What it would be like for an advisor in the 1980s to be magically transported to our 21st century? The changes would be dazzling: the Internet and social media, exchange-traded funds and Morningstar data, Skype conferences and the virtual cloud, plus a few million mobile device apps that do everything but vacuum your house.
But the most substantive change, in my opinion, would be the dramatic upgrades in financial planning software. Back then, the most advanced programs were overlays and templates built on VisiCalc or Lotus 1-2-3. Today, advisors import client data into integrated calculation engines that pull in historical investment performance data and client lifespan estimates and use tax tables to compute future portfolio values. Monte Carlo simulations even give the odds of retirement success.
The planning software evolution is nowhere near finished; in fact, it may just be getting started. Case in point: a new planning engine called InStream Solutions is simultaneously creating four major innovations that could change the way advisors work as dramatically as today’s best financial planning applications represent upgrades over VisiCalc.
Viewing your client comprehensively
InStream is a goals-based planning software engine: that is, It will calculate a client's probability of reaching pre-determined goals. This is not an innovation, of course, but it represents the core around which the innovations are built.
Just as with other planning programs, you enter a client's personal and portfolio data and get reports and probability estimates. But the program offers one remarkable feature that I predict will become more popular in the future: the client’s data, including goals and assets, family members, home address, phone number and employer, are all automatically integrated into a contact management system that is organized as a mindmap. The mindmap display makes it easy for the advisor to see a client's personal and financial situation in one place, organized intuitively. More importantly, it allows the client to see an integrated personal and financial picture and perhaps understand for the first time how his or her accounts fit together.