The term "basic analysis" has evolved in recent years. Where once it referred to the ability to determine a client's financial position, net worth, goals and willingness to take risks with a portfolio, more recent definitions have focused more intensely on the process of asset allocation, re-allocation and portfolio balancing.
This is a problem for many financial planners, because the typical client may not be heavily invested in stock, bonds and mutual funds, particularly in the current economic environment and its highly volatile markets. A narrow definition precludes the possibility that the client may, in a tough jobs environment, be wholly vested in the stock of the single company they work for, or that the client may be tied to an IRA or 401(k) that does not permit easy manipulation of the portfolio.
So the current definition of basic analysis must provide for management of all of the possible asset allocations and balancing. This reduces the possibility for manipulation and management of the portfolio to achieve the highest possible returns, focusing instead on giving the client the most realistic view of how the asset will be drawn down and what its effective rate of return will be under a variety of scenarios.
The 2010 review of basic analysis software includes packages at each end of the spectrum, as well as a number that have made the move to Web-based, rather than desktop-based, systems. In all, we reviewed seven software/ASP packages worth considering.
Morningstar Office Morningstar Inc.
Morningstar Office is a Web-based practice and portfolio management system for independent financial advisors.
Previously known as Morningstar Advisor Workstation Office Edition, Morningstar Office features the most current Morningstar research and data on more than 325,000 securities. The platform also includes sophisticated investment planning tools, complete portfolio accounting and performance reporting capabilities, practice and client management tools, e-mail and calendar functions, batch reporting, a client Web portal, and Securities and Exchange Commission document archiving. In addition, advisors can manage client data with Morningstar Back Office Services, an optional offering that allows them to focus on building their businesses, leaving the daily import and reconciliation chores to Morningstar.
This updated version of Advisor Workstation Office Edition provides an effective shell around the Morningstar basic analysis capabilities in Principia - a powerful resource designed to help advisors conduct fundamental, in-depth research on seven different types of investments - stocks, mutual funds, variable annuity/life sub-accounts, exchange-traded funds, closed-end funds, separately managed accounts and defined-contribution plans.
Its status as an online application eliminates one of the major headaches of offline basic analysis - the need to constantly revise and update performance data. In Morningstar Office, data is updated as soon as it becomes available - daily, monthly and quarterly - and includes performance details, underlying holdings information, and Morningstar Rating and Morningstar Style Box statistics. This allows financial planners and wealth managers to screen and rank the best investments for a specific client or create model portfolios for multiple clients.
A "Hypotheticals Tool" can be used to illustrate how recommended portfolios would have performed historically. Client reports include the ability to print to a PDF file for document management or electronic transmission.
For larger and more diversified organizations, the Advisor Workstation Enterprise Edition of the Advisor Workstation provides a modular, customized configuration that also features the most current Morningstar research data, sophisticated planning tools, complete portfolio accounting, client management tools, e-mail and calendar functions, batch reporting, archiving and more.
Morningstar is a substantial force in the markets for basic analysis, and has demonstrated a commitment to expansion from data gathering and analysis tools to a richer, more flexible and scalable set of practice tools suitable for both large firms and the sole practitioner.
NaviPlan Standard and Extended
Emerging Information Systems (USA) Inc.
NaviPlan Standard and Extended offer a goal-based planning system that includes effective tools for basic analysis. Both feature three levels of complexity, and are available in both offline (PC-based) and online versions (NaviPlan Central).
Aimed at the sole practitioner, NaviPlan nonetheless provides the tools for basic analysis, including asset allocation (user-defined or Ibbotson), stock option modeling (ISO and NSO), and Monte Carlo simulations for analysis. User-defined asset allocations allow the planner to create model portfolios and asset classes, as well as setting the corresponding return rates for each.
The Ibbotson Associates component embedded in NaviPlan is used to produce other portfolio recommendations, based on a risk tolerance questionnaire and scoring model, model portfolios matched to each of five risk levels, evaluation of a current or proposed portfolio, and a mean variance optimizer to compare an optimal asset mix with the client's current mix.
The Extended version is a more detailed cash-flow tool with a sophisticated tax engine, with updates for current tax tables and inflation values. It provides a more comprehensive treatment of incomes, expenses, assets and liabilities, stock options, and taxes, and is an excellent package for practices that need more extensive capabilities.
NaviPlan remains the most flexible of the basic analysis packages, incorporating the simplicity of the Financial Assessment in NaviPlan Standard with more extensive stock option modeling and goal-setting. This flexibility and a commitment to better usability make it a standout among basic analysis products in an economical but very effective package.
NumberCruncher/Financial Analyzer II
Leimberg & LeClair Inc.
NumberCruncher and Financial Analyzer II are simple but effective financial planning tools that include several directed to basic analysis.
NumberCruncher couples numbers, graphics, and client-ready explanatory text for applications that include a Life Settlement Number Cruncher, DeCoupleCruncher for clients that have decoupled holdings in one or more states, an Estate Planning QuickView, a Retirement Plan Analyzer and the Financial Analyzer II. NumberCruncher itself handles more than 100 computations - from 16 of the most common financial analysis ratios, to computation of QPRTs, GRATs, charitable remainder and lead trusts, and private annuities - in a fast and straightforward package that uses familiar columnar calculations.
Included in its analysis tools are those that compute four key numbers used in evaluating common stock investments; five key figures that are useful in analyzing bond investments; a computation of the compound annual rate of return on an investment; tracking of the life of an investment over 45 years; and a comparison of two investments with respect to gain or loss, total return and holding period return.
Financial Analyzer manages over 75 different financial planning computations to solve clients' mortgage, investment, financial, loan and depreciation problems. Like NumberCruncher, it is a fast and simple Windows application that allows results to be integrated into documents or presentation materials. Also of note is the Retirement Plan Analyzer, which evaluates pension and profit-sharing distribution strategies, computing an almost unlimited number of alternatives under methods such as discretionary or attained age. It includes minimum distribution rules, has been updated with the most current tax tables, and prints comparative graphs of the generated data.
These applications are not full-fledged basic analysis systems, but they do provide an economical and easy-to-use method of handling the widest possible range of basic analytical tasks. They remain attractive in their simplicity, effective results and appeal to sole professionals or small offices.
Profiles Professional EISI Inc.
Profiles Professional is a comprehensive and cash-flow-driven financial planning solution with 14 modules for analysis, financial planning, estate planning and sales support for the professional. It covers a wide range of financial planning topics, with substantial emphasis on retirement considerations such as retirement fund acquisition and disbursement, asset allocation planning, disability, long-term care and death. It is offered in three formats - a desktop version, the Web-based Profiles On Demand, and a hybrid Universal Desktop Application format that augments the desktop with some online capabilities.
In the most current version, the focus is on enhanced scenario presentation, as well as on streamlined client data entry and management; changes to the left-side navigation system; and a Retirement Asset Results Timeline to track contributions, withdrawals, growth and account balance over the life of the plan.
In terms of basic analysis, the core functionality in Profiles Professional is found in the included Ibbotson asset allocation module; and in the portfolio analysis, portfolio allocation, portfolio re-allocation and portfolio rebalancing systems. In addition, enterprise-level firms have access to the Morningstar Advisor Workstation Enterprise Edition, with access to rich contextual data regarding stocks, bonds and mutual funds, as well as substantial practice management tools. And there are additional modules that include the Ibbotson Security Classifier, a database of over 30,000 mutual funds, individual securities and variable annuities that may be used to classify a client's current holdings into multiple asset classes for portfolio analysis.
Profiles Professional is a flexible package with strong financial planning capabilities and a simple, but effective, set of basic analysis tools. Planners dealing with portfolios that are not stock- and fund-intensive will find everything they need in this package, though more extensive portfolio operations may require it to be augmented by an external research and analysis package.
Retirement Plan Analyzer
(800) 879-6665 ext. 115
Retirement Plan Analyzer is another tool that provides support for a slightly different form of basic analysis - the ability to analyze specified pension and Roth IRA programs as part of a comprehensive basic analysis.
It is one of an array of such tools from Brentmark Software that also includes Estate Planning Tools, Retirement Distributions Planner, Kugler Estate Analyzer, Charitable Financial Planner, RetireNow, Estate Planning QuickView and the Savings Bond Toolkit.
Retirement Plan Analyzer is used to evaluate various strategies of taking distributions from traditional IRAs, Roth IRAs, Roth 401(k)s and other qualified retirement plans. It calculates up to four alternatives simultaneously for varying types of distributions, and handles the intricate analyses required for effective retirement planning, estate planning, income tax planning, Roth IRA management and modeling/reporting.
The 2009 update to the Retirement Plan Analyzer added support for Roth 401(k)s; updated the tax calculations; added the State Death Tax Manager to handle state inheritance and estate taxes for all 50 states; redesigned insurance handling to include single life policies; handling of nondeductible contributions to retirement plans; the ability to include up to 10 non-spousal beneficiaries; and an updated user interface and navigation system. The program also handles additional contributions to retirement accounts, distributions to pay expenses (subject to minimum distribution rules), insurance premiums and proceeds (single life and second-to-die insurance), and pre-59-½ distributions that avoid the 10 percent penalty.
The Retirement Plan Analyzer deftly addresses a critical factor in estate planning with analytical capabilities generally reserved for more complex and more costly software solutions. Though not directly associated with portfolio basic analysis, it nonetheless handles a more difficult task in analyzing pension plans and Roth IRAs within the context of a balanced portfolio, and for this reason alone deserves a place in the workflow of financial planners.
StockOpter Pro Net Worth Strategies Inc.
StockOpter Pro is a specialized analysis tool aimed at providing insights and analysis for the participants of employee equity compensation programs. Though more than 10 million employees hold employee stock options, there are surprisingly few tools that assist in integrating company stock and options into the overall financial plan - much less provide the tools needed to analyze, model and diversify these assets appropriately.
StockOpter Pro is built on the Microsoft Excel platform, but with specialized toolbars and functions that enable advisors to compare the resulting taxes and cash flow of various diversification strategies and then optimize the appropriate strategy for efficiency.
Though aimed at the broader application of stock option planning - maximizing terminal wealth and optimizing the subsequent after-tax cash flows, the strength of StockOpter Pro is in its analytical capabilities to reduce the risk of concentration in one or a limited handful of stocks.
It does this by contrasting the value of the company stock and options to the value of an investment account over a 15-year or shorter horizon, then enabling what-if scenarios to determine how these assets will perform against different strategies and stock price assumptions. The application enables equities from more than one corporation to be modeled, helping to manage the diversified careers of today's highest-level executives.
Though priced above most Excel-based applications, StockOpter Pro offers substantial value because of its unique focus and its strong modeling capabilities. It provides an effective replacement for advisor-built spreadsheets for stock option planning, because the input and strategy wizards save time, increase productivity and eliminate calculation errors. While it differs from traditional basic analysis programs that focus on external stock portfolios, it nonetheless serves a critical purpose for those who carry stock from their own company.
Estate Planner (formerly zCalc)
The Tax & Accounting business of Thomson Reuters (800) 331-2533
The Thomson Reuters Estate Planner is an analytical product and toolset that enhances the practitioner's ability to create, analyze and present tax and estate planning strategies. A set of spreadsheet-based models and calculators, the Estate Planner is tightly integrated with Microsoft Excel and PowerPoint, and makes use of spreadsheet functions and templates to produce reports that are easy for the client to follow.
In addition to the Estate Planner basic analysis module, the suite consists of the Function Library, templates and a presentation generator. The Function Library is an add-in to Excel that allows the advisor to perform estate, retirement, charitable, financial and tax planning calculations inside a spreadsheet. It installs over 100 custom functions that work just like Excel's built-in functions.
The templates are the same models and calculators contained in the Estate Planner but provided as regular Excel spreadsheet files/templates. These templates are unlocked and fully editable so that they can be modified and customized with the calculation power of the Function Library and the presentation power of Excel.
The presentation portion of the program includes a series of Microsoft PowerPoint slide shows covering a variety of estate and charitable planning topics, including those strategies contained in the Estate Planner. The most recent enhancement to the Estate Planner is an advanced estate tax calculator that offers the ability to do complex federal and state estate and inheritance tax computations.
The Estate Planner Suite is an effective toolkit for estate planning, though its role as a basic analysis package in terms of stock and portfolio analysis are limited. Fast and economical, this is a planning tool that will remain invaluable to the small or sole practitioner, but may not have enough tools in stock assessment, re-assessment and portfolio balancing to meet the needs of high-net-worth and more sophisticated clients.
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