Next you go to the retirement expenses area. You can create one target amount for all monthly retirement expenditures, or you can break retirement spending down by category or by discretionary and non-discretionary expenses. For each retirement expense, the application allows you to enter three values: the necessary amount, the target amount and the aspirational amount. Necessary amounts are arrived at using the absolute amount provided. For the target and aspirational values, incremental amounts are calculated. The default discount rates range from 4.8% for necessary goals to 7.8% for aspirational amounts, but users can adjust them. Once net present values are arrived at, they are multiplied by a "survival probability" to arrive at an actuarial net present value (ANPV) for each goal level. You can also enter educational goals, one-time goals and recurring goals. The calculations differ slightly for each, but they broadly follow a similar methodology.
You then enter savings plans. There are two types: retirement savings (pre- or post-tax contributions to a retirement account) or other savings (after-tax savings). For retirement savings, the program calculates the ANPV of the future monthly cash flows. GoalgamiPro then discounts each year's future savings by a Treasury yield curve to calculate the savings' net present value for that year. GoalgamiPro next calculates the ANPV of each year's savings by applying the survival probability of the person who owns the retirement account in each year to the respective net present value. Once the ANPV is determined, goalgamiPro will deduct the present value of the deferred income taxes that would be owed on the savings from the ANPV for tax-deferred retirement accounts.
Social Security benefits are defined by the user. GoalgamiPro does not calculate them for you. For balance-sheet purposes, goalgamiPro does a net present value calculation similar to that used for retirement savings to arrive at a value that is entered on the balance sheet.
All of the data entry to this point sounds time consuming, but it actually takes longer to read about than actually do. Of course, the time required will vary depending on the case and the level of detail you choose, but a basic case can be done in about 15 minutes. Soon, the time required will shrink. That's because ASI is working on an integration with Salesforce through the AppExchange. That would automate the integration process for those using a custodian-supplied version of Salesforce. We also expect some direct custodian integrations of the program if there is demand. Once these take place, all the assets will flow seamlessly to goalgamiPro. Then all the advisor will have to do is create a scenario and add assumed tax rates, Social Security receipts, savings and retirement expenses.
The Output
Once all the data is entered, you get a "goal funding analysis." The analysis consists of two views: the balance-sheet summary view and the balance-sheet analysis view. The former clearly illustrates the client's current net present value balance sheet by type of resources (assets) and types of commitments (liabilities). The balance-sheet analysis shows the three goal levels (the necessary, target and aspirational levels) and for each displays the category amount, the amount funded, the funding ratio and the margin of safety. The last shows the amounts that could be lost but still allow the investor to fully fund a category. This view also includes a chart of resources versus commitments, a pie chart of resources by type and a pie chart of commitment by type.
After viewing the results, the user can generate a report. A report template allows for a bit of customization. Advisors can customize the report title and advisor information and also select from a number of pre-written narratives that explain where a client's assets are in relation to his or her funding needs. (Advisors can also add their own text.)
The report is a colorful, one-page piece that presents the same information contained within the goal funding analysis and the balance-sheet summary in a condensed, client-friendly view. As we said at the outset, this is not a financial plan. It is a quick checkup that reveals the current status of the prospect's/client's financial health.
Our Take
Clearly we could take issue with some of the program's limitations in calculation assumptions and methodology-and question the utility of the net present value balance-sheet approach. But given the limited scope the application is designed for, the methodology is well thought out and appropriate to the task at hand. ASI appears committed to improving the program regularly. Since the program is Web-based, ASI can roll out incremental upgrades fast, and it does. Currently, updates are being released every three to four weeks.
At $495, we think goalgamiPro would be an interesting supplement to existing RIA programs. It offers a different approach to generating a diagnostic for prospects, and the one-page report could be the basis for starting a discussion with a prospect or client. It's quick, it's easy and it might lead to a full planning engagement. GoalgamiPro should appeal primarily to investment professionals who want to try, at a high level, to help clients get a quick diagnostic on their overall financial health. If the market is receptive to ASI's methodology, goalgamiPro should do well.