Profiles+ continues to improve more than 30 years after the planning software premiered.
If you discuss financial planning software with a
broker/dealer or insurance-affiliated advisor, Profiles+ Professional,
the marquee software package in the Financial Profiles product line,
will almost assuredly be part of the conversation. The Carlsbad,
Calif., firm has been one of the leading purveyors of financial
planning software since 1969, and they have a loyal following among
NASD-registered advisors. According to a September 2005 survey by
Tiburon Strategic Advisors, among independent reps Financial Profiles
has a commanding 25% market penetration.
That's not to say that the program is universally loved and admired. Few, if any, elite independent RIA advisors I know use the program for comprehensive financial planning. Perhaps this is because there is a perception among independent fee-only planners that Profiles+ is primarily a sales tool as opposed to a serious financial planning tool. That perception, if it does persist, may be outdated. Over the last few years, Financial Profiles has been making a concerted effort to improve the overall quality of its products. The recent launch of Financial Profile's Universal Desktop Application (UDA) afforded me with a good opportunity to gauge the fruits of their labors.
Universal Desktop Application (UDA)
Universal Desktop Application, the latest addition to the Financial Profiles lineup, is a hybrid platform. This online/offline platform is currently only available to enterprise customers. Using UDA, reps working for large firms can enjoy the ability to operate locally, without an Internet connection, while the enterprise can still enjoy the benefits of a "connected" workforce. The UDA is not a new program, it is a new platform. Both Profiles + Forecaster and Profiles + Professional are available on the UDA platform.
The look and feel of UDA is virtually indistinguishable from the non-UDA version; the real difference in how the data is stored. With UDA there are two copies of the data files: one that remains on the rep's computer, the other on the enterprise server(s). When operating in the connected mode, advisors can synchronize the two files immediately. If an advisors works offline, the latest data is stored only on the local machine. When the advisor next connects to the central server, the new data on the local machine is used to update the server's data.
The primary advantage of UDA for the enterprise is the ability to store data centrally. This in turn allows the enterprise to perform oversight and compliance monitoring, identify trends throughout the firm, target cross selling opportunities, monitor usage rates, etc. At the same time, a central data repository allows the firm to create multiple backups and a coordinated disaster recovery plan.
The UDA platform should not be confused with Profiles On Demand, which has been available to individual advisors since January 2006. On Demand is a Web-only application service provider (ASP) version of Forecaster and Profiles. Through this delivery model, the application and all client data is stored on the central server, which means an advisor can work from any computer whenever an Internet connection is present.
Using this platform, both individual advisors and firms can outsource the storage, maintenance and backing up of client data. In addition, On Demand relieves users of the need to install and maintain software on a local computer. The downside is that you need an Internet connection to perform work. You also lose the ability to perform the sort of data mining that UDA enables.
Financial Profiles+ Professional 7.6
For this article, I decided to try out the latest version of Financial Profiles+ Professional on the UDA platform. When I initially tried to install the applications from the CD, I ran into an immediate problem. The financial planning program installed fine, but the UDA application did not. Initially, I thought that the antivirus software of my antispyware program might be interfering with the installation, but that was not the case.
I called technical support, and we were able to determine that the cause of the problem was a corrupt UDA installation file. Normally, this would raise all sorts of red flags, but not in this case. Since my installation was unique (all other installations are enterprise installations), I attribute the problems to the fact that this installation disk was created especially for me. On a more positive note, the corrupt file gave me an opportunity to work through an issue with the Financial Profiles technical staff, and I was impressed with the service I received.
Once I got past the installation woes, I was able roam around within the program. Generally speaking, the application has not changed much from the last time I looked at it. That's not to say that there haven't been some improvements; there have, however the overall look and feel are consistent with previous versions.
To start a planning engagement, you select a planning mode from the Welcome screen. The primary modes are "Preview," "Primetime," and "Personal." The Preview mode is primarily a prospecting mode. The manual makes clear that this mode is not a true financial planning application. It is there to entice a potential prospect to pursue a real financial planning engagement. The beauty of this mode is that it only takes minutes to complete.
You enter only clients' names, dates of birth, Social Security information, income sources and needs (education, survivor and "independence," or retirement.) Then you input some basic assumptions (inflation, investment return, survivor needs, retirement needs, etc.), or you can go with the defaults the program provides. The computed output you will receive is a very simplistic analysis. It appears to be a straight-line calculation inflating the available assets and projected savings at a constant rate, and computes those amounts to the stated "needs." The idea is to disturb and motivate the prospect to take the next step, and enter into a more meaningful engagement. The report can include all sorts of educational pieces that will hopefully further motivate the client, along with a "documents needed" list should the prospect want to move forward with the engagement.
The Primetime mode is what I would call planning lite. It builds upon the areas in the preview, adding a financial statement, disability needs, asset allocation, accumulation planning and long-term care. It is appropriate for novice planners, or for clients with simple planning situations and limited means who want to start along the right path.
Personal provides the tools to create a goals-based plan that incorporates both accumulation and distribution phases. It probably requires about double the data input that Primetime requires. While Primetime offers 17 data entry sections, Personal offers 27. Among the extras: dependents and beneficiaries, taxes withheld, liquidation order and estate. If this is still not enough detail, there is a comprehensive mode and optional add-on modules (advanced estate planning, Forefield integration, Ibbotson autoclassifier and Monte Carlo) that further advance the functionality of the program. The more detailed Personal and Comprehensive modes offer advisors the option to perform cash flow and tax sensitivity analysis. The other modes do not afford this option.
After spending some time navigating around Financial Profiles+ Professional, I get a sense that the application is improving, but it is readily apparent to me why the program is more popular among advisors at B-D and insurance firms than it is with independent comprehensive planners.
Financial Profiles+ Professional is scalable to the knowledge and the ability of the user, which fits in fine at B-D's and insurance companies, where employees with varying skill sets often use it. At the enterprise level, Profiles offers management and compliance tools that allow corporate users to keep some measure of control over how the application is being used. Better yet, the new UDA actually allows enterprises to better mange the data, as well as mine it for additional opportunities.
From the end user's point of view, Profiles+ also is scalable. Depending on the situation and the amount of time the advisor wants to invest up front, Profiles+ can create a "preview plan" in as little as ten to 15 minutes. Clearly this preview is not a true financial plan, but it could be the instrument that eventually persuades a prospect to enter into a planning arrangement. If that is the result, the Preview serves a valuable purpose.
As a financial planning tool, the program has its good points and its not-so-good points. Data entry is simple and convenient. Once the data is entered, you can create a plan with the push of a few buttons. It is very easy to control the output. You select the individual report pages you want included in a plan, and you are ready to go. If you regularly use the same sets of pages, you can memorize them for future use.
Unfortunately, some features that sophisticated planners crave are either poorly implemented or missing. For example, Monte Carlo (MCS) capabilities are not included with the program. You can purchase MCS capabilities as a $250 (retail) add-on, but even that has limitations. All of the assumptions, including the number of iterations, are preprogrammed; the advisor cannot adjust MSC inputs at all.
At least one competitor, MoneyGuidePro from PIE Technologies Inc., allows advisors to "stress test" a portfolio by looking at an illustration of how it would have performed over certain historical periods. Financial Profiles does not offer this capability.
Sometimes I get the impression that compromises are being made for speed and simplicity, and that as a result, certain important details are being sacrificed. For example, the reports I viewed lumped the Social Security income of both spouses into one line item. (If there was a report that broke out the cash flows to each spouse, I didn't find it.) This omission makes it difficult to audit the plan or examine alternatives, should they exist. Broadly speaking, I'd like to see improved tools for distribution planning.
There are a few things that Financial Profiles could do to improve the user experience as well. For example, on the Taxes Withheld page, the advisor has to enter federal, state, self-employment, Social Security and Medicare withholding. Since the advisor has to enter income and self-employment income, the program should be able to automatically generate a default self-employment, Social Security and Medicare withholding estimate for both spouses.
According to David Oates, marketing director at Financial Profiles Inc., many of my concerns will be addressed in the next full release of Financial Profiles+ Professional (version 8.0), which should be available later this year. The new version is slated to include better distribution planning tools, historical portfolio analysis, some measure of income risk, a method of calculating "safe" withdrawal rates and much more.
The bottom line is that UDA is an important platform improvement for enterprise users. The core Financial Profiles+ Professional has improved since the last time I looked at it, but in its current form it is not likely to win over elite independent advisors. However Version 8.0, if it fulfills its promise, may nudge the application up another notch or two versus its competitors.
Joel P. Bruckenstein, publisher of
Virtual Office News (www.virtualofficenews.com) and an expert in
applied technology for financial services professionals, can be
contacted at firstname.lastname@example.org.