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Things to Consider When Choosing The Financial Planning Software 

15 days ago

Financial planning software is an indispensable tool to understand the long-term impact of any financial trade-offs and make an informed business decision. The best financial planning software fills the gap by taking the necessary number-crunching to calculate the projected outcomes, which eventually helps the clients in knowing more about their financial decision.

Looking to find the financial planning software?

Well, that’s not an easy feat.

All financial advisors do not have the same types of clients, which means the financial planning approach may depend highly on the situation. Hence, no one insurance software can be rated as the ‘best’ software.

We suggest that instead of running behind the best financial software, choose the one that is best suited for you, for the type of clients you work with, and the way you want it to integrate and interact with your existing technologies.

In this article, we will walk you through the basic things which you should look for in financial planning software. Let’s have a look.

Things to Consider When Choosing The Financial Planning Software

Is it Goal-Based or Cash Flow Based?

For decades, the only differentiating factor between financial planning software has been “goal-based” versus “cash flow-based”. This refers to the detailed assumptions regarding how a household’s total cash flow is handled in the software.

A goals-based investment software captures money allocated towards specific goals and projects whether the goals will be achieved or not. For instance, let’s suppose you plan to invest $20,000/year towards saving for retirement, and $5000/year for college savings, a goal-based software will evaluate whether your savings, along with growth rates will lead you towards the goal. One major limitation with such software is that it does not track total household income as well as expenses, it only assumes the money to be allocated towards a specific goal that has been determined, and projects the outcomes.

On the contrary, a cash flow-based financial planning software tracks every dollar in the household, combining total inflows, and making sure that they match with total outflows. So, if we take the same example, a cash flow-based software would not simply project your outcomes based on $20,000/year for retirement and $5000/year for college, instead, it will also make other allocations for the household expenses including tax obligations, and so forth. In simpler words, it would not just include cash flow towards a specific goal, it will track all cash flows.

Is it Straight Line or Monte Carlo?

Another major thing to consider is how the best financial planning software is projecting the outcomes. Is it projecting a “straight line” based on the entered assumptions or does it project a wider range of returns using Monte Carlo analysis?

Furthermore, does the software analyze alternative scenarios? Can it provide side-by-side comparisons of potential trade-offs? Also, how well does the planning software model taxes in particular? Some software only allows for a basic assumption regarding effective tax rates, while the others will provide a detailed year-by-year tax projection based on the tax brackets, projected income, and various deductions.

Make sure that you consider all of these factors before making a decision.

Does it Provide Interactive Tools or Printed Reports?

Gone are the days when a financial report printout by insurance software was considered the holy grail of making the right decisions. In recent times, things have changed and most financial planning software offers more than just printed reports.

Rather than simply gathering client information or data, inputting it into the software, and printing the reports, the data is added to the software, and the financial advisor and client work together to craft a plan with interactive tools of the software, give it a test run and see how well it endures under various circumstances.

Flexibility and Ease of Input

When financial advisors handle the investment software, flexibility, and ease of input matter a lot to them. If we talk about ease of input, it can affect everything from the raw time to put client data into the plan, to getting results on a learning curve. In short, the more complex the input process, the more training they will need to use it to the fullest.

Now, in terms of flexibility, some software solutions will force you to use the preset inputs determined by the software makers- which might be good for some, but a nightmare for those who prefer to use their inputs. As the financial planning software varies greatly, some tools will allow a broad-based average return, while the others will only allow preset inputs, some will allow for return assumptions to be changed, while the others will allow you to set the entire cross-relation matrix.

To cut it short, you will get a lot of factors and tools in the software. However, you will have to see which one works the best for you. Perhaps you might be happy with the preset inputs looking at the type of your clients. If that is the case, it is advisable to go for software that freezes the assumptions.

Modular Financial Planning Tools

Most of the financial planning software focuses on projecting wealth accumulation and decumulation in retirement. However, some clients might need modular areas of financial planning. For instance, evaluating their insurance coverage or college savings, and so forth.

If you have such client needs, look for a financial planning software that includes core accumulation/distribution projection for life insurance, disability insurance, college savings, social security timing, tax planning, retirement drawdowns, stock options and executive compensation, and so forth.

If you are looking for efficient financial planning software, policy administration system, CRM for Insurance professionalsinsurance agency management system consider contacting the team of Equisoft. Founded in 1984, Equisoft strives to advance digitalization to enable growth for all its clients and customers. Their robust financial planning software will help you in making in-depth interpretations of your current financial situation and devise credible plans for the future.

With advanced tools for analysis, Equisoft will empower you to build an effective financial plan with your clients. You can learn more about the software here.

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