Web Sites to Consider

by Ed McCarthy (www.icfpbiz.net)

Financial services has been one of the fastest growing business segments on the Web, as the continued growth of online stock trading demonstrates. But stock trading is just one example of the Web’s potential to offer useful tools to advisors and their clients. I recently looked at two interesting sites that you might want to investigate.

FinancialPlanAuditors.com (www.fplanauditors.com)

There is an obvious weakness in any financial plan’s projections that rely on a single estimate for a variable outcome’s future value. For instance, retirement planning projections typically assume a single rate of return for the client’s portfolio and other assets. But the planner—and hopefully the client—realize the odds of earning that precise return are infinitesimal. While everyone wants to see better-than-projected results, there will always be variability in the actual returns.

The FinancialPlanAuditors.com (www.fplanauditors.com) site allows you and your clients to review the validity of a plan’s assumptions. The site is interactive—the user enters personal data (date of birth, retirement age) and financial data (current investment and retirement plan data, projected contributions and distributions, etc.). In an interesting twist, the site allows both parties—adviser and client—to share access to the input. This means you and the client can log onto the site and review the plan’s input and output simultaneously. For clients who have difficulty getting to your office but are comfortable with the Web, this arrangement could be very convenient. This simultaneous access is an excellent demonstration of how the Web can lead to increased and more efficient client interaction.

The site also uses an interesting analytic method. Instead of relying on a fixed investment return, the projected results factor in the market’s historical volatility dating back to 1926. The resulting analysis creates a graph that shows the expected future value bracketed by upside and downside results. For instance, there is a 33 percent value the client’s net worth will exceed $XXX and a 66 percent chance he will run out of money before age 70. According to the firm’s press release: "The system tests an investment plan using the actual history of the market, and accounts for the "timing risk" associated with deposits, withdrawals and the variability of annual returns." I don’t have any other details on the site’s computational method, except that it is not a Monte Carlo simulation.

There is currently no charge to use the site, so except for the time required to input data, it is a free resource for you and your clients. Advisers can also list their names and contact information in a directory on the site. Investors who use the site have access to that directory so listing in it could generate leads to prospective clients. If you visit the site and wish to share your comments on it, please post them on the Internet section of the CFP Biz Technology bulletin boards—I’m interested in getting your feedback on the site’s technology and content.