In a September webinar, FinMason CEO Kendrick Wakeman demonstrated how advisor users of Orion Insight’s portfolio management software can use its Five-Minute Financial Plan to help attract and retain clients.
Thanks to an integration first announced during Orion’s Ascent/FUSE conference earlier in September, Orion users can seamlessly use the application, which Wakeman called a “light financial planning and integration tool,” directly inside Orion’s platform, and do so without any special training.
“It’s easy and intuitive,” he said, can be used “right out of the box,” and “gets you 80% of the way” to what full-blown financial planning software like PIEtech’s MoneyGuidePro and eMoney Advisor provides.
Getting that far is “probably adequate” for many clients, he said, especially for those whose advisors are currently not offering financial planning because of the software’s cost and complexity. Using the Five-Minute Financial Plan is, he argued, is a “great and easy way to step into financial planning right away” and is “affordable” at $39/month/user.
But it’s also valuable to advisors who already use robust financial planning software, Kendrick said, because of how it helps in areas like prospecting. “Advisors tell us it’s difficult to get a prospect to commit to the time and effort” involved in gathering financial documents and then creating a financial plan before signing on as a client.
“This is an easy way to get in front of a client and to demonstrate some value right off the top,” he said, and then eventually buy into the time and effort to create a full-blown plan.
It’s also the case, Wakeman said, that advisors who use financial planning software aren’t doing so for all of their clients, especially those who either don’t need a full plan or who don’t have the assets to make creating a plan economically feasible for the advisor.
Wakeman said that he learned at the Ascent/FUSE conference that many advisors create multiple plans for clients and then wind up choosing one or more of those plans to present to clients. The Five-Minute software provides an outline of the client’s current financial situation and “where he wants to go,” allowing the advisor to perhaps create only two plans from which to choose, thus improving the advisor’s efficiency.
Fintech firm FinMason, said Wakeman, runs “one of the biggest investment analytics firms in the world,” with its services delivered through APIs. Wakeman said the integration with Orion for the planning software is unique to FInMason’s standard business model—”we don’t produce front ends, but power front ends”—but created the Plan because if “felt there was a gap in the marketplace for a lighter-engagement” planning tool.
Providing financial planning to clients and prospects, he said, is “not just a benefit, but is critical” for advisors, citing both Ron Carson and Joel Bruckenstein, who he said have publicly argued that doing so is table stakes now for all advisors. Another sign of the critical nature of financial planning: “Morgan Stanley is paying its advisors a bounty” for each financial plan they produce, Wakeman said, since the brokerage firm sees doing so as a way to keep its own clients and “steal everybody else’s.”
The Plan uses a “full 10,000-iteration” Monte Carlo analysis to show the probability of a given client running out of money in retirement. Using data from a client’s Orion portfolio, the advisor uses the Plan’s sliders to adjust the common levers that can affect a retirement portfolio, such as setting spending levels in retirement; working more before or in retirement or continuing to save in retirement, for example. It also can show the effects of special spending events, such as buying a house or paying for college, on the client’s portfolio.
The Plan software runs the Monte Carlo simulations almost instantly to provide a dynamic picture of the portfolio’s strength or weakness at different client ages in retirement, right in front of the client or prospect. “The actual planning part takes much less than five minutes,” Wakeman said in finishing the demo, while “the talking took up the rest of the time.”
What are the assumptions in the Plan? Wakeman says the software uses a 15-factor, multiasset global model, similar to that used by MSCI, to forecast rates of return and volatility, which he said is an academically robust model, rather than use historical rates of return.
Since the Five-Minute Financial Plan was meant to balance “simplicity and robustness,” it doesn’t currently allow for data outside of Orion to be imported into the software, or allow the user to adjust for different future interest rates. However, Wakeman said FinMason is working on a variety of upgrades to the software, such as a Social Security module and the ability to input a series of portfolio models.
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