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.
I later discovered that if you scroll through to the bottom of the page, there is a picture of the data input screen. Click on the picture of the field about which you want further information, and context-sensitive help will appear. How's that for intuitive? When I finally found the "help" I needed, it was of limited value. I was told I could: a) get the information from a financial planning program b) Press F3 to use a built-in calculator or c) employ other means. Why they require the user to go through multiple levels of help to find a built-in calculator is beyond me!
When I asked a company spokesperson about the help section, I was told that the procedure for using help was clearly spelled out in the manual. My reply was that numerous studies have indicated most software users never open a manual, and that if you needed the manual to learn how to use the help section, something was amiss. You can draw your own conclusions.
Another problem I ran into was terminology. The program requires, among other things, the following inputs: "Adequacy Legal Instruments as %," "Health /LT Care Insurance as %," and "Occupational Stability/Volatility as %." Short explanations of these data fields are buried two or three levels down in the "help" section, but it sure would be nice if they were easier to find. There's a life expectancy adjustment field, but before you can use it, you have to know what you are adjusting. By now, I'll bet you can guess where you have to go for the answer.
Yet another major criticism of the program is its planning methodology. All calculations assume constant rates of inflation and constant rates of return throughout the model. No attempt is made to illustrate the impact of variable returns or their impact on the plan's probability of success.
OK. Enough already; there's no need to beat a dead horse. AdviserPlan is a great idea, but the execution is poor. Quick, easy inputs resulting in a solid, basic plan for the masses is a great idea. The concept of the Risk Capacity Index is excellent, as is the idea of linking the index to suggested model portfolios. PPC has to decide whether it wants to take this program to the next level-building a fast, intuitive, basic financial planning program-or not. If it does, the company should fix the design flaws, improve the help section and add a Monte Carlo engine. It probably should consider offering a Web-based version to complement the desktop edition as well.
Financial Planning Workflow Solution-A Good Deal
Financial Planning Workflow solution is a bundle of three PPC products at a discounted price. The bundle includes The Guide to Personal Financial Planning (CD version, regularly $240), Tax and Financial Planning Client Presentations (regularly $362) and AdviserPlan (regularly $261).
While I can't justify purchasing PPC's AdviserPlan on its own, purchasing the bundle gains you access to The Risk Capacity Index at no additional cost, assuming you have use for the two other products, and you just might.
PPC's Tax and Financial Planning Client Presentations software package is a well-conceived program that includes an extensive collection of educational documents, flow charts, financial calculators and PowerPoint presentations (including scripts) grouped by financial planning topic. Unlike some of its competitors, this product impressed me with its educational, unbiased prose. Among the subjects covered are charitable giving, estate planning, income tax, insurance retirement and Social Security. Documents can be grouped into individualized packages for clients. Documents can be moved to MS Word or another word processor for editing, if required.
A well-written set of documents and slide presentations is a necessity for both novice planners and seasoned professionals. Beginners will find this program useful as both a marketing tool and an occasional source of information. Experienced planners will probably use it primarily as an education tool. In either case, having a wealth of client-ready materials at your fingertips will save you enough time over a year to pay for the program many times over.
Some will find The Guide to Personal Financial Planning, which in printed format fills three binders, a worthwhile investment. While the computational forms are archaic (does anybody out there still calculate college funding needs with paper, pencil and a handheld calculator?), there are plenty of useful forms, checklists, tables, worksheets and practice management documents to help run a financial practice more efficiently. The reference manual is, for the most part, filled with concise, useful information. As one would expect, the guide is particularly strong on tax related subjects. My guess is that newer planners will benefit most from this guide, but established firms in the process of reviewing their forms and procedures are sure to find the guide a prudent investment as well. Financial Planning Workflow Solution, at $495, represents a good value.
Joel P. Bruckenstein, CFP, is co-author of the book Virtual Office Tools for the High-Margin Practice: How Client-Centered Financial Advisers Can Cut Paperwork, Overhead, and Wasted Hours. (See www.virtualofficetools.net for ordering information.)