RightCapital: The Future of Financial Planning Software

With a seemingly endless stream of new technologies to help us run our practices more efficiently, it can be difficult to choose the best tools for specific tasks. The more complex the task or procedure, the higher the switching costs, making it both difficult and time-consuming to adopt a new software platform or service to get the job done.

This is especially true with regard to financial planning software, where advisors may have years of data for hundreds of clients, and likely have policies and procedures in place specific to their particular financial planning tool(s). Moreover, their actual client planning processes may even be driven by the features and/or limitations of their current tools. For advisors in search of new planning software or those starting out on their own, it's paramount to pick the right platform, and one that will stand the test of time.

RightCapital is a relatively new competitor in the financial planning software landscape. (While it is likely I'll conduct similar in-depth reviews in the future, it should be noted that I have no financial interest in the technology tools/services evaluated.)

The Purpose of Financial Planning Software As an advisor, I've used or tested just about every comprehensive planning software on the market. The impetus has always been one of necessity rather than sheer curiosity: My current tool is too simple, too complex, or too outdated, and I need to find a better way to provide the best possible client experience. Yet it's the client experience that companies tend to lose sight of when developing or refining their offerings, leading to significant trade-offs when choosing among different providers.

All too often, advisors are guilty of the same mistake, viewing their planning tools as magical number crunching machines that spit out pretty (or not so pretty) charts and graphs to support their recommendations in lengthy PDF documents. We tend to pull our hair out when our planning software can't exactly model the implications of a complex taxable event in a single year, yet somehow are able to come to terms with the not-so-small assumptions we make about rates of return, inflation, and a myriad of other factors that have an enormous impact on decades of future cash flows.

Thankfully, the creators of RightCapital seem to recognize this tendency for advisors to miss the forest for the trees. The platform allows for a sophisticated level of granularity in planning but is intuitive and visually appealing enough to achieve the real purpose of financial planning software: effectively communicating planning principles, influencing behavior, and helping clients feel confident in their financial futures.

What RightCapital Gets Right Unlike some of the major planning software platforms available today, RightCapital is not a strictly cash flow or goals-based system. Advisors can choose which method to use on an individual client basis, or opt for a modified cash flow based method that assumes any excess cash flows are spent. Onboarding new clients is a breeze, with the ability to invite clients to input some of their own financial data directly into the software, link their financial accounts via the aggregation platform, and upload supporting documentation to their own secure vault using drag-and-drop functionality.

RightCapital is intuitively organized into dashboards based on subject area, including investments, retirement, insurance, education, taxes, and estate planning, with each dashboard containing several subcategories organized into tabs for more detailed analysis. Investment portfolio analysis and retirement projection rates of return are based on the client's actual holdings, and historical returns for various asset classes can be customized at the advisor level. Retirement analysis includes Monte Carlo simulations and detailed cash flow projections for future plan years, as well as forecasted withdrawal rates. These projections rely on RightCapital's robust tax engine that not only forecasts estimated effective tax rates, but will actually generate an example IRS Form 1040 for any future plan year, along with Schedules A, B, D, and Form 6251 (alternative minimum tax).

Where RightCapital excels is the collaborative ability to walk clients through a plan directly within the platform, and to demonstrate the effect of various plan changes in real time. Whereas other platforms may require waiting for a new report to be generated after changing a plan variable, RightCapital updates all future cash flows and simulations almost instantaneously, allowing advisors to perform scenario analysis and graphically illustrate the effects of various stress tests with clients directly in front of them. Advisors can enable access to each of the dashboards on an individual basis via the client portal, assign tasks to clients, and even allow clients to change some of the planning variables on their own. This allows clients continuous access to their up-to-date financial plan with account balances/position values refreshed daily (if using the aggregation feature or one of many integrations), and helps keep them focused on plan outcomes and possibilities rather than market movement.

Room for Improvement Like any technology tool as complex as financial planning software, there are features that could use some refinement. One of the most prominent tabs on the main client dashboard is a graphical illustration of "historical net worth," yet the chart only displays one month of history, essentially rendering it useless. This is unfortunate: The ability to track net worth since inception would be highly useful to both advisors and clients, not to mention a great way to illustrate the value of working with an advisor focused on long-term holistic planning. While there are likely technical challenges to developing this feature to its full potential, it should be a top priority.

Likewise, while advisors have the ability to create custom portfolio models and change the default return assumptions for each asset class, it would be ideal if RightCapital also allowed for a simpler method to specify an investment rate of return within a plan that was independent of asset class returns or the client's current holdings. Though flat rates of return can be tested via simple scenario analysis within the retirement planning module, these custom scenarios currently can't be illustrated within the cash flow projections.

Another potential product enhancement that would significantly increase advisor/client engagement is an online presentation feature that would enable clients to quickly join a meeting with their advisor via a custom link, allowing advisors to walk clients through a plan remotely without relying on a third-party screen sharing application. Combine that with an official mobile app that clients could download to their own devices and further improvements to the (currently limited) budgeting feature, and RightCapital could eventually become a true personal financial management platform for advisors.

The Verdict Given the platform's ease of use, relatively sophisticated level of planning granularity, and almost unbeatable price ($100-$150 per month depending on plan), I recommend that most advisors start their planning software search with RightCapital. While some may prefer slightly more control over planning variables afforded by competitors such as eMoney Advisor, the pace at which RightCapital is developing new features and the company's willingness to rapidly incorporate feature requests from users into the platform is impressive. Combined with top-notch support, RightCapital is quickly defining what financial planning software of the future can and should look like.

Ben Brown is a certified financial planner and an IRS enrolled agent. He is the founder of Entelechy, a fee-only financial planning and investment management firm based in Bethesda, Maryland, serving clients in the Washington, D.C., area and nationally.

The author is a freelance contributor to Morningstar.com. The views expressed in this article may or may not reflect the views of Morningstar.