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Client Reports: How Less Can Be More

Condensed client report software look to fill the gap between financial planning tomes and no planning at all.

Bill Winterberg, 05/10/2012

To deliver thorough financial plans to clients, financial advisors may be compelled to deliver lengthy reports illustrating how a variety of circumstances, assumptions, and projections can affect the outcome of client goals. While these reports serve as the primary deliverable in the planning process, clients may become paralyzed by the enormity of large plan documents and their endless recommendations.

In addition, most advisors create plans independently after gathering client goal information in discovery meetings, as opposed to engaging clients in an iterative process with immediate feedback. Advisor Software Inc. (ASI) is tackling the issue of mind-numbing plan documents and lack of client collaboration with a new tool that creates simplified client deliverables and helps set expectations of attainable financial goals.

ASI Evolution
Based in Walnut Creek, Calif., ASI has offered a variety of tools and solutions to the financial services industry since 1995. The company's products power several of the back-end features available to advisors through investment custodian websites.

"We work with what we call enterprises, and that's large organizations such as Schwab [Advisor Services], TD Ameritrade [Institutional], Franklin Investments, Russell Investments, and so forth that private-label our services," said Neal Ringquist, president and COO of ASI. "We've had 80,000 advisors use our apps and probably not many of them know that they are using Advisor Software apps."

To diversify its enterprise market relationships, ASI recently completed an integration of the ASI Portfolio Rebalancing Solution® with Grendel CRM (See One Capable CRM Flying Under Most Advisors' Radar).

According to Ringquist, the company continues to expand its visibility by offering technology products directly to financial advisors. One of those products for advisors is goalgamiPro, a financial diagnostic tool that generates a compact client report referred to as the Household Balance Sheet.

GoalgamiPro is an entirely Web-based application advisors use to create two single-page client reports titled, "Can I Afford My Goals?" and "What Is My Plan?"

After logging in to goalgamiPro, advisors can browse a list of all of the client households configured in the program. To the left of the household list is a folder tree that can be used to organize households using an advisor-defined folder hierarchy.

Creating a new client household requires a client's first and last name, gender, date of birth, and household name. With the household identified, advisors then add household members (e.g., spouse and children) and household investment and retirement accounts. Financial accounts can be imported by either Excel spreadsheets or csv-formatted files generated by Schwab Performance Technologies® PortfolioCenter, or the data can be manually entered by the advisor. According to Ringquist, ASI is actively developing integrations with CRM software such as Salesforce to reduce some of the manual data entry requirements.

After entering household members and associated asset information, advisors then enter data about anticipated future savings, such as savings from cash flow, an inheritance, or the sale of a business, as well as identify any expected benefits, such as income from Social Security, pensions, or annuities.

In addition to listing assets and savings, advisors can customize the assumptions used in the calculation of net present values listed in the output reports. Advisors can customize the percentages used to factor cost of living adjustments, discount rates for goal levels, transaction costs, and any early withdrawal penalty amounts, or the program-provided defaults can be used.

Collaboration Connect
After identifying household investment accounts, future savings, anticipated benefits, and plan assumptions, client goals are defined for the plan. Advisors can enter goal information either independently or by inviting clients to use a new goalgamiPro feature called Collaboration Connect.

Collaboration Connect enables a website that clients can use to follow a four-step process of entering their own household goals and objectives. The process begins by introducing clients to three levels of goal planning: necessary, target, and aspirational.

In step one, clients review their household information previously completed by the advisor. Clients are encouraged to contact their advisor should they identify any errors in this step. Step two begins the household goal selection process. Clients are presented with a series of icons representing a variety of goals and objectives, including significant life milestones, purchasing "big toys," saving for a child's college tuition, and more. The program provides guidance by listing sample goal scenarios as clients browse and select the options. This step offers a nice way to anchor clients by illustrating realistic projections.

After selecting a series of goals, clients proceed to step three and begin to enter details about each goal. Here, clients are prompted to enter dollar amounts for each of the three goal levels identified at the beginning of the goal planning process. For example, under a college savings goal, clients may list a necessary goal of $20,000 per year to pay for in-state tuition and list an aspirational goal of $60,000 per year for tuition at top private schools.

During this step, Collaboration Connect displays a preview of the Household Resource Chart, comparing the household's current and expected resources to the amount of resources required to meet each of the three goal levels. This chart, which displays the net present value of both assets and goal funding levels, updates in real time as clients modify household goals, and it quickly illustrates whether clients have enough resources to meet goals at the necessary, target, and aspirational levels. Any shortfall of resources needed is highlighted in red and labeled a deficit in the chart.

This quick resource preview can be effective at allowing clients to evaluate their own thoughts on what goals they feel they need to meet versus those that would be nice, but not essential (i.e., aspirational). They can adjust each goal's dollar amount and time period to see how the changes affect the Household Resource Chart. Instead of taking days or weeks to refine the goal-planning process with advisors, clients can immediately adjust their own expectations by seeing a summary of results as they modify goals in real time.

Finally, step four allows the client to review all goals entered into the program and then notify their advisor that they are finished. Clients can print a summary of the goals entered along with the Household Resource Chart preview if they want. Advisors have a Collaboration Connect summary screen in their account where they can see the status of all the plans entered into goalgamiPro, and the date and time of each plan's most recent activity.

Household Balance Sheet
All of the data entered up to this point flows into the goalgamiPro calculation algorithm to generate the output report labeled, "Can I Afford My Goals?" This single-page report contains three sections, with the top two thirds of the page showing the Household Balance Sheet and the bottom third split between Household Plan Details and Goal Funding Status.

The Household Balance Sheet lists the net present value of the household's current and anticipated resources (as discussed earlier) in the left-hand column. The right-hand column lists the net present value of the necessary, target, and aspirational goal levels.

The center column contains a vertical bar chart of the household resources compared with a bar chart of each of the three goal levels. This is the same Household Resource Chart clients can preview as they add and modify household goals via Collaboration Connect. Again, this simple bar chart easily illustrates any shortfall in household resources required to meet the funding requirements of each goal level.

Below the Household Balance Sheet is a section titled Household Plan Details. Here, a short statement on the household risk capacity appears along with the anticipated household savings numbers that were entered in the tool. The risk capacity is stated as the percentage of resources the household can afford to lose before jeopardizing the capacity to fund all goals identified as necessary. Here, too, is a brief disclaimer of the assumptions used to calculate net present values in the balance sheet.

To the right of the plan details is the Goal Funding Status window, which extrapolates the top three goals in terms of each total net present value amount. Each goal is compared with a "funding status bar" with different colors: green for funded, yellow for uncertain, and red for unfunded. Here it is a bit easier to see how well each of the three goal levels is funded for each defined goal. For example, necessary levels for funding retirement living expenses and college savings may fall under green, showing that the goals are projected to be funded, but aspirational levels for funding a vacation home purchase may fall under red, indicating a projected shortfall.

Finally, an optional cover page titled "What Is My Plan?" summarizes much of what clients can print using Collaborate Connect's final step. Listed in this report are details of the total household resources, the household members, frequently asked questions on the plan, and household goals defined in the plan.

Big Picture Advantages
Advisors will likely argue that goalgamiPro misses many important details and nuances of a true comprehensive plan, but remember that the purpose of the tool is to deliver a straightforward diagnostic in a concise format. This tool is not intended to replace more robust financial planning software. GoalgamiPro allows clients and advisors to work collaboratively and quickly perform a back-of-the-envelope analysis using big picture goal planning.

As goalgamiPro isn't comprehensive financial planning software, pricing is lower than its full-featured counterparts. Advisors can subscribe to goalgamiPro for $495 per year, and that includes an unlimited number of household plans as well as unlimited use of Collaboration Connect by clients. ASI offers a seven-day free trial of goalgamiPro. Note that a credit card is required to begin the trial, so advisors who are not interested in subscribing after the trial period will need to cancel their account within seven days.

I feel goalgamiPro offers an effective way to show clients how well they are currently prepared to meet their short- and long-term objectives. When used appropriately, one-page diagnostic reports can help facilitate a series of more in-depth discussions between advisors and clients and reduce the paralysis clients might feel when faced with large, and often intimidating, financial planning documents.

Bill Winterberg, CFP, is a technology and operations consultant to independent financial advisors. His comments on technology have been featured in a variety of financial industry publications. You can view more information about Bill and see his schedule of upcoming speaking engagements at his Web site, FPPad.com. The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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