Advisors do live in interesting times. Our industry has been going through a lot of changes over the past decade, but I would argue none have impacted us as much as the fear of automated competitors. We have now had a decade plus to come to terms with the threat of fee compression from Robo-Advisors. In that time, we have also managed to find more ways to use technology to our advantage. So, where does that leave us today? I heard a wiseman once say “The best way to compete with Robots is to be more human.” In context, advisors will need to offer personal and analytical services that are vastly superior to what an automated software can provide. Consequently, vendors will need to provide more tools to enable sophisticated advice from Advisors. To a small degree, this has already happened. Irony aside, planning software has become much more prevalent in planning conversations. Advisors are having many more planning conversations today because technology makes it easier to do so. Unfortunately, traditional Financial Planning Software (FPS) is still dramatically lacking in the power needed to enable advisors to offer more differentiated advice and to fully showcase their value.

Despite the threat from automation, most planning experiences still seem to design for simplicity at the sake of sophistication. It’s as if the objective is to see how fast we can get the client through the process rather than how long we can get them to stay. Most advisors are attracted to the idea of giving their clients online access to their plan through a portal, which implies to me that we see value in additional engagement. Unfortunately, it’s a portal into technology that was designed for advisors, not clients. In fact, in this digital day and age, the only experiences truly designed for the client are paper reports, and, as we all know, even they are really designed for advisors. If we want clients to properly value the service advisors provide, we must give them a service that is clearly valuable, which is advice that extends beyond passive or active investment management. This must start by designing an experience that actually focuses on the client.

Is today's experience engaging?

I was in my twenties the first time I used Financial Planning Software. I credit it to teaching me the importance of saving at an early age. In fact, I appreciate having had access to financial planning software when it came time to start my first 401(k). I started with an aggressive savings strategy because my plan said I needed to do so in order to have the lifestyle I wanted someday. Looking back, I’m glad I started with a strategy that represented me and not just a rule of thumb. Of course, it made an impression on me that I was using software only available to advisors and that advisors had no interest in me as a client...but that’s a different issue. I enjoyed playing with future goals, sending my future kids to college (Go Hokies!!!) and paying for future homes, vehicles, and vacations in my future super-baller lifestyle. Though I spent a lot of time interacting with that planning software, I did so because it was my job. It was obvious to me that the technology wasn’t really geared for people who didn’t have a lot of money or were not already at or near retirement. That knowledge lessened my excitement and how serious I took the plan. Even if I were older and well-off, I would have still been frustrated that the software didn’t allow me to truly build a plan to my specifications.

That was twenty years ago, and as our culture embraced technology in all facets of life, we have increased expectations for FPS. Modern day consumers expect more control and more customization, but they’re not really getting it. I hear advisors complain that their clients don’t participate in their portals to the degree that they had hoped: “My clients just aren’t into that,” you might hear. However, it’s likely that most of your clients are just like everybody else, walking around, staring at their phones, and almost constantly engaging in some form of technology. Do we not have millions of 80+ year-olds surfing the web on their netbooks and using “The” Facebook? Do we not see people playing with hand-toys meant to focus their fidgety energy? Showing clients a Monte Carlo Result and a Net Worth number will not be enough to get them to participate. Providing functionality that resembles what they get for free at Mint.com is not engaging. Do we seriously believe that our clients DON’T want to engage with their financial futures…. their dreams? We just haven’t given them anything to engage with.

Dream Scenarios

All clients have dreams. One of the most exciting aspects of creating a financial plan is to envision a future where hard work and planning pay off to allow those dreams to become a reality. Most advisors who use Financial Planning Software input financial goals and discuss “reach” goals in the same context as dreams. “Reach” goals are really just financial goals applied to a single timeline which represents a client’s financial plan. An example of a “Reach” goal is to buy a new car every 5 years or to take annual vacations that escalate in cost every year. When I speak of dreams, I am suggesting the possibility of deviating from the primary plan entirely and exploring completely different scenarios. Examples of “Dream Scenarios” would be “Taking a Sabbatical,” “Starting a Business,” or “Early Beach Retirement.” These are dreams the client may immediately suggest, or they could be dream scenarios that you encourage them to explore through the planning process. The problem with traditional planning software is that it’s not designed to explore “Dream Scenarios” beyond loose modeling, meaning the scenario changes only loosely compared to the clients’ expectations of items that impact their plan. I believe Dream Scenarios are the most obvious example of a lost opportunity for engagement by advisors during the planning experience.

Let's consider a quick example. Your clients recently explained to you how their friends have retired early, sold their primary home, and downgraded to a smaller house near the beach. They would like to explore the possibility of doing something similar. This new scenario requires the sale of a home that wasn’t previously being sold, with the income from that sale being rolled into the purchase of a new home that was not already a goal in the clients’ “Plan.” Additionally, we may need to adjust most of their goals and possibly account for any difference in additions to assets prior to retirement, social security distribution, etc. The list could go on, and that’s the point: Do more than what the robots (Automation) can do! Your clients have come to you for advice; why not give as much as you can? This is the promise of financial planning software that could not be obtained otherwise.

Hard Questions

Dream Scenarios aren’t the only type of engaging Scenario which can serve as a deviation from the “Plan.” The label of “Dream” is just that, a label. I could have just as easily labeled that dream of starting a business as a Hard Question: ”Can I afford to start my own business?” My personal favorite is: “What would our retirement look like if we found a way to keep this house and use it as a rental the next time we upgrade our home?” It’s my favorite because it’s my personal example. However, I found I could only model it with traditional financial planning software if I created the alternative plan as a completely separate client and input the alternative as that client’s current plan. Additionally, I also found I couldn’t model the scenario to the degree I felt like I needed to make the entire exercise worth it. This is another example of a “Hard Question” created as a scenario that deviates so much from the Plan that most advisors are tempted to simply speak to it at a high level because the work it would take to actually model it is too laborious. Again, this is another missed opportunity for Advisors to do more than what the robots can do because FPS hasn’t traditionally made this example very easy to model.

Sensitivity Analysis

A Scenario analysis could also be a “Sensitivity Test” for expenses, goals or even economic events out of your control. Let's say your client has 3 children and, therefore, a bunch of certain, and possible, college expenses. If you are looking for something that will engage your clients, give them a page that allows them to easily test certain expenses like college. They have three kids and your plan has them going to a state university for 4 years. What if their dream school turns out to be out-of-state, or private? What if it takes 5 years and not 4 years for undergrad? What if one or more go to graduate school? No matter what your clients’ philosophy is on these questions, this is an example of something that will certainly be engaging. If we make it easy for them to engage and make it worthwhile for them to take control, they will

Risk Analysis

The most common type of Scenario we use to change our current plan assumptions is Risk Analysis. “What if something happens to me tomorrow? Will Rick and the kids be OK?” Most planning software provides a page dedicated to answering this question, but it’s also another example of a lost opportunity to provide an increase in value of services. You shouldn’t be relegated to only the limited options on that “Life Insurance” analysis page. Additionally, advisors typically have access to one page to play out one version of risk analysis, but real life has many permutations. They may provide a bunch of choices you’d expect to see, but all are at a very high level and you have a clear opportunity to do more. The only extra work required should be the usage of brainpower. You are engaging in the Art of working with your clients to uncover these opportunities mixed with the science of applying your expertise. The labor involved in using the planning software to prep/perform the analysis should not be time consuming.

Conclusion

​The next generation of Financial Planning Software will place an emphasis on engagement by giving clients more control of the experience. Talking about iteration and the power to test small questions quickly is certainly one way to engage, but I’m arguing that we can go deeper. It is the dream scenarios and hard questions that clients want to iterate, not merely the standard suggested actions. If our software is more powerful and intuitive, the opportunities to engage become endless. Clients will feel compelled to interact with their plans long after they take them home. Imagine the paradigm shift in personal relationships if clients actually had a reason to routinely log into their Client Portals and interact. The more clients engage, the more they need expert tutelage and advice that a robot cannot provide. Financial Planning Software that caters to the wants and needs of clients will effectively enable the advisor to offer the differentiated advice, authentic engagement, and increased value that irrefutably makes the Client/Advisor relationship an obvious choice over automation.