In our new series called, The Budget Conscious RIA, we are exploring options on how advisors can operate their RIA without unnecessary technology expenses or complicated workflows.
As an RIA owner myself, I understand how important it is to keep your costs low while you begin to build clients. I hope to share some tips with you on various parts of your practice to help you make smart decisions when implementing new technology in your practice.
The first part of our series will be focused on a critical aspect of your practice – the financial planning software.
Your planning software is most likely the hub of your operations, so it’s important you plan on spending time to evaluate your options.
Due to the integration of your client’s financial lives with the software, I typically suggest picking a solution you can grow into rather than one you will grow out of. Picking a cheaper solution with basic features may cost you more to replace in the future.
Before we take a look at some options, this post is not meant to be an extensive review of any particular system. The goal is to give you a few viable options for each price point so you can do your own research on how each option will fit your practice. There is no substitute for hands on, free trials!
Economy: Pen and Paper/Microsoft Excel
Cost: Free – $80.00/year
Obviously, the cheapest solution is not using any financial planning software at all! Before you quickly dismiss this option, let me explain…
Which financial planning software were you able to use on the CFP exam? None! Just your fancy calculator.
You can still provide great, actionable advice to your clients without a fancy and expensive financial planning system. Even though running calculations by hand can be time-consuming, you will better understand how each variable in the formula plays a role in the result. Picasso was even quoted as saying, “Learn the rules like a pro, so you can break them like an artist.”
You might be giving up some fancy reports that some software uses, but you can also have your own reports designed that might look even better!
Think about who your clients will be as well. Do they need complex estate planning, tax, and retirement scenarios built and analyzed? Or, are they just looking for feedback on their insurance coverage, budget, and general savings? If it’s the latter, you can definitely get away with launching your firm without a full-blown financial planning software solution in place.
Both Advizr and RightCapital fit into my “Mid-Size” category. These programs are simpler versions of financial planning software, but still a few steps up from Excel. Both systems also have a similar cost.
While you will be able to make simple financial plans and projects, you will likely not find all the features you might need as your firm grows. For instance, neither of these programs have complex estate planning features which could be a deal breaker if you have older, higher net worth clients.
With that said, these programs do offer some strengths over larger systems. RightCapital has some tax planning features that go beyond what you would find in a program like eMoney.
If I had to choose, I would pick RightCapital in this mid-size space. It’s best for advisors who work with younger clients that don’t have many complexities, and it has a more modern and visually appealing user interface…another plus for younger clients.
RightCapital also seems to be making continuous improvements and adding more features to their program which means it might grow with your practice as well.
Again, try to imagine how your practice might expand and what clients you’ll be working with.
Even though RightCapital or Advizr may be a more attractive option for your budget, the cost of migrating data to another financial planning software could be very high, and these companies know that!
One great feature many financial planning tools offer is a client portal. This may be a space a client can come in and view their accounts, budget, or save sensitive financial documents. The more a financial planning software can encourage you to integrate your client’s experience with the portal, the less likely they know you will leave.
Not only will you have to transfer all the client’s planning data, you will have to have the client move their own documents to a new vault and get used to a new interface. If it was a struggle to get your client to use your portal in the first place, how well will they tolerate a change?
I decided to put MoneyGuidePro and eMoney in the same category, as they are both more robust options than other financial planning tools on the market, although it is worth mentioning that MoneyGuidePro is much cheaper than eMoney. You will also find many head-to-head comparisons of these two programs.
If you are looking for a system you can learn, master, and grow into, then consider MoneyGuidePro or eMoney.
I personally chose eMoney for my practice even though it was more robust then what I needed at the time. I knew I wanted to grow into the system I chose, and I wanted to have the ability to model as many different scenarios as I could.
eMoney has robust tools for analyzing retirement, education, and estate planning calculations. They also include some great reports that can be customized by each client, including reports the client can run on their own!
Another option is to use MoneyGuidePro and integrate with eMoney’s eMx Select dashboard. This option is still cheaper than just using eMoney by itself and gives you access to eMoney’s client portal which is definitely a strength of that system.
Get “Hands On”
All in all, getting hands-on experience with these tools is something you will need to do before you select an option. Take a previous case, or use your own data, to get a feel for constructing a financial plan.
For financial planning software, don’t make your decision solely on budget. If it makes sense for your practice, paying a bit extra now may save you headaches and higher costs down the road. Remember, being old-fashioned with a program like Excel is still a great option!
Have you ever grown out of a financial planning system and had to make a change? Let us know how it went in the comments below!