This past week I attended a three-hour online demonstration of the financial planning software MoneyGuidePro. This was an interactive session in which participants were allowed to input a case to get a better feel for the tool. Then I had a one-hour follow-up session. Here’s what I learned. 

MoneyGuidePro is an amazing tool in many respects. In addition to the typical inputs, there is a great “what if” tool with numerous real-time alternatives. It also features a client-specific, pre-populated recommendations section covering areas such as retirement, cash flow, risk management, etc., based on the data entered. It’s also quite intuitive, unlike some planning software I’ve seen. 

I was particularly impressed with the data input. It seems as though they’ve thought of just about every possible situation. It also contains a life expectancy calculator where you can enter a few variables such as smoker/non-smoker; general health condition (good, poor, etc.), and other factors. Then, it will provide a probability of living to various ages. If the client is married, it will forecast the probable life expectancy of both spouses. Yes, it is quite impressive. 

I learned that MoneyGuidePro integrates with several custodial platforms. This interface will allow the advisor to download the client’s portfolio with a few clicks, then it will read the ticker symbols and determine each investment’s sub-category.

One of the most impressive things I found was the presentation tool. After creating a client’s plan, it converts it to a Power-Point type presentation. It also contains a feature called Star Track, which allows an advisor user to save each year’s plan and compare it with past plans. However, it only compares certain metrics, not the entire plan.

MoneyGuidePro has a unique Social Security optimization tool where the advisor can check various strategies such as file and suspend to determine the best option for the client. 

With all of its positive attributes, I did find a couple of negatives related to the federal income tax and the client’s estate. For example, prior to retirement, the plan is goals-based and cash flows are immaterial. However, at retirement, it becomes a cash-flow-based tool. When calculating the client’s federal income tax, it fails to consider the Net Investment Income Tax (3.8%), the excess Social Security withholding tax for employees (0.09%), the phaseout of personal exemptions and itemized deduction, and a few other items. Instead of using itemized deductions when applicable, it uses the standard deduction in all cases. Therefore, the cash-flow calculations during retirement will likely be inaccurate. 

Another shortfall is found in the estate calculation. In the U.S. there are nine community property states, including our most populous state, California. If the client lives in one of these states, is married and has life insurance or retirement plans (i.e. anything with a beneficiary designation), it will not allow the user to treat it as community property for the purpose of calculating the value of the gross estate. For instance, if the husband has an IRA worth $1 million, the plan will assign 100% ownership to that spouse. In general, in a community property state, only 50% of the IRA would be included in the husband’s estate. Because the program will not allow a 50/50 split on assets with a beneficiary designation, it will not reflect the correct estate value. Unfortunately, based on what I was told, the company has no plans to address this. 

In summary, if the advisor doesn’t need this tool for estate planning and they work with clients in common-law states, MoneyGuidePro may be an excellent choice. In addition, if the advisor is not concerned with the elements omitted from the federal income tax calculation, MoneyGuidePro may be fine.

However, because I work with clients who live in a community property state, and believe that federal income taxes are an important component in calculating the client’s annual cash flow shortfalls and surpluses, I will continue my search for a financial planning program with the specifications I need. 

Until next time, thanks for reading and have a great week!