PFP Notebook can be a good planning
solution for new and low-volume practices.
An interesting aspect of being an advisor is that
each of us has his or her own unique approach to financial planning.
All Certified Financial Planners (CFP) and other planning professionals
follow a six-step planning process, and they abide by certain practice
standards. However, within that broad framework there is plenty of room
to exhibit one's individuality, and most good advisors I know do just
that.
This individualism carries over into the way
advisors select and use financial planning software. The larger, better
known firms in the business, such as EISI (NaviPlan), Financial
Profiles, MoneyTree and PIE Technologies (MoneyGuidePro) are well aware
of the many approaches advisors take to financial planning, and they
generally do a good job of being flexible enough to cater to advisors'
diverse needs. For those who cannot find what they are looking for from
the above-mentioned firms, however, other options do exist. One of
those alternatives, which has managed to fly below my radar screen
until now, is PFP Notebook.
PFP Notebook is distributed by Brentmark Software
(http://www.brentmark.com), a firm best know for its specialized
estate, retirement and tax applications. These include Pensions &
Roth IRA Analyzer, Pension Distribution Planner, Estate Planning
QuickView, and Kugler Estate Analyzer. In addition, Brentmark maintains
a number of informative Web sites such as the Roth IRA Web site
(www.rothira.com), the Roth 401(k) Web site (www.roth401k.com) and the
State Death Tax Web site (www.statedeathtax.com).
PFP Notebook defies categorization. It is a
comprehensive financial planning program in the sense that it covers
all the major bases (personal financial statements, risk management,
investments, retirement, estate, education, income tax), but it is not
nearly as comprehensive as MoneyTree's Total Planning System, NaviPlan
Extended, or, in many respects, MoneyGuidePro.
Priced at $595 for the first year and $199 for
annual maintenance thereafter, the program is less expensive than major
competitors, but it is not so inexpensive that it can be considered an
impulse purchase. Some of the screens have an old, almost antiquated
(technologically speaking) feel to them, but overall navigation is
surprisingly intuitive. These incongruities make PFP Notebook a
particularly challenging program to review, but it is a task worth
undertaking because PFP notebook represents a good value when paired
with the right advisor.
Getting Started
The program comes with adequate documentation to get
you going. There is a printed Quick Start Guide that complements the
100 page-plus manual. System requirements are modest. If you have a
Windows computer that functions, it can probably support this program
(if it can't, you definitely need to buy a new computer).
Once the program is installed on your hard drive,
you need to perform a few simple setup tasks. First, set up yourself,
and any others who will use the program, as a registered planner. This
allows the program to link each client case to a planner profile. It
also allows planners to designate a password, so each planner can
control access to their own files. Planners also can customize how
their name will appear in letters and reports.
Next, you set up the company. Again, this is to specify the company
information that will appear on letters and reports. It is also a good
idea to set up "general assumptions." These are the default values the
program will use for inflation, pretax investment returns, after-tax
investment returns, education, inflation rate and years until
retirement. These rates can be changed for individual cases; they are
just the defaults.
The program provides a number of data gathering
aids. Advisors can elect to send clients a forms packet to fill out.
The packet includes a detailed fact finder. It also includes a very
well done document called The Financial Planning Bill of Rights. This
one-page document clearly spells out the rights and responsibilities of
the planner and the client. It can be edited if desired. There's also a
list of required documents that the client is expected to bring to the
initial meeting. In addition, the program has the ability to
generate a cover letter to be included with the packet.
There are two negatives to using this method. One is
that the client may not want to be bothered with a long form. The other
is that someone must enter the data contained in the form into the
program. To combat the latter deficiency, the program offers an
automated method of data collection. You can create an electronic data
gatherer with a few mouse clicks. This form can be loaded on a disk or
e-mailed to the client, who then enters the information electronically.
Once the data comes back to the advisor, the file is effortlessly
uploaded to the program creating, or populating, the client file.
Once the client file is created, the program creates
a progress schedule for the client. The progress schedule is a list, or
work-flow map outlining all the steps in the planning process
(engagement letter sent, engagement letter received, completion of
general information, etc.). This allows the advisor to stay on task; it
also provides a record for compliance and for the client.
PFP Notebook includes other practice management
tools. There are general letters (engagement letters, transmittal
letters, etc.), insurance letters covering various types of insurance,
an action checklist, a client evaluation form and a request for Social
Security information.
The planning process is straightforward. Advisors click an arrow to
move from one screen to the next. Client information, including goals
and objectives, are entered first. Next comes Finances. Of note here is
the clear handling of mortgages, with easy schedule creation, payment
history, graphs and the like. Risk management includes a capital needs
analysis and current policy information. The investment section is
flimsy but functional. It offers three asset classes (equities, fixed
income, cash). The risk questionnaire is also bare bones.
Like the investment section, the retirement section
is no frills. Essentially, the program looks at the client's estimated
retirement income need in today's dollars, subtracts any expected
indexed income, such as Social Security payments, and arrives at a
future income need. Next, the program looks at income-producing assets,
assumed rate of return, assumed inflation rate and retirement age to
determine if additional funds are needed. If there is a shortfall, the
program can calculate the additional savings required to cover the
shortfall. PFP allows adjustments for surplus and deficit years during
retirement, prioritizing order of withdrawal and designating assets
subject to RMD.
The estate section includes a checklist to help
insure that advisors contemplate potentially appropriate planning
techniques. While of limited use to veteran planners, it is useful to
less experienced folks. In any event, going through the checklist is
appropriate because it allows one to document the process for
compliance purposes. Once the section is completed, advisors can view
the impact of estate and gift taxes in graphical form. Multiple methods
of calculation are offered including 2009 rates, Repeal in 2010, Sunset
in 2011.
The tax section allows the advisor to create an
abbreviated Form 1040 to estimate the impact of income taxes and plan
for tax minimization. Again, a simple checklist documents the process.
Evaluation
PFP Notebook has a number of things going for it.
Price is right there at the top of the list. The $595 initial price is
reasonable, but the renewals, at $199, are a true bargain. If you end
up owning the program for four years (assuming no increase in the
yearly maintenance), your cost of ownership would come to under $300
per year. That's cheap for anything approaching a comprehensive
financial planning program.
PFP Notebook is easy to learn and use. Navigation is
intuitive. Compared with other comprehensive financial planning
programs, it is streamlined comprehensive planning, but it does cover
the critical elements; and it allows the advisor to do so fairly
rapidly. Depending on one's client base, more complex programs may be
overkill, in which case you are paying a premium in time and money for
unnecessary features and added complexity. There's something to be said
for buying what you need, and nothing more. PFP Notebook fits that bill
for some.
There is a great deal to be said for the built-in
practice management tools. I fully recognize that many readers are
already documenting their process and creating letters elsewhere, but
the facility of having processes, action checklists, forms, form
letters, etc., all built right into the system makes it more likely
that advisors will use them. This is a plus, not only from a practice
efficiency standpoint, but also from a compliance standpoint.
Not all is rosy, however. The interface is a
mixed bag. It t is reminiscent of DOS or Windows 95. On the one hand
this ook may be partially responsible for the ease of use; on the other
hand, some screens, like the report options screen, are antiquated to
the point that it detracts from performance. The "old" style precludes
some features that are becoming increasingly common in other programs,
such as the ability to create presentations (as opposed to printed
reports) on the fly.
Most of the calculations are of the straight-line
variety. You pick a rate of return, for example 8%, you project it out
at a constant rate for 20 years, and bingo, you get a result. The same
can be said for spending assets during retirement. We all know that the
return on most assets fluctuates, and the order of the returns matters.
We really cannot illustrate this to clients effortlessly using PFP
Notebook due to a lack of stress testing and/or Monte Carlo.
By the same token, there is no real facility to model employee stock
options. You can count them as an asset and designate a rate of return,
but the results will be less than satisfactory from an investment
modeling perspective.
The estate tax module covers the basics in a very
solid manner, but it is not appropriate for complex planning needs. As
mentioned previously, the investment portion of the program is basic.
Recommendations
For an experienced planner who routinely deals with
the complex planning needs of high-net-worth clients, PFP Notebook is
not the best product. On the other hand, if your typical client is in
the accumulation phase and has a fairly straightforward financial
picture, it might be a nice fit, provided that you provide
supplementary education regarding the variability of returns and their
impact on the plan.
PFP Notebook is appropriate for those new to the
profession, or those who do a limited number of comprehensive plans
each year. For such planners the checklist, work flow and other
practice management tools can provide critical reminders as well as a
facility to document the planning process. In addition these planners,
with their lower anticipated volume of plans, may not be able to
justify the cost of more expensive comprehensive programs.
Overall, PFP Notebook strikes me as a reasonable balance of price and
functionality. It's unlikely to take on the market leaders any time
soon; however there are those who can profitably deploy this
application in their practice.