2003 and forward. Any projected value can be overwritten at the discretion of the planner. There is a scenario editor to create up to six variations of the base financial plan, which allows "what ifs" relating to future income, rates of return, economic conditions, real estate decisions, and much more for each year through the next 25 years. Scenarios can be removed from the display by unchecking the boxes at the top of the screen.
WealthWhen is structured with some basic financial planning areas of assets & liabilities, income & expenses, retirement options, and stock options, including rating the probability of the stock soaring or crashing.
The net worth chart is one of the most important features, as it allows a comparison to various scenarios to determine the best strategy. This chart shows net worth for every year in the model, for every scenario. The program also has the ability to quantify carryforwards such as net operating loss and alternative minimum tax.
When the icon is clicked, an Excel template appears briefly, asking about enabling macros. Once authorized, a screen appears with a logical flow chart showing tabs for assets & liabilities, income & expenses, investments, stock plans, retirement plans, income taxes, scenarios, and finally reports & charts. Click on the assets & liabilities, and tabs for start here, input for rates of return on assets/inflation, real estate, and other assets appear.
A similar result is found when selecting income & expenses, allowing input for wages, business income, rent and even non-taxable income. Other details can be referenced to actual forms from the tax return, and are recalculated when the recalculate button is pressed.
The retirement plan section allows for input of 401(k), IRAs, and SEPs, as well as distributions and Social Security. Up to six scenarios can be presented, including variations on interest/inflation rates, wage changes, sales of stock options, and allocations of expenses. Pushing a summary button puts all selected scenarios into a matrix for easy comparison.
Annual balance sheets, income & expenses reports, stock transactions, and tax reports are easily generated and can be changed for up to 25 years. Graphs include net worth, inflation-adjusted net worth, assets & liabilities, income/expense breakdown, and value of carryforwards.
J&L Retirement & Financial Software Professional
Imagine a $59.95 retirement and financial planning software program that also has calculators for mortgages, refinance analysis, accelerated mortgage payments, inflation, trade-off analysis, required minimum distributions and credit card payoffs -- then add Monte Carlo simulation, ability to import or export tab- or comma-delimited files, and a 64-page PDF instruction manual.
The program is organized with quick tips, as well as clear instructions for events such as withdrawals, deposits, mortgages, credit cards, transfers, and retirement. The Financial Planner is designed to create a financial plan comprised of financial events that take place during the client’s life. It was created to give a "broad brush" overview of your financial future based on actual and proposed financial plans.
It is easy to create a plan by creating accounts that represent current investments, assets, equity and the return rates, and filling out an initial values form, containing the client age at which the plan starts and the client age at which the plan ends (death or retirement). Income tax rates are also entered along with inflation statistics.
A financial scenario consisting of money-related events is applied to the scenario at the event’s start age and continues until the event’s end age. These events represent a deposit to, or a withdrawal from, an account. There is an event available that allows you to change the fundamental rates with which the scenario is calculated. The scenario is run to see how accounts are affected by the events.
Initial significant assumptions by the planner include investment savings, tax-free savings, retirement savings, and assets, not part of the plan liquidation, plus equity and the related outstanding mortgage. The next assumption consists of events that affect the client’s money that are triggered by their age. Another assumption is when an event requires money to be withdrawn from client accounts.
When the program is started, header tabs appear for summary, accounts, scenario, results, net worth, and incoming/outgoing, and then under the Monte Carlo heading various accounts as selected by the planner. Click on accounts, and savings accounts and investments appear. Double click on any of these accounts and then double click on any account and input for account name, initial amount, effective yearly rate, random minimum and maximum rates, annualized standard deviation, access order, account type, assign group, early withdrawals, assign minimum required distributions, and assign asset allocation.
The scenario tab gives a chronological listing from the starting age for inflation, investment rates, and any other changes desired until death. Results show the client age, type of investment, tax-free investments, retirement assets, equity, liabilities, and final net worth per year.
A feature at the bottom of the screen allows you to edit initial values and run them again if you do not like the results. Selecting net worth, incoming/outgoing, and groups presents line graphs. A bonus feature is the Monte Carlo analysis, which can perform up to 200 iterations based upon input from the planner. The planner can also select from over seven reports, including comparisons of various results and scenarios.
Whether you are a new financial advisor, a registered investment adviser, a broker/dealer, syndicator, or a veteran investment professional, compliance with Securities and Exchange Commission rules and registration can be daunting and intimidating even if you feel you have your act together. Nancy Lininger describes herself as a consultant to the financial services industry, and she also assists financial planners as a guide through governmental regulations and a developer of marketing plans.
Lininger has produced a set of tools on a disk with 11 Word templates. As basic and perfunctory as these documents may appear, they are not calculators or fancy presentation reports. Instead, they are crucial documents that every advisor should have in place.
The first document is a new account form that has input for the advisor, including name,
account type, marital and employment status, investment objectives, risk tolerance, and financial data. Once the net worth, inclusive and exclusive of home furnishings, is listed, there is a space for the client to sign (certify) and date the form. This is the first start of a clear written communication with the client.
The next document is an investment policy statement, perhaps the most crucial document to create between an advisor and a client. An IPS establishes an understanding between the client and the advisor and includes a statement of objectives, time period, target rate of return, and risk tolerance. Objectives can include aggressive growth, growth, income, tax-deferred income, or capital preservation. Time period describes the number of years, the use of the funds (college, retirement, wealth transfer), special liquidity needs, and how often the planner will report to the client. Risk tolerance has the clients rate themselves high, medium or low.
Also included are the losses relative to indices and losses related to the portfolio as a whole. The target mix of securities as well as the client opinion of initial public offerings and thinly traded securities is listed. Finally, the authority delegated to the advisor is listed. The client and the advisor must sign and date the form.
A daily blotter for input with all trading activity, lists of sales, cash and certificates, number of shares, and when and how sent, and trading confirmations, among other data, helps the advisor track and document daily activities. Other logs include a client holding record and a product cross-reference log.
Other forms include a privacy notice document kit, a quarterly report of access person/affiliates, including personal securities transactions and family accounts. For advisors sharing fees or commissions, there is a solicitor’s agreement including compensation disclosure for the client, instructions to the advisor in the use of solicitors, acknowledgments, and sample solicitor disclosure language.
An engagement letter advisory agreement template lists services to be offered such as financial planning, consultations or asset management. Also included are trading authorization, fee/payment authorization, client responsibilities, term of engagement, compensation, conflict of interest disclosure, and arbitration terms.
A comprehensive supervisory procedures manual enables the advisor to set up procedures as required by the SEC. It is presented as a do-it-yourself document with guidelines and suggestions to tailor to the advisor’s practice. In order to stay in compliance, Lininger offers a subscription to the CompliancE-News newsletter for $25 a year. This includes quick bites of information affecting the industry in compliance, practice management and marketing.
Any advisor who has been through an SEC audit will surely appreciate all that this has to offer.
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