For instance, one of the workhorses in our practice is the professional tax software. We can produce mock tax returns and the precision that comes with that makes our tax planning very valuable.
The biggest thing that is needed to give good advice that the software is completely incapable of doing is caring about the client. Planners must take the time to get to know the client, and well, if they are going to give good meaningful advice. If it were just about sound mathematics, people wouldn’t have financial stresses. But, because they are human, they don’t necessarily behave as the math suggests.
These behavioral issues are the factor that causes us to use financial planning software more than anything else. Software can really help us paint a picture of how a client’s finances can work. We see clients getting value from interactive tools used in collaboration with us to assess trade offs and what ifs. Love that.
Some of the other aspects though don’t do much for me. Do clients really need to have their Monte Carlo Simulation updated daily? The theory behind this is that when the market takes a tumble, the client will see that their success rate hasn’t declined as much as they thought and be less prone to panic. That may be true for some, but we didn’t see an updated MCS result stem anxiety much in 2008/2009 because it still showed the numbers going in the wrong direction. The software didn’t keep my clients from panicking in the great recession, I did, and I suspect most planners reading this can say the same.
Nonetheless, I see great potential for software generally but particularly with respect to behavioral issues. It is the most interesting frontier for technology to me because I think it can help me help my clients. I’m also keenly interested in using AI and data analytics to draw insights from my client base and other technology to improve efficiency.
As I said, we are regular users of our financial planning software but to give good advice, much of the time, we don’t need it. For many cases, I can outline the basic actions needed on a napkin. Planning is strategic after all. Financial planning is supported by technology but it is driven by wisdom, born from expertise and experience. Let’s not elevate software to a seat of higher importance than that of a qualified, caring professional doing real financial planning.
Dan Moisand, CFP, has been featured as one of America’s top independent financial advisors by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager, and Worth magazines. He practices in Melbourne, Fla. You can reach him at [email protected].