SunGard is making its first real effort to market the company's PlanningStation application to independent advisors.

    SunGard Data Systems Inc. is an enigma. It is the largest technology vendor in the financial services business, but you hardly ever hear the name SunGard in the independent advisor space.
    With 14,000 employees, $4 billion in annual sales and $25 trillion in assets on its accounting and portfolio management systems, SunGard's 2005 annual report says the company serves 25,000 customers in more than 50 countries, including the world's 50 largest financial services providers. Yet SunGard's financial planning application, PlanningStation, barely has received a mention in advisor periodicals. While sales revenue of companies like MoneyGuidePro and MoneyTree basically would amount to a rounding error on SunGard's income statement, independent advisors know much more about these other vendors than this behemoth.
    I researched PlanningStation and have some good and bad news to report about it. The good news is that this is a good planning application that even the most demanding independent financial advisor-including an idiosyncratic fee-only comprehensive planner-should consider, and it is beginning to make inroads with independent advisors. The bad news is that, like many of the other best of breed applications, SunGard in the past hasn't been very active in pursuing the independent advisor market-including the independent broker-dealer and registered rep market as well as registered investment advisors-and has not figured out exactly how to sell its products to independent financial planners.

Company Background
    SunGard was formed in 1983 in a leveraged buyout from Sun Oil Company. It went public in 1986 and was listed on the New York Stock Exchange. In August 2005, SunGard was purchased, in a leveraged buyout again, for $11.5 billion. It is now owned by a consortium of private equity firms, including Goldman Sachs & Co., The Blackstone Group, Kohlberg Kravis Robert & Co., Bain Capital Partners, Providence Equity Partners, Silver Lake Partners and Texas Pacific Group. The company loaded up on debt, including a $5 billion senior secured credit facility, $3 billion of senior unsecured loans and a loan that securitized $375 million of it its receivables. As of June 30, the company had $7.4 billion of debt, including $4.4 billion of variable rate debt.
    Headquartered in Wayne, Pa., SunGard derives 78% of its revenue in the U.S., and 77% of its non-U.S. revenue is generated from the U.K. SunGard has three business lines. According to the company's June 30, 2006, quarterly filing with the Securities And Exchange Commission, SunGard's Higher Education And Public Sector Systems business division, which provides resource planning and administrative software and services to colleges, universities and school districts, as well as state and local governments, accounted for 21% of SunGard's revenues. Availability Services, which keeps technology infrastructure secure and provides recovery and IT management systems to SunGard's customers, brought in 32% of the company's revenues. The Financial Services line of business accounted for 47% of the company's revenues.
    The Financial Services line serves buy-side investors, including banks, investment managers, mutual funds, insurance companies and trustees. It also serves sell-side firms, including brokerages, custodians and transfer agents. SunGard provides enterprise-wide applications to institutions for straight-through processing of investment transactions with front and back-office functionality, including trade order management, compliance checking, accounting and reporting. It also provides treasury management systems and owns a clearing firm, an equities trading desk and a New York Stock Exchange member firm to facilitate treasury management. The financial services business is rounded with wealth management and brokerage system applications, like PlanningStation, as well as employee benefit plan accounting systems and insurance marketing and policy administration.
    What has made the company attractive as a leveraged buyout candidate twice since 1983 is that 89% of its $4 billion in revenue is recurring revenue. In addition, no single customer accounted for more than 3% of its total revenue during the three years ended in 2005. Still, even a big company like this could be vulnerable in a downturn in the financial services business, and servicing debt payments could be tough if the stock market crashes and a large chunk of its customers can't pay their bills or go out of business. Financial stability is something advisors have to worry about with any of their tech vendors-especially small ones-and the risk of this giant should not be overlooked.
    The company is great at acquiring small technology companies and repackaging their products by integrating them into larger SunGard systems. It's made about 150 acquisitions in the last 20 years.

PlanningStation Basics
    PlanningStation is the re-engineered software application first offered by a firm called Sterling Wentworth, a small tech company that had 120 employees when it was purchased by SunGard in 1999. Within a year of buying Sterling, SunGard acquired Frontier Analytics, makers of Allocation Master, a well-regarded asset allocation and analytics application that is now integrated into PlanningStation. (Harry Markowitz, a winner of the 1990 Nobel Prize for Economics for his work in the 1950s on portfolio theory and the importance of asset classes and diversification, is on the advisory board of Frontier Analytics.)
    PlanningStation is comprised of three different levels of planning tools, called "series," and each series contains modules for creating financial plans. The Foundation Series includes the most basic modules, with the Planning Series containing more sophisticated planning modules and the Advisor Series providing the most detailed modules.
It will literally take you just minutes to fill in 20 data points in the retirement module of the Foundation series and generate an 11-page report you can give a client. The retirement module in the Planning Series contains a minimum of 80 data inputs, and generates a report about 20 pages in length plus 20 spreadsheets. The Advisor Series retirement module provides a 30-page report and requires 402 pieces of data.

    The modular architecture and progressive sophistication of each series makes PlanningStation easy to use, and allows advisors with differing levels of expertise to use the program. It lets you start a client who has little money with a simple plan, but you can adopt a more detailed approach as the client's assets grow and his needs become more complex.
    Once you input a client's data it can be accessed across all of the modules. So if you want to run a hypothetical case on a client projecting how his portfolio will grow and affect his plan, you can later use the same data inputs for that client to run an insurance illustration. You can show a client up to three different planning scenarios at one time, but PlanningStation stores more scenarios.
    The report writer is simple, allowing you easily to select which pages you want to give a client from a long list of pages. The Web-based application has a "presentation mode" that is visually appealing and meant to be shared with clients. While it is Web-based, PlanningStation also works "off-line" when you are not connected to the Web. The Monte Carlo Simulation uses forward-looking capital market assumptions that come with Allocation Master, a feature sure to please advanced planners. But this program is obviously suitable only for advisors who are willing to post data to a Web server hosted by SunGard.

    PlanningStation can assist with tax preparation and can create IRS Schedules A, B, C, and D, and it tracks 401(k)s with matching contributions as well as the cost basis of a Roth IRA. Using its scenario comparisons, PlanningStation allows you to show how a plan will perform with and without Social Security, and with and without repeal of the estate tax. The program differentiates between active and passive income, but it uses estimates that you input, not actual state tax rates.
    PlanningStation's features for making portfolio projections are as sophisticated as any of the other out-of-the-box planning packages available, allowing you to create your own model portfolios and reuse them for different clients, define your own asset classes, illustrate current versus recommended asset allocations and apply one portfolio in preretirement and another postretirement in the same case.
    To make long-term-care insurance illustrations, the software imports the costs of care from a state-by-state database listing or you can input your own locale's costs. PlanningStation makes disability insurance illustrations using existing or new coverage, and makes recommendations for additional coverage. It can analyze whether you have adequate homeowners insurance as well as auto insurance, but not umbrella policies.
    PlanningStation lets you model estate plans for couples three ways: assuming a death today, and that the client dies first; assuming a death in the future where the client dies first; and assuming a death in the future where the spouse dies first. It lets you show the impact of the entire alphabet soup of trusts, including CST, ILITs, CRUTs, CRATs, QPRTs and QTIPs. The program illustrates how adding these trusts would change an estate plan. However, it does not model generation-skipping trusts. The software also does not support nontraditional couples, reverse mortgages or private annuities, and it does not actually calculate the taxes on trusts.

Cash Flow Projections
    Until early September, PlanningStation was available only as a goal-based plan planning software. Although it was comprehensive, it did not allow for detailed, year-by-year projections. For anal-compulsive planners who feel they have no choice but to run such detailed plans, not having a cash-flow modeling engine was a deal killer. In September, however, SunGard launched a long-awaited cash flow consultant module.
    Nathan Call, the product manager for the cash flow module, says that for every 1,000 users of the application, only 25 to 50 will use the cash flow module. "It's for a high-net-worth client who has nonstandard planning needs, not just wanting to plan for retirement but who wants to see how selling a business in 2010 will affect his cash flow and tax situation."
    The beauty of cash flow planning is that you can have a client who is going to make $8,000 a month from January 2007 through March 2008 and then change his earnings from April 2006 through March 2015 to $4,000. The same is true of expenses. You can input month-to-month expenses for any specific time period. You can make unlimited withdrawals and contributions for exact amounts at exact times in the future. Dividends can be reinvested or distributed for a specific period. You can liquidate specific accounts at specified life events, such as retirement.
    The cash flow consultant allows a user to make some complex calculations, such as modeling the effects of using an Internal Revenue Code Section 72(t) withdrawal from an IRA for those under age 591/2. Taxes, when using this module, are assessed annually every January, spiking expenses in that month but creating a more realistic assessment of your cash flows. When you examine a chart showing your projected cash flows year by year, you can drill down in any given year for more detail. This can also be done with your projections of net worth, so you can drill down to see details of the contributions and withdrawals from specific accounts.

A Focus On RIAs
    These features are best suited not for the enterprise-wide brokerage and bank clients SunGard has traditionally sought but for more advanced financial planners. Maybe 5% of the reps at a brokerage firm with 1,000 or 2,000 reps have a practice where they daily deal with high-net-worth clients who demand such fastidious planning. It's safe to assume that the vast majority of bank and brokerage reps work with only a few clients with a net worth in excess $3 million and complex planning needs, and they often can outsource plan writing for these complex cases to specialists in the home office.
    So what's up here? Why would SunGard want to develop this product for complex planning cases when few of its users need it? Call says SunGard is now interested in serving independent financial planners, selling to what they call the "retail" market-"onesies," instead of just selling 50, 100 or 1,000 seats in bulk to a large institution. The move in this direction makes some sense.
    The head of an elite group of advisors at a large insurance brokerage called me a few months ago and told me that SunGard was planning to launch a cash-flow version of PlanningStation after advisors in his group had pressured SunGard for the last couple of years. With sophisticated advisors demanding it at large institutions, SunGard had to respond. And now that SunGard has built the software, why not sell it to independents over the Web?
    Actually, there are good reasons why not to do it-and, hence, reason to wonder aloud whether SunGard will succeed where other larger software companies have failed. Supporting independent planners-typically an RIA firm not affiliated with any B-D-often can be a major headache. These advisors are the most demanding customers you can ask for. They became independents because they want to do things their own way. Telling them they can't customize a risk tolerance questionnaire in their asset allocation software is a deal killer to them. Telling them they can't change the words on a risk disclosure is a deal killer.
    In addition, since they are small businesses and usually have technology systems comprised of a patchwork of applications strung together with no strategic overlay, RIAs demand a lot of support and suck resources from sales and support staff. This is why Intuit last month withdrew its portfolio reporting package from the RIA market. It's why Advent is so disliked by RIAs-because it takes a hard-nosed business approach to making sure its RIA clients pay for support.
Can SunGard Do It?
    SunGard is different from Intuit. Unlike Intuit, SunGard has been focused on working with advisors for years, albeit mostly serving large brokerages and banks with captive sales forces. It already sells 1,500 retail-client advisors PlanningStation. Call says the company is attracting 40 new independent advisors a month to its retail product, a 35% growth rate in the number of independent advisors it lured over the previous 12 months.
    In a sign of hope, key functionality in PlanningStation is customizable. For instance, the retail product, which is hosted on SunGard's own Web servers, allows you to change your disclosure and put your own logo and company colors in you reports. Moreover, you can actually change the capital market assumptions built into the Monte Carlo simulator. Call says SunGard is working on letting individual RIAs customize their risk tolerance questionnaires. While the application comes with automatic asset classification system of mutual funds from Morningstar, you can classify assets as you wish.
    The application does not have an interface to import portfolio data from Schwab PortfolioCenter or Advent Axys. However, Call says SunGard is negotiating with Schwab, Fidelity and TD Ameritrade to allow data from custom accounts to be easily imported into PlanningStation. My guess is those deals could take months to negotiate and then many more months to actually get working.
    Interestingly, SunGard's focus on enterprise-wide sales to big financial services companies with captive sales forces has left it with a small profile among independent broker-dealers. While some large BDs have licensed pieces of SunGard's products, not many independent BDs are buying it for their reps and telling their reps they must use PlanningStation as their planning application. Raymond James has done an enterprise-wide deal integrating PlanningStation, but that is a rare win in the independent BD space. The challenge in selling to BDs for a company like SunGard is that it must be guaranteed a minimum number of licenses to make it worthwhile to set up a BD with a version of the software that runs on the BD's Web server and is integrated with the BD's back-office. SunGard would seem not to have deep penetration in the independent BD space yet.

Summing Up
    For sophisticated planners, the full PlanningStation suite costs $625 a quarter. That includes the Foundation and Advisor Series as well as the Cash Flow Consultant module. For advisors who do not need cash-flow planning, the price is $500 less. And SunGard sells less expensive versions that do not handle in-depth retirement, education and estate planning.
    I do have to say that in all my years of covering technology I have not met a more open and forthcoming group of staff at a big company. While I have my doubts that SunGard will be able to provide support demanded by comprehensive planners, my impression of the culture at SunGard, based on my conversations with about six of the company's employees over the past six months, is that this is a healthy organization. Who knows? Maybe they can pull it off. It sure would be good to have more competition in providing key technology applications to the independent market. 

Andrew Gluck, a longtime writer and journalist, is CEO of Advisor Products Inc., a Westbury, N.Y., marketing company serving 1,500 advisory firms.