Two of the hardest tasks in financial advising and planning are getting clients - and then keeping them. Software can help with the first, but success in getting new clients is largely a matter of marketing expertise.Keeping your clients also is difficult. As their advisor, your clients expect you to be able to help them not only establish their financial goals, but also to achieve them. These goals are not necessarily static - they can be a mix of maximizing capital, maximizing income, offsetting income realization, or any other application of wealth and assets that the client's imagination can come up with. The strategies for accomplishing these goals are what the client is paying you to come up with.

In many cases, the client will also expect you to come with a plan to apply their assets to reach the stated goals. This is where the right software can be a tremendous help and advantage.

The process is not a simple one. Once the client's goals have been finalized for a stated period, your job really begins. You'll need to research the available asset forms that best suit the intended investment strategies, then decide how the client's assets will be allocated to the appropriate investment vehicles. Asset allocation software tools are a large part of the answer.

Danger, Will Robinson!

Unlike accounting software such as general ledger, there is no single application that you can point to as the right way to perform asset allocation. That's because the process requires both experience and judgment, and the ultimate goals can be very different for each individual engagement.

Because of this, different software vendors have taken different approaches to constructing asset allocation tools. In many cases, asset allocation is a part of a larger application encompassing other aspects of financial planning. Asset allocation can be a stand-alone module in a modular planning system, or it can be integrated into a comprehensive planning application.

With the wide variety of planning tools, including those for performing the asset allocation process, it's easier than ever to get in over your head. Many planners look at computerized planning tools as "black box" tools. Simply plug in a few figures and constraints and out pops the "answer," ready to bind with your report and hand to the client.

Truth be told, some vendors go out of their way to market their applications for just such use. Even relatively inexperienced planners can use these tools to produce impressive-looking reports and recommendations.

The problem arises in that, unless the planner understands the mathematical models that each tool is built on, as well as the other decision-altering defaults, they are not really in a position to judge how accurate the allocation recommendations are that the software produces. Yes, you can use the software and get results. But being really comfortable with those results requires that you understand the underlying process.

We're not saying that you have to be able to duplicate the results achieved by the software by using a pencil, a pad of paper and a calculator, though, ideally, you should be familiar enough with the underlying mathematical models to do so in a pinch. At a minimum, however, you should be aware of the different modeling approaches that might be employed in performing each aspect of the allocation process. This knowledge lets you provide the client with additional background, in the event that they want to know why you (and the computer) chose one particular allocation approach over another.

How we tested

We examined seven software packages that perform asset allocation. These ranged from moderately sophisticated to very sophisticated, and the prices of each of these packages reflect these capabilities. None of the packages are what we would consider entry-level, given that the process of asset allocation is a rather sophisticated undertaking.

Some of the applications we examined were more focused on a particular type of planning, such as retirement planning, while others were designed as more general purpose planning tools, and could be used in a wider variety of planning scenarios. We tested both PC-based in-house applications as well as several Internet-based solutions.

In testing each application, we used the same scenario, with a couple having a set amount of assets, including liquid and non-liquid assets, and multi-level goals and constraints for investment and income, retirement, education, and purchase goals for a house and boat. We examined each package for ease of use, appropriate computations, and the different modeling and reporting options. In no case did we get the same results from any two of the seven packages, though all applications produced suggested plans that were quite viable.

Many of the vendors cite modest hardware requirements for their applications. While in many cases you can get away with using a fairly basic PC, if you anticipate doing a lot of planning, or will be using complex models, you will be better off with a more capable hardware configuration. These days, you can purchase a powerful and fast Pentium 4 or AMD64-based PC with lots of RAM and disk storage space for well under $1,000, though a laptop with the same amount of power will cost a bit more. Most allocation algorithms employ considerable mathematical computations and reiterative routines that run much faster on more powerful PCs. Fielding a higher-end computer for these tasks can, in the long run, save you a significant amount of time.

If you anticipate having the client with you at your desk (or in their home) when performing these tasks, a high-end system is a must. You don't want to have to explain that the computer is bogged down, especially when you are charging the client big bucks for the analysis and advice.

We performed our testing on a mid-range 2.4GHz Pentium 4 system. Our test platform had 1GB of RAM, a 120GB hard disk, and a double-layer optical DVD burner for back-up. We also have broadband cable modem Internet access, and are running Gigabit Ethernet across our network. This is a configuration that should be similar to those that many of you are using.

One of these, and one of those...

Asset allocation means different things in different contexts. If you are strictly into one type of financial planning, such as retirement planning, asset allocation means how you will advise your client to spread her investments among different vehicles. More comprehensive scenarios require multi-level planning, first splitting assets between desired planning levels, such as retirement, income, education and the like, and then determining the specific types of investment vehicles in each of these planning categories.

Depending on which type of planning is most common in your firm, you will have to determine which of the products (or similar ones, which we were not able to review) will best serve your needs. On one hand, buying more capability in a software product than you need might mean going over budget. On the other hand, buying just the features and capabilities that you need right now doesn't give your practice much, if any, room to grow. As with your clients, you'll need to allocate your purchasing budget in a manner that produces immediate returns, as well as the possibility of future growth.

AdvisorVision 4.0


AdvisorVision is a brand-new Web-based planning product from AdviceAmerica. At the time we reviewed it, AdvisorVision was still in late beta testing, and is scheduled to be online and available by the time you read this review. The AdvisorVision system is modular, and you can subscribe to just those areas in which your practice has clients, or the entire system. This makes the AdvisorVision 4.0 system scalable, and equally usable by smaller and larger planning practices.

Each module is available on a left-side Windows Explorer/Microsoft Outlook-style panel. Adding additional modules to the system gives you additional choices as to the types of goals that you see on the planning menu, including net worth, retirement, education, life insurance, accumulation, emergency fund, estate planning and debt management. Portfolio rebalancing and asset allocation are also triggered with choices available on this menu. With different types of financial planning available, you can easily perform multiple levels of asset allocation, with different allocation strategies and constraints for each type of goal.

Exactly what you end up with depends on how you configure the system (and how much you are willing or able to pay for). We tested the complete system, though the data feeds from the various available investment reporting services were not implemented on our test account. With these in place, AdvisorVision is able to take your constraints and actually filter different kinds of specified investment vehicles to find those that meet the selection criteria. Of course, you have to make the actual choices from among those meeting your requirements.

As with other applications in this round-up, risk tolerance assessment is rather simplistic, and may affect the choice of securities or even security classes recommended, so you will always want to second-guess this area of any financial planning system.

AdviceAmerica has contracted with a number of well-known names in the investment strategy field to build the knowledge engine that underlies the AdvisorVision application, and will be more than happy to discuss the different investment models.

We found navigating through AdvisorVision fast and easy. The menus are arrayed logically, and wizards take you sequentially through screens during both the set-up and planning process. Reports are highly configurable, and comprehensive. They also look great - you'll be happy to give them to your clients. As with most of the higher-end applications that we tested, you can output the reports in Word format, which is editable, or in PDF format, which is not.

We were connected to AdvisorVision though a broadband cable connection, and found system response exceptionally good. At the same time, we did our testing during the beta period, so the system load may be somewhat higher when the system goes live.

AdvisorVision 4.0 is a well-designed and obviously well-thought-out planning system. Even at the entry level, which is far from low-end, the AdvisorVision system is affordable, but still has all of the bells and whistles of a top-of-the-line offering.

Retirement Income Navigator

Brentmark Software

Brentmark sells its Retirement Income Navigator as a tool for retirement planning. It most certainly does this task, and does it well. The Custom Income Needs and Dividend Features section of the excellent documentation will show you how to modify the constraints to handle cash-flow/income planning situations as well, which makes Retirement Income Navigator a more general-use tool.

Asset allocation is computed on the basis of a screen that asks if you want to "Reallocate for maximum ending capital," "Find the highest income from the investments," or "Find the lowest capital that will support the income needed." In making the computation, you can specify to the nearest percentage how the allocation should be computed. With only the trio of choices available, making multi-level allocations isn't intuitive, but it is possible, and the manual illustrates several possible multiple-level scenarios to show you how to perform this type of plan.

Retirement Income Navigator is based on the vendors' own Investment Strategy Generator model. This model is explained in detail on Brentmark's Web site, and does not embrace Monte Carlo simulation as a tool in determining asset withdrawal strategy (so you won't find this capability in the software). Data entry is very easy, and the screens on this application are large and uncluttered. Reports are useful, but they are not as comprehensive as those in many of the other applications we looked at.

Retirement Income Navigator seems to be targeted primarily for a savvy individual investor who wants to do their own planning. It lacks any real data transfer capabilities (other than manual entry or cut-and-paste) to mutual fund and securities reporting services. Still, for an accountant who is just adding a financial planning component to his practice, Retirement Income Navigator is an easy-to-use and affordable tool. Just check out the vendor's Web site and download their book first to make sure that you agree with their investment strategy model.

Cheshire Financial Planning System

Cheshire Software Inc.

As with many of the other packages included in this round-up, Cheshire's Asset Allocation Planner is a part of its larger Financial Planning System. The complete Cheshire system is priced at $1,799 for the first year, with a $750 annual maintenance fee after the first year. The complete system includes the asset allocation planner, as well as the retirement planner, education planner, net worth and cash flow planner, estate and trust planner, life and disability insurance planner, distribution planner, a Monte Carlo simulator, and the financial planning questionnaire. The allocation planner module by itself is $499 for the first year and $150 annually after that.

We tested the Financial Planning System, as the asset allocation module, by itself, is really rather basic. At the same time, if all that you want to do is input a set of securities, rates of return and specific goals, the asset allocation module may serve your needs. It allows you to define an unlimited number of asset classes, and you can cut-and-paste in historical rate of return data.

The asset allocation system uses the Efficient Frontier curve module for constructing its allocations. Monte Carlo simulation of rates and payouts is not available in the stand-alone asset allocation module, though you can add on this capability.

We found Cheshire's interface a bit simplistic compared to some of the other packages we looked at: There is simply a row of icons across the top of the window. Move the mouse over an icon, and a bubble pops up detailing which of the functions the icon launches. Click on the icon, and one of the above-listed modules is launched.

This approach makes Cheshire's Financial Planning System (and the asset allocation functions) a bit less tightly integrated than most of the other comprehensive planning systems in our round-up. Still, we did not find it particularly awkward to move between modules, and the finished product - the reports that you'll need to hand your client - is professional enough in appearance and content to not embarrass you.

The asset allocation could use Monte Carlo simulation, if you have added this feature to the system or have purchased the entire Financial Planning System. Cheshire does not appear to automatically link and download data from any of the securities research services, which can be an annoyance if your clients have extensive or widely dispersed holdings.

Ibbotson Portfolio Strategist

Ibbotson Associates Inc.

Ibbotson Associates provides the financial planner with a comprehensive set of planning solutions from which to choose. The iPlan system is Web-based, while the Portfolio Strategist, which is the software we reviewed, is an in-house, PC-based planning system. Ibbotson also offers its EnCore investment analysis system, which focuses more on the individual components of an investment and its performance.

The Portfolio Strategist, as you might guess from its name, is more targeted to helping you select a mix of investment vehicles that meet the client's desired investment goals. It consists of a set of integrated modules - Portfolio Strategist, Fund Optimizer, Security Classifier, Fund Strategist and Analyst - all of which are available as separate modules as well (except for the Fund Optimizer, which is included with the Portfolio Strategist or Analyst modules).

We found Portfolio Strategist fairly easy to use, but Ibbotson does offer formal tutorials on the system. The screens are rather busy, with tabs on both the left side of the screen and on the top. Added to this are a set of icons across the top of the screen for more system-wide operations such as saving or opening a file, printing, or even changing the colors of the tabs.

While the screen layout is a little busy, the tabs are arrayed in logical format. The tabs on the left side of the screen are global operations - client profile (and set-up), the current portfolio configuration, the client's risk profile, choices in optimizing the portfolio, constraints for sensitivity analysis, and implementation of the optimized asset mix. As you choose each side tab, the top set of tabs changes to reflect the different data screens that pertain to the global operations chosen.

Portfolio Strategist provides a high degree of financial tuning, with very different strategies available for different kinds of goals (education, retirement, income, etc.). Monte Carlo simulation is provided for making probabilistic projections, and you can easily divide the portfolio into taxable and non-taxable components for more advanced analyses. Ibbotson provides a variety of data services that are seamlessly accessed by the software, though these need to be separately subscribed to.

When you are finished with the planning, and are ready to generate a plan for the client, it can be output in either Word or PowerPoint format, a nice touch. Filters let you customize the plan contents and format, and the ability to present the plan to your client as a PowerPoint presentation with a video projector will be embraced by many planners, and possibly copied in the future by some of Ibbotson's competition.

Total Planning System

Money Tree Software

The Total Planning System that we received from Money Tree Software is their top-of-the-line product. It includes the vendor's "Easy Money" goal-based module, the "Golden Years" cash-based module, and the "Strategic Solutions" report module, which also contains the Monte Carlo simulation components.

Each of these modules is available separately, and both Easy Money and Golden Years contain asset allocation features. Chances are, unless you specialize solely in retirement planning, you will get the best use out of the integrated system rather than individual modules. When installed as a system, data is entered only once, and can be used and modified by any of the three modular components of the system.

We installed the comprehensive Total system, which takes only a few minutes. Unlike several of the other packages we tested, Total does not come with subscriptions to one or more stock or mutual fund services. Money Tree does provide a stock/fund look-up capability, but it's based on the quotes available on Yahoo, rather than hooking into Morningstar or another professional service aimed at brokers and financial planners. This may change in the near future, as the Total Planning System is a fairly new iteration and upgrade of Money Tree's earlier planning offerings. Money Tree is likely to offer several interfaces to other systems in the future.

As with all of the tools we examined, data entry is the bottleneck - there's simply no way around it, as you will have to enter the client's current holdings, personal information and investment desires. Total does ask questions to determine risk tolerance, and as with the other packages, this function is rather simplistic. Most of the packages that we examined will require you to perform some degree of second-guessing the applications' advice on what types of investment vehicles to recommend.

Because Total doesn't have the same degree of access to huge databases of stocks and funds, it allocates assets to meet planning constraints by selecting fund/stock choices by risk and return categories. As the planner, you'll have to make the choice of specific securities or funds that fit into these parameters.

Most tools of this type provide Monte Carlo simulation to project possible asset value changes over time. Total includes a Monte Carlo simulation, and the results of this computation can be applied to a current or anticipated holding and output as a report for the client's consideration. The actual asset allocation is performed on the basis of you changing goals or other parameters such as risk aversion.

Money Tree's Total Planning System is in its first generation, and is definitely a work in progress. It is, however, a capable and very affordable planning system for the smaller financial planning practice that concentrates more on the consultative end of the business.

Planning Station

SunGard Online Investment Systems

SunGard is one of the premier names in the financial planning industry, with many of the large brokerage houses using this vendor's software. The Planning Station is an online application service provider product, and supplied in modular form, so you can select (and pay for) just the capability that your practice requires. This approach also allows you to afford a higher-end financial planning product than you might if you had to purchase a whole system that contained features that you currently don't need.

The Planning Station system also has modules for planners and sales professionals, and these share a common database. This comes in handy if your practice stratifies these functions, as the planner can perform the brunt of the data entry and perform the planning analysis, and the results can be accessed by the sales personnel in the firm to make the portfolio changes.

We examined the entire Planning Station system, including the Allocation Master component. This module is based on the well-known Frontier Analytics Allocation Master desktop product, which is also available from SunGard to run as an in-house application rather than in ASP mode.

Using the ASP version of Allocation Master proved easy. A left-hand pane provides the various options available, and on-line help in a right-hand pane explains what kind of input or action is expected in a particular window. Wizards step you through the process, from entering personal and investment data, through making decisions on risk tolerance, and multiple goals.

The Planning Station is a multi-level planning tool, and you can set several concurrent goals, including large purchase, education, income and retirement. The system uses the Efficient Frontier model to suggest an asset mix, which, of course, you can modify. Monte Carlo simulation can be used to give probable performance scenarios, and comprehensive reports with easy-to-understand graphic are simple to produce. A nine-page client questionnaire is available, and it's an easy way to have your clients organize their data for the initial interview and data entry.

Considering how complete Planning Station is, we found it remarkably easy to use. Different pricing plans are available that depend upon what modules you require and what data services you wish to subscribe to.

Zephyr StyleAdvisor

Zephyr Associates Inc.

At an annual fee of $18,000 per year, with no discount for renewals, StyleAdvisor is the most expensive planning product in this round-up. That fee includes a license for StyleAdvisor, which is a comprehensive planning system, and AllocationAdvisor, a subsystem that permits you to generate asset allocation scenarios and reports. Also included in the above annual fee are subscriptions to the Zephyr Index Database, which contains more than 10,000 indices and is updated monthly, and to the Morningstar Mutual Fund database, which is also updated monthly.

A large number of other data and research services are also available for annual subscribers. Obviously, with this price structure, StyleAdvisor is targeted for financial institutions, midsized to large brokers, and larger financial planning practices.

The StyleAdvisor application can be used for analysis of funds or their managers. The AllocationAdvisor uses these style analyses and the mean-variance optimization technique developed by Harry Markowitz, a Nobel Laureate, to create Efficient Frontier portfolios. You can use a variety of statistical methods, including Monte Carlo simulation, to perform projections on these portfolios for possible future growth and returns. In the works for the next release of StyleAdvisor is an additional allocation module based on the Black-Litterman model.

Considering the degree of sophistication, we found StyleAdvisor very easy to use. The AllocationAdvisor, in particular, uses clear, uncluttered screens that are very intuitive. A comprehensive pick list of the available funds and securities information from the services you subscribe to lets you build a database of current asset holdings in minutes. You can get the current prices at any time by just clicking on a sync tab.

We found that the reports generated by AllocationAdvisor and StyleAdvisor require a bit more sophistication on the part of the investor. This is not a system meant for the unsophisticated, either on the user side or the client side.

Smaller practices without a large number of clients who are willing to pay fairly hefty fees will find it difficult to justify the yearly cost of Zephyr's StyleAdvisor. Those practices that can afford the application, however, are precisely the ones that will get the greatest benefit from it.

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