|
February 03, 2010 |
|
Online Finance Tools Fall Short, Study Says |
(Dow Jones) Popular online tools and
software help people get a sense of their finances and how much they
need to save, but they may not give a complete picture.
Many of the tools don't adequately take into account
longevity, health-care costs and other risk factors, according to a new
report by the Society of Actuaries and the Actuarial Foundation.
The report evaluates the benefits and shortcomings of 12
popular financial planning software programs including Fidelity's
retirement planner, the T. Rowe Price retirement planner, and Money
Tree, one of the most popular software used by independent advisers.
Kirk Kreikemeier, a financial planner involved with the
study, says the tools often failed to address longevity, didn't factor
in a financial crisis and take Social Security into account. Part of
the solution is more transparency, he says. For example, the software
could direct investors to the Social Security Administration Web site
for its free and precise benefit estimate.
The limitations of the software place greater responsibility
on advisors to consider multiple scenarios to limit risk, says
Kreikemeier. "Even if you're not able to address risk it would be
helpful to disclose it," he says. "You don't want a false sense of
security."
Companies defend the software and some advisors say the
tools often are effective at getting investors to at least think about
retirement savings.
"It's a way to get people engaged in the process," says
Stuart Ritter, a financial advisor at T. Rowe Price Group Inc.
He says the T. Rowe Price online tool does take into account some of
the risks and variables but "if we take into account too many
questions, people won't use the calculator at all."
David Conner, sales and marketing manager for Money Tree
Software, says they adjusted the software last year, but it's largely
up to the advisors and their compliance departments, which set the
rates of return and other factors. "We tell them to make sure they use
this to show uncertainty, not certainty," he says.
Chris McDermott, senior vice president at Fidelity
Investments, says the tools can help consumers "understand where they
are at."
"This is not a one-time discussion," he says. "This tool can
help put a road map in place, but they (investors) need to stay
active."
Copyright (c) 2010, Dow Jones. For more information about Dow Jones' services for advisors, please click here.
|
CONFERENCES
Dorothy 
