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Financial Planning's Future

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Financial planning software programs are better than ever, there are more of them, and the landscape of this key technology area is changing. The industry leader, NaviPlan, has undergone a major facelift and simplified its software. Upstart MoneyGuidePro, a Web-based application, has stepped up the competitive pressure with its innovative approach. Meanwhile, traditional competitors like Financial Profiles remain very much in the running.

Yet when it comes to financial planning software, the one thing that has not changed and remains a challenge for these software companies is the market itself: Independent financial advisors continue to have such different approaches and want so many different things. While one advisor may say MoneyTree is imprecise and not comprehensive enough, another may like it because he believes minutely detailed cash flow projections stretching 20 years out are folly. While one advisor may see a Web-based application as a shackle holding his firm prisoner to a technology provider, another sees Web-based applications as liberating.

What seems clear after tours over the past six months of numerous planning programs–including eMoney Advisor, Financeware, Financial Profiles+ Professional, MoneyGuidePro, Money Tree, NaviPlan Extended–is that the independent advisors being targeted by planning software vendors are segmented into two distinct markets. There are a couple of thousand sophisticated planning firms that mostly do business under an RIA, and then there are many thousands of less-sophisticated advisory firms that are usually run by registered representatives of a broker/dealer.

The sophisticated planning firms–those with a CFP or multiple CFPs and other credentialed staffers that create rigorous in-depth plans and update them annually–tend to be different from one another. Yes, all of these firms are investment advisors doing planning. With respect to planning, however, some want goals-based plans, while others want cash-flow oriented plans. Some want detailed tax projections, while others do not get mired in those details. Some demand a stock option analysis tool that is integrated into their software, while others will only be satisfied with a dedicated stock option planning software package that is powerful enough to advise top corporate executives. Some want to model an estate’s cash flows, while others don’t need such precision or leave estate planning entirely to attorneys.

In addition, sophisticated planners often are uncompromising about the tools they wish to use, preferring two, three, or even four applications for planning. They use one program just for tax planning, another for investment analytics, and yet another just for Monte Carlo simulations, all in addition to a traditional planning program. Using just one application that won’t yield the reports exactly the way they want but that can get the job done quickly is simply not an option.

The Fussy Planners

The idiosyncratic nature of sophisticated planners is good for smaller software vendors. Fussy planning shops keep these vendors profitable. It also promotes competition among the vendors.

Since sophisticated independent advisory firms are so opinionated and their business processes are so diverse, it’s impossible for any single program to completely dominate the market. As a result, EISI NaviPlan and Financial Profiles, which respectively have 230 and 75 employees, must compete with much smaller shops like Money Tree and MoneyGuidePro, which respectively have 14 and 21 employees.

Keep in mind that the financial planning software field is still in its infancy. A majority of the less-sophisticated part of the independent advisor market, the independent registered representatives, don’t regularly use planning software. Based on my own informal polls when I speak at trade conferences, it’s pretty clear that most independent registered representatives do not use financial planning software. According to a large broker/dealer that I checked with and that wishes to remain unnamed, only about 40% of its reps currently use planning software. The number of reps using planning software on a majority of clients is, of course, much lower.

Most reps are focused on investing and selling because it’s hard to get paid for doing financial planning. Basically, financial planning is a professional service that clients ideally pay for by the hour or by retainer. Not many advisory firms charge a separate financial planning fee or retainer for planning. It’s often a freebie that comes when buying investment products, so advisors don’t put much labor or thought into it. Because planning is difficult to get paid for, it has historically posed a major obstacle to the growth and scalability of independent investment advisory firms. Planning itself has not been a scalable business because it is labor intensive and requires skill and time, precious resources.

However, planning software is making the service more scalable and the software is likely to be used by many more reps in the next few years. The programs are being simplified so that any rep can use a planning application. They are moving to the Internet and being integrated into independent B/D platforms. Plus, the applications are now more sales oriented and can be used as tools to discover assets in prospects. These technology trends will have a big influence on the growth of financial planning in the next few years, and on independent advisors.

Planning Software Available to Reps

With the B/Ds now cutting deals to integrate planning software packages into their online platforms, many reps that never before bought planning software will find it is provided for free by their B/D or at a low cost. The B/Ds are making the software available because it makes their reps better at what they do and because compliance can be monitored over their online platforms. Plus, the B/Ds like the idea of having rep data reside on their servers. The confluence of these factors is likely to mean an upsurge in financial planning services over the next few years, a trend that has been predicted for years but seems to finally be coming to fruition. With some of these new planning applications, it will take less time and skill to make plans, and the programs will help you sell your products and services.

But enough about the big picture. I have spent many hours in recent months getting tours of planning packages, so that I can report on them to you. I waited to see about six of them before writing this story to gain perspective. I’ll be reporting my findings on specific packages in the next few months. This month, we’ll cover four of the leading planning packages. Please understand that I could not have done this reporting and known what issues to focus on without the help of a group of experienced planners who attended online demos of these packages and took advantage of free trials that the companies offer.



This is the granddaddy of Web-based planning applications. When I first wrote about it in the late 1990s, Financeware was called Financial Plan Auditors, and the Internet boom made its founders giddy with thoughts about how they could retool the financial planning industry to use a proprietary probability analysis method and collaborative online planning. They had grand plans. Consider this press release from the company issued March 23, 1999: “Management stated that the unique mathematical method being licensed from Online Financial Planning, Inc. could allow them to potentially dominate the online financial planning market using tools and mathematical methods not currently disseminated throughout the financial industry.”

At the time, the idea of an advisor sharing a browser with a client, working collaboratively online live together, was revolutionary. This was also one of the first planning applications to integrate something akin to Monte Carlo simulations, applying a powerful statistical method to show how likely a client’s portfolio was to succeed. I bought into it. So did the venture capitalists, with the VC arm of TD Waterhouse leading a group that made an $8 million investment in Financeware and Northwestern Mutual Life Insurance in August 2001 leading a second round of $8 million financing.

The bursting of the Internet bubble brought Financial Plan Auditors back to earth. But this classic dot-com story does not entirely diminish Financeware’s significant contribution and standing.

Financeware says it has 1,200 advisor customers that pay for its application independently (not as part of an enterprise deal through a B/D), and another 28,000 advisors who have signed up through institutional-level sales. Financeware has been successful because it is easy to use, provides an array of reports, and lets you quickly provide an assessment of a client’s retirement plan while showing the client’s risk/reward tradeoff. The company has added to advisors’ understanding of using probability analysis and Monte Carlo simulations, and does a good job of educating advisors about how to use its software.

With its goals-based approach, advisors do not spend time collecting data from clients about budgets. It allows for side-by-side comparisons of up to four different plans, takes an import of data from Schwab PortfolioCenter software, makes projections based on average federal tax rates and lets you model the effect of state income taxes on a plan.

You can run as many different portfolios as you’d like in a projection, shifting asset allocations annually, if you’d like over the course of a client’s lifetime or just creating a pre- and post retirement portfolio to reflect the client’s changing risk profile. You can also easily alternate the order of death for a married couple’s plan to see how that would affect a plan for a surviving spouse. The report-builder gives you flexibility to add or subtract sections to a report package.

But Financeware has failed to keep up with it competition in a few key places. It has no way of modeling estate planning, for instance.

Scott Yang, a planner at Weil Capital Management in Palo Alto, California, whose firm has been using Financeware for years and is happy with it, does express some frustration over Financeware’s inability to model the impact on a plan of buying a long-term care policy. While you can work around the problem by inputting the cost of the policy as a major expense coming out of the portfolio, Yang notes that other planning tools have done a better job of in this area. Yang says the program is also missing the ability to easily model disability insurance costs.

Another limitation is that Financeware does not include a classification engine to model current portfolio holdings. Financeware’s planning philosophy puts little value on the traditional notion that advisors must show clients how their recommendations add value by projecting a client’s current portfolio against a proposed portfolio. The Financeware planning methodology is instead focused on how much risk is involved in achieving your financial goals.

“It’s a good tool for limited circumstances,” says Karen Spero, a veteran financial planner at Spero Smith Investment Advisers in Cleveland. “But it is not a comprehensive planning package.”

Spero, one of about a dozen advisors who attended several of the online demos of different planning packages that I’ve arranged in recent months, says her firm has used its own spreadsheets for planning, but is now seriously considering buying a program instead. “There’s been so much improvement in planning software that we’re rethinking,” says Spero, a CFP whom I’ve known for years.

Spero likes Financeware for what it is good at–probability analysis on retirement portfolios–but says it comes up short in other areas. “It would work well for investment managers who do not write full-blown comprehensive plans,” she says. But in a reaction that is typical of sophisticated planners, she would not switch from her spreadsheets to Financeware because it is not comprehensive and is not as detailed as she wants in the data it collects.

Financeware costs start at $1,250 annually for a single-user bronze license and rise to $3,500 annually for a platinum package. The packages differ in the data they draw upon when running a probability analysis, the number of side by side comparisons that can be run and in other significant ways.

While Financeware is a good program and was way ahead of its time, its core functionality–Monte Carlo simulation–is now offered in many other planning packages while it has failed to build out additional features that planners want.



Carlsbad, California-based Financial Profiles is the second largest supplier of planning software to the industry. According to the company, 50,000 advisors are licensed to use its products. Likes its larger rival, EISI, Financial Profiles has two planning software applications, Profiles + Forecaster and Profiles + Professional, which is what we are focused on, and 30,000 of the licenses are for the flagship FP + Professional.

Financial Profiles is focused primarily on the enterprise-level institutional market of B/Ds but also sells direct to advisors unaffiliated with a B/D, and Professional is the package that would appeal to these more sophisticated planners. The company estimates that 65% of its users are independent registered reps, 25% are employee registered reps, and 10% are independent advisors affiliated with RIAs or CPA firms but are not NASD-licensed to sell securities.

This software is comprehensive and is geared to high-net-worth individuals. Advisors choose from a total of nine planning modules covering specific planning issues clients often face: estate planning, long-term care, financial independence, disability, survivor needs, asset allocation, education, net worth and accumulation.

It supports model portfolios and uses the Ibbotson Associates classification engine to categorize client holdings. It also integrates Ibbotson Monte Carlo simulation and an eight-question risk tolerance questionnaire.

The planning features are strong, handling a full range of complex trusts, such as a charitable reminder unitrust, qualified personal residence trust, and generation skipping as well as a credit shelter trusts, and the software calculates federal taxes on these trusts.

The report builder is easy to use. Just click on which of the reports you want to add to a package, and it’s done. There are 400 reports to choose from.

Data input with FP+ Professional works the way a lot of advisors do: it’s paper based. While the company is planning to make its online interface more up to date with live data input into browser screens and the paper approach is outdated, it is very well organized. When you’re going to meet with a client, you print out an Adobe Acrobat PDF form where you write in all of the client’s personal data. Each section of the data collection form is boxed out and denoted with a watermark number. So the personal data is section 1 and occupation information is section 2. At the bottom of the data collection form is a set of tabs that list the sections of the data collection form you need to fill out in order to provide answers to a client about a particular planning issue. For instance, to run an asset allocation report, you must collect data from the client in sections 1, 3, 10, and 12. After you collect the data, you must input it into the program. That’s a bit cumbersome but it is well organized.

The software falls short in a couple of areas that sophisticated planners may find irksome. For instance, the risk tolerance questionnaire cannot be edited. In addition, you can not run side-by-side comparisons of different plans for a client without creating a new plan for the client. Only in the estate planning module can you model two strategies side by side.

In the investment planning part of the program, you cannot design your own model portfolios. If you buy the Ibbotson asset allocation add-on module, that comes with five model portfolios. But you cannot add your own or edit the Ibbotson models. Similarly, you cannot add your own asset classes and are limited to the 13 asset classes that come with the Ibbotson asset allocation model.

You also will not easily be able to enter different pre- and post-retirement portfolio allocations for a client. Assets each have their own rate of return and you can not assign a rate of return to a portfolio. Mark Grenader, JD, CFP/PFS, a senior VP at Investec Advisory Group in Houston, says that although he otherwise liked FP+ Professional, requiring that he input return rates for each individual asset was a deal-killer. “If we have a client with 50 different holdings, I’d rather analyze the overall portfolio,” says Grenader. “It’s too much detail.”

FP+ Professional is priced at $1,000 annually for a single-user license, though it is discounted when purchased through a B/D that has a distribution agreement with Financial Profiles. Adding the Ibbotson Asset Allocation module is an additional $200 a year, and the Monte Carlo is another $250 annually. Advanced estate planning module is another $250 a year, which is needed to do the more complex trusts. Until now, the software was available only in a desktop version. That changes in January when it will be released in a hosted online version that you’ll access over the Web. The Web-based version will have the same functionality and interface as the desktop version, however. The company expects the online version to cost slightly more than the desktop software.



This program is strong and planners have a hard time finding bad things to say about it. Harold Evensky, who for years has been a leader in the financial planning profession, helped design the program and actively promotes it. But make no mistake that the driving force behind MGP is the CEO of Pie Technologies, Bob Curtis. Curtis’s software has revolutionized planning by combining a goal-based approach, sales-oriented presentation graphics and reports, browser interface, and comprehensive scope. (In the November 2003 issue, I covered Curtis’s idea about planning.)

I am amazed at how Curtis has done so much with so little staff. He now has just 21 employees, but is supporting 17,000 users. Curtis says 25% of the users are IA representatives, 25% are employee registered reps, 40% are independent registered reps, 9% are fee-based planners, and 1% are money managers. Advisors can permission clients to see their plans online and can also share plans with another advisor.

What is most innovative about this program, however, is the way it handles goal planning. I believe it is the only program that lets you fund goals by priority rather than chronology. In other words, when you input goals in other programs–say you want to buy a boat this year but also fund your child’s education that she starts in three years–other programs will fund the boat first if you say that you want to buy it this year and the college bill only starts three years from now.

MoneyGuidePro let’s you say that you want to buy the boat this year but it is not as important to you as funding your child’s college education. You prioritize your goals in order of importance and that’s what gets funded first. And then the program shows you graphically which goals are 100% funded and which are only partially funded.

MGP balances the simplified goal based approach that eschews long-term cash flow projections but does not sacrifice detail and is comprehensive. The program in pre-retirement uses current federal and state tax tables as the default for a client’s marginal tax rate and uses current tax tables to calculate progressive tax rates post-retirement. It includes a stock option module that illustrates many possible exercise strategies and shows you how they would impact a plan, with side-by-side comparisons on screen of three exercise strategies.

Assets you input are automatically categorized using the Morningstar classification system. You can use MGP’s risk tolerance questionnaire or edit it and create your own, and MGP is in the process of integrating with FinaMetrica, a leading risk tolerance questionnaire provider that is highly touted by leading planners.

MGP also includes long-term care insurance and disability insurance modules that allow you to illustrate how purchasing these policies versus not doing so will affect a plan in the years ahead. It is an effective tool for showing a client how paying premiums for an LTC policy now can help a couple avoid being in poverty in old age if one spouse must be placed in a nursing home for a long period. MGP also includes a database of LTC costs by state to let you accurately illustrate the cost of care and a similar database is integrated for college cost calculations.

Catherine Jacobs, who runs a financial planning software service bureau and works with Financial Profiles’s two planning programs, has been fairly tough in looking at planning applications but raved about MGP. “I like so many things about this software, it’s hard to know where to begin,” she says. She was especially impressed with a “stress test” feature that shows the effect on a portfolio of two consecutive bad years–with losses in stocks equivalent to two standard deviations.

Where the program perhaps falls short is in estate planning. It models the effects of an irrevocable insurance trust but not a credit shelter trust, a charitable trust or other trusts. (However, it does graphically illustrate an estate plan in an organizational chart.) While the program does make an attempt to model cash flows, make no mistake, this is a goals-based planning tool. If you are looking for a cash-flow planning tool, this is not the one for you. But if you are interested in a solution that allows you to run plans live on the fly with clients by inputting only basic data but that can also handle more detailed and comprehensive cases, then this is an outstanding candidate. And at $995 a year, which is discounted through B/Ds and trade groups to $795, the price is right.

NaviPlan Extended


This was the most improved product I’ve seen in my latest round of demos of the planning applications. Canada-based Emerging Information Systems Inc. (EISI), the makers of NaviPlan Extended and its simpler sibling, NaviPlan Standard, has finally cracked the usability barrier and made its software friendlier.

Based on user numbers supplied by the vendors, EISI is the dominant vendor in financial planning software. Founded in 1990 by Mark Evans, a computer science professor at University of Manitoba after he built a planning application for a small advisory firm, EISI now has 70,000 licensed users. The company would not give details about its client base–the percentage that is employee registered reps versus independent reps, for instance. So it is hard to judge its penetration in the independent advisor and independent B/D market. However, the company does say that of its 70,000 users, just 1,500 are the U.S. version of Extended, its powerful desktop program for sophisticated planners. So it is fair to assume that NaviPlan Standard has historically been the big seller for EISI.

Until now, I was not very impressed with either product. NaviPlan Standard was a little simplistic. It didn’t give users real after-tax portfolio projections, for example, but still required a good bit of data input. NaviPlan Extended, on the other hand, was too complex. It gave you good reports and was very complete, but over and over again advisors would complain that the data input was overwhelming. Even sophisticated advisors gave up on it and moved to less detailed applications because of the data input requirements.

EISI has now revamped its interface to very cleverly make NaviPlan Extended less demanding of data input and more versatile. The change makes it likely that over the next couple of years, or perhaps sooner, you’ll see one version of NaviPlan instead of the current two.

What’s new is that you can now choose different levels of plans when you open a new case. This feature has already been added to NaviPlan Standard, and it is now in a beta version that is soon to be released in NaviPlan Extended 10.1. If you are sitting down with a prospect or a new client for the first time, you can do a “Financial Assessment” that requires minimal data input. This level of plan is a needs analysis in which the client tells you about his goals and holdings. So it is really a discovery tool with which an advisor can learn about a prospect’s net worth and assets.

Being able to create a quick assessment or basic financial plan and yet have access to much more powerful planning in the same application provides advisors with the best of both worlds. When a prospect becomes a client or a client’s financial life becomes more complex, you can “promote” the simple plan to a more detailed plan level. So a client can start out with a simple plan that requires little data input and grow into a more complex plan over time. The flexibility NaviPlan is building into its products is very impressive.

Holly Gillian Kindel, a planner at Mosaic Financial Partners in San Francisco, who viewed version 10.0 in a recent demo, says her firm dropped NaviPlan Extended in 2002 because it was too complex, but she is recommending that her firm return to it. “NPE is more user-friendly and flexible than previous versions,” she says. “EISI appears to be committed to improving the program on an ongoing basis.”

With EISI addressing its usability issues, NaviPlan Extended’s comprehensive capabilities can shine. Knowing that you can do the heavy lifting when you need it, it will give comfort to detail-oriented advisors looking for the best tool in making cash-flow based plans. Plan projections in NPE are based on actual, not average, tax rates. While the program does not actually create Schedules A, B, C and D for submission with a tax return, they give you the data you need to fill in the forms. An Alternative Minimum Tax calculation is integrated into the application, helping you avoid that hidden tax trap.

Advisors can run two side-by-side “what-if” scenarios on screen and an unlimited number of scenarios can be shown in reports. NPE includes all of the bells and whistles a sophisticated advisor might want, such as a stock option planning module, a Monte Carlo simulator (in which rates of return and standard deviations can be set at the account or holding level), the ability to define your own asset classes and returns on them, and creation of your own model portfolios for reuse in multiple client plans.

NPE is integrated with a database of long-term care costs, makes assessments and recommendations of LTC insurance coverage needs, and models how disability insurance income will offset a disability need. The college planning tool imports college costs from a database of thousands of colleges and universities. NPE also handles the full range of complex trusts, including CRUTs, CRATs, QPRTs, and QTIPs.

NaviPlan Extended’s single-user license fee costs $1,250 a year, and the Ibbotson Asset Allocation module costs an additional $125 annually, with an Ibbotson Mean Variance Optimizer costing another $100 annually.

Editor-at-Large Andrew Gluck, a veteran personal finance reporter, is president of Advisor Products Inc. (, which creates client newsletters and Web sites for advisors. Advisor Products may compete or do business with companies mentioned in this column. He can be reached at [email protected].


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