UBS Financial Services Inc. is being sued for two patent infringements in a case some experts say could affect the entire financial planning industry.

Wealthcare Capital Management, which serves individual investors, financial advisors and institutions, filed suit against UBS in U.S. District Court in the Southern District of New York for using what it contends are its own  proprietary processes for financial planning.

The two patented processes involved in the suit assess a client's long-term financial goals and then use a capital-market modeling technique to determine how these goals can be achieved.

Wealthcare has offered in the past to license the company's advisory system to UBS, but the Switzerland-based UBS has declined, says David B. Loeper, founder and chief investment officer of Wealthcare Capital Management. Loeper is chairman of Financeware Inc., the parent company for Wealthcare and its intellectual property rights arm, Wealthcare Capital Management LP LLC.

The suit seeks monetary damages and an injunction banning UBS from using the financial advising systems that are part of programs, including MoneyGuidePro.

"We believe that our recently issued patents validate that our Wealthcare process is ground breaking in the industry," says Loeper, who adds that the patent office studied the proposed patents for seven years. "It would be unfair for UBS, or any other organization or individual advisor, to use our intellectual property without our permission and without fairly compensating us," he adds.

"We filed suit to protect the investment we have made in this intellectual property, and to protect the investments of our advisors, licensed users of the system and our advisory clients."

Others disagree with the validity of the suit.

Joel P. Bruckenstein, CFP, an industry expert on technology for advisors who writes for Financial Advisor magazine, says a successful suit could raise the cost of doing business for all financial advisors--a cost that probably will be passed on to clients. For the suit to be successful at that level, it would require a court to grant extremely broad protection to Wealthcare's patents.

"The implications are that if the patent is upheld, MoneyGuidePro and other software providers will raise the cost of software for every financial advisor," says Bruckenstein. "The affect of just filing the suit means that for the time being advisors may have to do extra due diligence with their software providers, which also will raise operating costs.

"In my opinion it appears he is trying to patent the financial planning process itself. I cannot imagine why the patent office granted this patent, but I would urge them to reconsider," he adds.

In a letter drafted to MoneyGuidePro subscribers, Bob Curtis, CEO of PIEtech Inc., says, PIEtech Inc., the developers of MoneyGuidePro, "vehemently denies any infringement. We will aggressively defend ourselves and our customer, UBS, from these baseless claims.

"I have spoken to many in the industry who feel these patents should never have been issued. Personally, I am outraged that anyone would attempt to patent the core tenets of the financial planning process.  This is not just a threat to MoneyGuidePro, but to our entire industry.  No one should own the financial planning process and try to charge a tariff for its use," Curtis says. "Now, more than ever, we need to encourage innovation in the software that facilitates your ability to deliver professional advice to your clients."

Loeper disagrees. Wealthcare describes its system as a goal-based advising approach that allows advisors to give their clients confidence in exceeding their goals without unnecessary sacrifice to their lifestyle, while avoiding undue risk. It enables advisors to craft a recommended portfolio allocation and recommended package of life goals based on a client's current assets, their range of ideal and acceptable goals and relative priorities amongst the goals.

"I want to set the record straight. This is the first law suit we have ever filed and we would not have done so if we did not believe that we have sound advice from our patent attorneys that we can win this infringement case," Loeper explains. "At the same time, there may be a lot of advisors out there using MoneyGuidePro appropriately and not infringing on our patented processes."
Loeper says the patented systems are used by about 30,000 licensed advisors.
UBS declined to comment on the case.

-Karen DeMasters