Much-Needed Makeover

Profiles Professional Version 8.0 gets a new look.

The release of Profiles Professional 8.0 is a big deal for a number of reasons. First, with an estimated 50,000-plus end users, Profiles continues to be one of the most widely deployed financial planning programs on the market today. Second, this release is the first major overhaul of the program since EISI, now the largest vendor of financial planning software in North America, acquired Financial Profiles Inc. in August 2006 from the Hanover Insurance Group Inc. Thus, this is our first opportunity to gauge the impact of EISI's takeover on Profiles Professional (formerly known as Profiles+ Professional).
Has EISI been able to apply a much-needed makeover while retaining the unique characteristics that Profiles users have come to love, or is Profiles destined to become a NaviPlan clone now that EISI is at the helm? We're about to find out.
When I first discussed Profiles Professional 8.0 with EISI Senior Product Consultant Cliff Skrdlant, he told me that one of the primary goals of this release was to increase user productivity and efficiency. EISI apparently noticed that the user interface was a good place to start.
Over time, the Profiles interface had become cluttered. As new features were added, it often seemed that they were shoehorned into the existing structure. This maintained continuity from one version to the next, but often made it difficult to locate new controls, which were sometimes buried or located in counterintuitive places.
From the moment you launch version 8.0, it is obvious that something has changed. The Welcome screen (the first screen you see when you launch the program) has lost its cluttered look. Now, this page offers only two options: to either create a new case or open an existing case. If you choose the new-case option, you are transported to a new page that offers three case modes: the "Express" mode, the "Comprehensive" mode and the "Detailed Cash Flow" mode.
Unlike previous versions, which required knowledge of the different plan types before you could begin, the new "Create new case" page offers a good summary of relevant facts. For each of the three plan types, it tells you who the target client is and the estimated time for initial data entry, plus the modules and features each plan mode offers. For example, it tells you that a comprehensive plan offers expanded goal-based analysis (unlike the express mode) and it is ideal for most clients, particularly those aged 35 to 55. Data entry is estimated to take 25 to 45 minutes, and in addition to the express mode modules, the comprehensive module offers estate analysis, business continuation, income tax analysis, stock options and a tax-sensitive option. If further details are required, the user can click the little information icon associated with each plan. This reveals a pop-up box containing additional detailed information. As was the case in previous versions, there's also the option to create a preview. This is not a financial plan, but more of a basic initial assessment that can be used to engage the client and demonstrate the need for financial planning.
Once you select a plan, you are taken to another new screen that reveals more of 8.0's new flexibility. Previously, when you elected a plan type, you had the option of completing a single module or the whole plan. If you chose to complete a full plan, the program displayed all of the required screens-and the advisor had to complete them.
Now, the user has much more control, so each plan can be better tailored to the client's needs. In a comprehensive plan, the advisor can choose to include one to seven analysis objectives (retirement, education, estate planning, accumulation, survivor needs, disability and long-term care). Next, they select from a context-sensitive list of extended analysis objectives. For example, if the advisor decided to include a retirement objective, the extended options would include an asset allocation provision and tax-sensitive provisions. If the asset allocation analysis is selected, advisors would then have access to the Monte Carlo option. If a user only chose to analyze disability, however, a tax-sensitive analysis would be the sole available extended option.
Users can also select which "assessments" they want to include. Personal planning choices include risk tolerance, financial statements and income tax analysis. Business assessments include business valuation and key employee valuations. Once the selections have been made, the input screens and the output will be sized to reflect the customization.
The final steps before the case data entry begins is the "case setup." First, you enter the plan date, inflation rates and tax rates (which are not available in the preview or express modes) on an assumption page. This information was in the previous versions, but it was not in a single, up-front input screen. Then comes the new asset allocation setup. Here, the user can set return assumptions at the asset class level, or use the supplied Ibbotson Capital Market Assumption default rates. In the past, no guidance was given in the core program, and if the user did not supply rates, the fields remained blank.
The impact of the asset allocation on the plan has changed as well. In the past, the program showed how the current portfolio looked. Based on the score of the risk-tolerance questionnaire, the program suggested a new allocation; however, the asset allocation was never really integrated into the plan analysis, and the allocation did not directly impact the goals analysis. Now it does.
In addition, the user can designate an asset allocation methodology to be used in the plan. For example, there can be one allocation for all accounts, a separate allocation for qualified and nonqualified accounts, allocation by account or allocation by objective. You can choose to assume the automatic annual rebalancing of managed accounts, or not.
For existing cases, the case setup section includes a link to upgrade an existing case. This is a really good idea because it allows users to seamlessly expand either the depth or the breadth of cases as needs change over time.   
With the exception of the asset allocation changes, we've confined most of our discussion so far to the interface, and with good reason: The new interface is so much better that it should lead to improved, more customized plans in less time. The impact of these improvements should not be underestimated. Nevertheless, a pretty face is not enough. The program also has to deliver the planning goods, and when compared to previous versions, Profiles Professional 8.0 does just that.
As was the case with the interface, EISI ripped a lot of the guts out of the Profiles Professional calculation engine and then rewrote them. According to Gregg Janes, vice president, product management-planning, previous versions of the program performed calculations using something called "goal solves." Without going into a lot of technical details, the firm found this methodology produced accurate results, but it had a few drawbacks. From the end user's perspective, it was indecipherable. You could not really follow the calculations, so you couldn't audit them and you couldn't really explain them to someone else. The previous methodology was slow as well. With Profiles Professional, EISI has replaced the complex calculation methodology with a more straightforward net-present-value calculation method. This change delivers faster calculations that are easier to audit without sacrificing accuracy.
Janes says they also reworked the way retirement calculations are made. Now, on a yearly basis, the program looks at inflows (income) and outflows (expenses). Outflows include all planned savings expenses. In years where there is a surplus, the program default assumes that the excess is spent, although advisors have the option to save a portion or all of the excess instead. According to Janes, "Assuming that clients will save 100% of a yearly surplus is unrealistic, so we'd prefer to take the more conservative approach. The only exception is a surplus due to RMD," he says. "We assume that RMD will be reinvested, not spent."
Previously, Profiles did not distinguish between hard assets and investment assets. This led to some unintended consequences that drove longtime Profiles users nuts. For example, if you wanted to sell the primary residence to fund retirement, the program would liquidate the asset as needed, even if it had to do so one shingle at a time. Clearly, that was a bit unrealistic.
Now, Profiles recognizes a hard asset when it encounters one. It understands that if you own a primary residence, for example, there may be one or more loans associated with it. When you sell your home to fund retirement, the default is for the whole house to be sold at one time (what a novel thought), with the associated liabilities being paid off. Net proceeds from the sale are dropped into the plan, where they are available to fund goals.
In addition, advisors can adjust proceeds for sales expenses by entering them as a percentage of the sales price or as a fixed dollar amount. There is even an option to treat the home as a primary residence so the taxes will be calculated properly. Finally, there is a downsizing option, which makes it easy to model selling off one home and purchasing a replacement for a fixed percentage of the cost of the existing one.
Profiles now offers retirement distribution functionality. The asset distribution screen allows the advisor to associate an asset with a goal, retirement being an obvious one. According to Janes, the program offers two "simple but smart" preprogrammed liquidation methods to choose from. One method is optimized to defer income taxes. The other is designed to minimize IRD at death. Generally speaking, if clients have not yet hit their goals, it would make sense to use the tax-deferral strategy; if they've reached their goals and they want to maximize income to the next generation, the latter strategy might be a better option. If neither strategy suits the situation, advisors are free to create their own custom liquidation strategies. In another subtle change, multiple assets with the same distributing ranking can now be drawn down proportionally. Previously, one was spent, followed by the next one.
Forms and reports also have received a makeover. EISI decreased the use of color in its forms to keep the printing costs for advisors low. The fact finder is now modular, so it can be better tailored to the clients' goals. The client objectives and recommendations flow through to the reporting module, so only those relevant to the actual plan are displayed in the available reports section.
Profiles offers some artificial intelligence to help advisors along. For example, time horizons are built into goals. If an education goal is associated with a child, the program will know when the funds are needed. When you hit the "client presentation" link, a wizard examines your inputs. If it identifies an error, a dialogue box explains the error and allows you to edit or remove the errant data.
EISI has removed a couple of features that current users may miss. One is a mode for proposed cases only. For now, the recommended work-around is to perform a "save as" on a case, make any proposed changes and rename the case with the word "proposed" in the case name. It is anticipated that a scenario-building capability will be added to an upcoming version, rendering the "proposed" mode obsolete.
The "concerns" and "risk rewards rating" functionality has been removed from the program, but this is not an issue since the new asset allocation functionality, combined with the new risk tolerance functionality, make the older options irrelevant.
EISI has also changed the way that the program deals with the cash value of permanent life insurance during retirement. Previously, you could use cash values to fund retirement. This is no longer the case. You can, however, enter cash flow from an insurance product as an income source.
There is much more to this upgrade than I can cover in the space allotted, but clearly, Profiles Professional is superior to its predecessors. The ease of basic data entry was always a Profiles strength; now it is even better. Complex cases are easier to create because advanced functions are more accessible and more logically placed. Retirement distribution capabilities, a major void in the previous versions, have been addressed, and many existing features have been significantly upgraded. Perhaps most important for enterprise customers: Despite the makeover, there is virtually no learning curve for current users. While much has changed, it is almost all for the better. The interface is intuitive, so you don't find yourself searching for fields or functions. They are all readily accessible.
This upgrade has been in the works since well before EISI purchased Financial Profiles, and it took way too long, but at least user patience has been rewarded. I could nitpick about some minor annoyances, but that really wouldn't be fair since the good so heavily outweighs any minor quirks. I also could point out that Profiles is not in the same class as NaviPlan Extended, but quite frankly, I think this is by design. I suspect that some large enterprise customers made it clear to EISI that they wanted a new, improved Profiles, not a NaviPlan clone, and they got what they were hoping for. Profiles Professional 8.0 stays true to its lineage while surpassing its predecessors. It is by far the best Profiles ever.