Financial planning isn't magic, but it is an art as much as it is a science. Different planning practices deal with different kinds of investment vehicles. But regardless of the vehicle, financial plans are rarely static.That's because clients' investment goals and resources change over time. What was right for last year's goals may not be right today, and will almost certainly change tomorrow.

In many planning practices, this provides continuity in a client relationship. Clients who are savvy enough to appreciate the benefits that financial planning offers are also usually savvy enough to appreciate a periodic review of their portfolio and investment strategy.

This strategy review allows the client-planner team to determine how the current portfolio is performing compared to the client's stated goals and targets, as well as analyze whether these goals and targets need to be re-evaluated. Many times, a client becomes more risk-averse as they near retirement, and this also has to be factored into the investment strategy.

Of course, retirement is only one possible planning goal. Clients frequently want to plan for other events, such as funding children's education or accumulating money for a major purchase. Some of these goals are long-term, others are more short-term. Some goals require maximizing capital, while others may require concentrating on income production.

An integral part of the planning process is helping the client to decide where to allocate their investment resources to best reach their stated goals and targets. This task, called asset allocation, is far from easy. There are thousands of different (and similar) investment vehicles, such as stocks, bonds, funds and annuities, and each carries its own risk, investment advantage and performance variability.

There are several research services, such as MorningStar, that publish performance histories on selected investment vehicles, which is a big help when you are trying to pick vehicles that fit the client's needs. Asset allocation software, either as a stand-alone application or as part of a more comprehensive financial planning system, is also a great help.

Keep in mind that unlike some applications, there is no "standard" asset allocation set of features and functions. Depending on who the intended user of the planning tool is, there may be more or less sophisticated and complete database resources or computation and modeling capabilities.

Capabilities and features, as well as prices, also vary between tools designed to be used by large asset management entities, such as banks or investment firms, or for small to midsized financial practices.

In choosing an asset allocation application, there are several things to keep in mind. One is that these applications are usually modular, and often are part of a more comprehensive financial planning system. A second is that if you subscribe to a research service, such as Morningstar, you'll want to make sure that the asset allocation product that you buy will integrate with the research services that you already subscribe to or know how to use.

Finally, while you don't have to be a financial wiz, you will make a better decision if you have a basic grasp of the modeling methods being used by an asset allocation system. These include the Efficient Frontier Model, and the principles of Monte Carlo simulation.


Asset allocation tools are available from entry level to those reserved for large investment firms and banks. Price and complexity are two of the factors that determine this. At the entry level, two popular products are Cheshire Software's Wealth Manager and Moneytree Software's Total Planning System.

The Cheshire Wealth Manager is a new product, and replaces the modular Financial Planning System. This affordable application ($900 per-year license fee) provides the ability to use Monte Carlo simulation to forecast performance, and will be suitable for many smaller planning practices that have clients with a limited number of assets to be managed.

For those planners on a limited budget but who need the ability to connect to and use other applications, such as Act! and research services such as Albridge and the Schwab Portfolio Center, Moneytree Software's Total Planning System is a good bet. It has three components - Easy Money, Golden Years and Strategic Solutions - for different planning goals, and Easy Money and Golden Years can perform asset allocation and Monte Carlo forecasting. With a first-year license fee of $1,495, the Total Financial Planning System is also within the financial means of many smaller practices.


There's actually a pretty large jump, both in price and capabilities, from the entry-level tools to the next level of offerings. In fact, with tools targeted toward a midsized or larger financial planning practice with large portfolios to advise on, most products are priced by the user and by quotation from the vendor. With subscriptions to several of the popular research databases, some of these products can easily run $2,000 or as much as $10,000 or more per user per year. Still, if your practice has the kind of clients who require this type of capability, and are willing to pay for it, the cost is well worth it.

If you are looking for an application that can scale up as your practice does, AdvisorVision from AdviceAmerica is worth taking a look at. AdviceAmerica offers this application, targeted toward financial planners; LifeVision, a similar tool for clients to use by themselves; and Retirement Income Edition, as part of its WealthVision system. It has a number of modules for different planning goals, including Net Worth, Retirement, Education, Life Insurance, Accumulation, Emergency Fund, Estate Planning, and Debt Management. You can add or delete modules as your clients' needs change, so you aren't paying for more capability than you actually need. The same scalability is true with research database subscriptions.

Larger practices and financial institutions may run AdvisorVision in-house, but small and midsized practices will appreciate the availability of the application as a Web-based Software-as-a-Service offering. This also makes it easy to run AdvisorVision from multiple locations, including client sites.

Two additional asset allocation applications are targeted at large planning practices with complex client-allocation scenarios. Zephyr AllocationAdvisor is available as a stand-alone tool or as part of the powerful StyleAdvisor system. Both the full planning system and AllocationAdvisor include subscriptions to Zephyr's own comprehensive index database, as well as Morningstar's mutual fund database. Subscriptions to other databases are available for an additional cost.

While most allocation tools use the Markowitz Mean-Variance Optimization Approach, AllocationAdvisor uses the Black-Litterman Model for calculating expected return. Black-Litterman allows you to add your own estimates of expected return into the model.

Finally, if your practice is aligned with a major bank or brokerage house, you may have access to Sungard's PlanningStation. As with AdviceAmerica's AdvisorVision, PlanningStation is Web-based and modular. The Allocation Master module is the one that actually provides the tools necessary to create an investment mix. This application uses the familiar Efficient Frontier Model, and provides Monte Carlo simulation to aid in forecasting returns. PlanningStation is oriented more towards "wealth managers" than financial planners, but if you can gain access to the tools, you will find them an excellent adjunct to your practice.

Regardless of the particular tool that you choose, having an asset allocation application in your planning toolkit will save you time and help you do a better job for your clients.

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




Fremont, Calif.

(510) 824-3777

Cheshire Wealth Manager

Cheshire Software Inc.

Newton Highlands, Mass.

(800) 734-6734

Total Planning System

Money Tree Software

Corvallis, Ore.

(877) 421-9815

Asset Allocation Module for Principia



(877) 586-5405

Planning Station

SunGard Online Investment Systems

Salt Lake City

(801) 955-3147

Zephyr AllocationAdvisor 6.2

Zephyr Associates Inc.

Zephyr Cove, Nev.

(775) 588-0654

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