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Financial Planning > Tax Planning

NaviPlan Upgrade Boosts ‘Advisor Gamma’: Exec

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Advicent introduced March 13 the latest version of its popular NaviPlan financial planning software, which incorporates the Trump tax law changes, new client reports and new functionality for its Narrator Clients portal functionality.

“The tax code changes are reactive to the tax law,” Advicent COO Tony Stich said, but even the tax upgrade “separates NaviPlan from the competition.”

Why? Because the sweeping tax overhaul directly affected estate planning and the marriage penalty, Stich said, which in turn has “significant ramifications on retirement scenarios” for advisors’ end clients.

Where Advicent has leapfrogged the competition, says Stich, is that NaviPlan 18.0 allows advisors to build those scenarios in two ways, whether those tax changes are “sunsetted and if they aren’t, allowing the advisor to showcase his gamma” to clients and to help “plan accordingly in both the short and the long term.” (Gamma is the quantitative measure of the advisor’s value to a client beyond investment management, first proposed by Morningstar’s David Blanchett in 2012.) Monte Carlo simulations, Stich pointed out, “don’t accommodate tax code changes in the future, when a client needs to rely on an advisor and his intelligence around these types of changes. This is how an advisor can show their value to their clients.”

An understandable advocate for NaviPlan, Stich charged that “it’s a disservice when financial planning software doesn’t accommodate and make all the assumptions needed” for a tax code change as significant as the overhaul that just passed.

NaviPlan 18.0 has updated its client-facing portal — part of the Narrator Clients 2.5 suite of tools, which Stich calls “the technology that wraps around NaviPlan” — which displays to the end client a financial lifeline, goals coverage and “other financial planning need-to-have elements” with a feature called ‘Explore Your Options.’

That feature allows clients to adjust items like their monthly savings rates, the dates they wish to retire and the amount of their discretionary spending to see how those adjustments affect achievement of their goals, such as retirement or other significant life changes.

Clients become involved in the financial planning process, and then can determine with their advisors’ help which steps or changes they need to make to increase the likelihood of achieving those goals. “The interactivity allows the financial plan to be a living, breathing” document, Stich said, while also reflecting the fact that “gone are the days of episodic planning” in which an advisor might work with a client annually or quarterly. “It’s now 24/7 access,” which not only involves the client in the plan, but also meets the expectations of clients that have been formed by their experiences with consumer technologies such as Uber, Netflix and Amazon.

“The consumer revolution started four years ago when clients started to get engaged in financial planning and money management,” Stich said. Why did that happen? “Changing client expectations,” Stich believes, partly due to the rise of digital advice platforms and those popular consumer applications. “The advisor has to catch up,” because that’s what’s expected by clients: the ability through user-friendly web applications to “interact with and to change their financial lives.” Should an advisor not make that possible for a client, “say goodbye to that client.”

Stich believes that clients’ desire for interactivity with their advisors is especially true with the Holy Grail of clients: the high net worth. The industry has long held a “preconceived notion” that HNW individuals are delegators, he said. “But we’re finding out it’s just the opposite. They’re very much involved in the planning process, they want to be in control,” but those clients do want to be “validated through their advisor gamma.”

The third big upgrade in NaviPlan 18.0, said Stich, are three new client reports covering range of returns, current portfolio breakdowns and risk tolerance analysis.

The “Range of Returns” report is meant to provide clients with insight into the potential range of their account returns over the course of multiple years, which the company said can be used as an explanation for how returns vary throughout a plan’s life. “Current Portfolio Breakdown” helps clients understand which asset classes make up their portfolio and how much of it is weighted into each one. The “Risk Tolerance Analysis” report aggregates a client’s risk tolerance questionnaire in the “modern style of client reports” which the company said acts as a reference for clients who may be wondering why their return rates have changed in an alternative scenario on various client reports.

While each of those reports is educational for an end client, they also “showcase an advisor’s gamma,” Stich said, while allowing advisors to better compete with digital advice providers, or robo-advisors.

Stich also had a warning on portals for individual advisors, “thousands” of whom are individual NaviPlan users, he said. Portals have become “table stakes” in the independent broker-dealer rep and RIA advisor market, he said. But NaviPlan also has a significant number of enterprise clients among banks and brokerage firms in the U.S. and worldwide — “60 blue chip firms in the U.S., 100 around the globe” — that use the NaviPlan API to provide some level of financial planning to their customers.

Those big financial services firms don’t want “out-of-the-box portals” for their customers, but are using NaviPlan’s technology to move toward “publishing financial plans in a banking environment.” Spurred on partly by moves like Amazon’s reported move into financial services, these large firms are “providing retirement analysis to their entire population, even those without financial plans,” Stich reported, to get closer to their customers and take advantage of their existing financial relationships.

“Independent advisors have to watch out” for those banks, Stich said, since they constitute “a sleeping giant that’s awakening.”

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