Design flaws make AdviserPlan complicated, but the software is worth a look.
When I was asked to review PPC's AdviserPlan, I approached the assignment with some trepidation. PPC has a solid reputation as a supplier of information and tools to the accounting profession. When developing AdviserPlan, they teamed up with one of the brightest financial planners in the country: Fredrick E. "Rick" Adkins III, CFP, ChFC, CLU. Adkins credentials are impeccable. He is CEO of The Arkansas Financial Group Inc., a highly regarded financial planning firm. Worth, Mutual Funds and Medical Economics magazines have all listed Rick repeatedly as one of the best financial planners in the country. Oh, and by the way, he's the current chair of the Certified Financial Planner Board of Governors.
According to Adkins, AdviserPlan is designed for CPAs who are looking to add financial planning to their practice. Adkins' vision was to create a product that could be used by a tax preparation firm to deliver basic financial plans to low- and middle-income people, and he in fact participates in an enterprise that offers such a service using components of AdviserPlan, specifically the Risk Capacity Index and the Model Portfolios.
According to PPC, the Risk Capacity Index is "a benchmark for the maximum level of investment risk that a client should take, based on the following key factors in the client's life situation: life expectancy, income consumption level, assets, debt, liquidity and family responsibility." The difference between risk capacity and the more frequently employed risk tolerance is subtle, but important. Risk capacity is designed to be a broader measure that evaluates risk based upon a client's total financial and emotional situation, as opposed to risk tolerance, which is often more narrowly defined. For example, a person may have the risk tolerance for a more aggressive investment stance, but not the risk capacity.
The model portfolios are asset allocation strategies keyed to a client's risk capacity. For example, a risk score of 53.1 might indicate a client's portfolio with a minimum expected return of -1.0%. The model portfolio is simply one efficient diversified portfolio that would meet a client's needs. Advisors with their own portfolio optimization software could construct alternate portfolios with the same risk characteristics if they chose to do so.
I do not take issue with Adkins' vision; in fact, I embrace it. The financial planning profession needs to figure out a way to provide meaningful financial planning advice to middle- and low-income citizens in a cost-effective manner, and the Risk Capacity Index, used in combination with Model Portfolios, just may be part of the answer.
Unfortunately, AdviserPlan wasn't what I hoped it would be. According to the company, AdviserPlan "measures the adequacy of your clients' retirement savings, educational savings, funds needed at death and disability insurance. Then, using the Risk Capacity Index, helps clients determine the appropriate level of risk and investment allocation." Based on that description and a brief conversation with a company spokesperson, I was under the impression that AdviserPlan was a basic, easy-to-use financial planning program, but it's not.
While Adkins' vision for AdviserPlan is solid, PPC's execution is poor. To keep things simple, PPC AdviserPlan starts with client income, subtracts taxes and targeted savings (usually for retirement and/or education), then assumes clients will consume the rest. In the case of low- to middle-income clients, this is often a valid assumption.
The program is designed so that almost all of the inputs can be entered on a single screen called "Before Planning." Those inputs can then be copied with a single mouse click to the "After Planning Screen," where the planner prescribes changes that need to be made. For example, if the client's legal documents are inadequate in the "Before Planning" input screen; the planner recommends the necessary changes to bring the client to 100% adequacy on the "After Planning" input screen. If retirement savings are inadequate, the planner recommends saving more on the "After Planning" input screen. All changes to the plan are immediately reflected in the client summary reports.
So far, so good. But when I tried the program, I immediately ran into problems. In order to estimate the adequacy of a client's funds upon death, the "Estate Related Information" section calls for the "PV (present value) of Income Capital Shortage." This is not a calculated field; the planner must supply this information. Unfortunately, a new user would not intuitively know this important fact. Presumably, an experienced planner will be able to arrive at an estimate, either through the use of a financial calculator or another financial planning program, but PPC's failure to build the capacity right into the relevant field is a major design flaw; with a "real" financial planning program, you supply the inputs and the program performs the number crunching.
Further complicating matters, the built-in "help" functions were poorly designed. Ideally, one should be able to get context-sensitive help by moving the mouse over a field or right-clicking on a field. With AdviserPlan, you can click on the question-mark button and then click on the field, but what appears is a general "Data Input Screens" help page, not the targeted information you need.