Certified Financial Planner

Posted on April 6, 2010 by admin

The need to organize finances for the purposes of reaching a financial target or goal has become a natural aspect of an increasingly complex financial world. Organizing your finances and getting financial advice can be split up into two major categories – financial planning software and certified financial planners. With financial planning software there is a multitude of subcategories based on price, ability, comprehensiveness etc. The same can be said for certified financial planners.

Some work based on commission while others work with a set annual percentage of your assets. Some that work within firms will even utilize the advice of other agents with specific expertise in certain areas. Which is the better option; the automated computing power of financial planning software or the experienced judgment of a credentialed financial planner?

There are quite a few variables to consider when determining whether having a personal financial planner or using financial planning software is the most suitable approach to handling your finances. By going through these variables you can determine what your financial needs are and be better informed for making the decision between either adviser or software.

How prepared are you to manage your own finances?

It is important to answer this question honestly and accurately. Some people can be intimidated or overwhelmed with the idea of managing their own finances. Do not sell yourself short, it may not be as complicated as you think. On the other hand, it is also important to recognize your limits. While you might be able to get by handling your own finances, there also is the possibility that you are coming up short in areas where having a more thorough grasp of things could benefit you substantially.

Are you disciplined enough to stick to your plan without having a coach?

You know yourself better than anyone else and, again, you would do yourself no courtesy by lying to yourself in answering this question. If you know you will not follow through with plans set by the most efficient financial planning software, having someone in the decision making process that will ensure you stick to your goals might be necessary for your financial plans to be successful.

How complex is your financial situation and what level of help can you afford?

This is a more quantifiable question. Financial planning software can cost anywhere between $0 and $1300. Financial advisers working on either commissions or a set fee will generally charge between .5% – 2% of your assets. Often the larger financial adviser firms will require a minimum of $500,000 in assets to take on a client. If you fall below that line chances are greater that you do not yet require a financial adviser. However, it might behoove you to employ an adviser even on a temporary basis if you find the complications of your financial life are considerable, for instance if you are dealing with a death or a divorce, a looming retirement, own a business or real estate, have a special needs dependent, and/or some other complication.

If you decide to go the route of a financial adviser it would probably be a good idea to have it set up as a strict nondiscretionary account, meaning that the adviser will require your input for any alterations of your portfolio, your debt management, or any other aspect of your financial world. The alternative is a set allocation program that allows your adviser to manipulate certain aspects without your consent. This can be good for minor changes but any major changes, if not all changes, should involve you as it is ultimately your money that is at risk.

Other than that the general rule for financial advisers should be similar to that of a software program. Determine the current state of your assets and where you want to go with them. Determine what your risk tolerance is so you know exactly what your limitations are for achieving your financial targets. Finally, devise and execute an effective strategy for getting there and make sure to stick to that strategy.

The answer to the question of whether a financial adviser or financial planning software is the best option depends on from what position the question is asked. If money were not a consideration the answer would always be to attain the services of a financial adviser. Oftentimes financial advisers will use financial planning software in assisting their clients. However the costs involved are necessarily a concern considering the very nature of the subject. The whole point of financial management is to free up additional finances, whether for retirement or some other financial goal. The first step in managing your finances is to determine how great a financial investment to commit to protecting and growing your existing financial investments.

In the complex financial world today organizing your finances is essential. Certified financial planner or financial planning software can both help you greatly in managing your finances, but there are some differences you should know before deciding on which to take.

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Justification Of Costs

Posted on April 6, 2010 by admin

Financial planning software can be an expensive investment in some cases, since some of the higher end software can cost upwards of $1200. Depending on what you need to accomplish, the more expensive programs may or may not be right for you. In the world of financial planning software, bigger is not always necessarily better. However, if your financial environment is a complex and convoluted maze of IRAs, CDs, annuities, college funds, 401(k)s, credit card debt and adjustable rate mortgages, it might do you more harm than good to shop for the lowest priced program available.

To understand fully why it might benefit you to buy a more expensive program or why it might benefit you to buy a less expensive program and what factors will determine each scenario, you need to have a basic understanding of how these programs work and what their intended goals are.

Financial planning programs are designed to simplify what can often times be a very complex financial situation. When faced with multiple different assets and debts, a financial climate with frequent and hard to anticipate variances, and a need to save money, these programs can be a life-saver. By organizing and simplifying the many complexities, it can be much easier to determine a path towards financial goals.

However some of the higher end financial planning software programs will not only clear up the confusion, but will also assist in mapping out a strategy for achieving your goal. Most programs will offer bar graphs and pie graphs as well as other charts reflecting the values of the status of your various different accounts. Additionally, the information from these accounts can all be accessed from one central location. So your stock portfolio, your retirement savings, your mortgage and credit card debt can all be cross referenced and analyzed in an integrated fashion to determine how best to achieve your target. Only some programs though will offer up suggestions as to which credit cards might provide cheaper rates and which banks might provide higher interest on your accounts.

Now that you have an idea of some of the capabilities of financial planning software, you can begin to address the issue of what price range would most appropriately suit your particular financial needs. Keep in mind that not all programs are better in proportion to their price. In fact, better is not an accurate term at all. The more expensive a program is will generally indicate how thorough or comprehensive the program’s functions are. Furthermore, some programs that might be a little more expensive might not have more bells and whistles than a program slightly less expensive. The price is just a general guideline.

On the lower priced end of the spectrum there is Quicken Premier for around $90 and the Deluxe version for around $60. The Quicken programs are for those that simply need help establishing and sticking to a budget. Programs in this range are most appropriate if there are a few credit cards, a 401(k) perhaps and the children’s college tuition to consider. There is not such a steep learning curve as the options are not overly detailed. This is precisely the type of program that would be suitable for someone with few financial complexities that is yet still interested in organization and some form of structure with perhaps a goal in mind.

MoneyTree Silver Financial Planner is closer to a mid-range program at about $495. This is just one example but programs around this range can generally handle additional tasks of a more complex nature. Most will offer the popular Monte Carlo simulation which can generate an estimated future path of your saving strategy with potentially negative randoms added in. This is also where the programs can start to become slightly more nuanced and complex requiring more detailed directions as well.

Software programs such as Naviplan and MoneyGuidePro represent the more comprehensive and higher priced end of the scale. MoneyGuidePro costs about $1295 so these programs are certainly only for individuals with quite extensive and complicated financial concerns. Every account is linked, all assets are integrated and a very detailed cash flow analysis is the result. Medicare premiums are considered against long term disability possibilities. Your portfolio’s quarterly changes will automatically adjust your path to attain your financial goals. Inflation will be automatically adjusted. But due to the considerably comprehensive nature of these types of programs by necessity the learning curve will be considerably steep. This however will most likely be worth the organization made from a considerably complex situation. Additionally a program such as this when used effectively can take the place of a costly financial planner in the form of a person.

Depending on the specific needs of the individual and what they feel they require for their finances will ultimately determine what program and what price range would be most suitable. Some with an extremely complicated financial affair might still be inclined to go with a pared down financial program and those with a more simplistic financial environment might still demand the over the top attention to detail abilities of a comprehensive high end program. However this article can provide a general guideline to be used as a starting point in the search.

Purchasing financial planning software depends solely on your needs and therefore some more expensive programs may or may not be the right choice.

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About

Posted on April 6, 2010 by admin

Financial Planning software is a program designed around the idea of helping you organize your finances. It is a really simple concept. The software itself and the implementation, considering the varied and intricate nature of finances in today’s world however can be much more complex.

Financial planning software is best put to use in a complicated financial environment of pensions, life insurance, social security, annuities, credit card debt, college expenses and so on and so forth. By making sense of a complex interaction of many different financial elements, these programs can be a saving grace.

Organization is only the beginning though. The general strategy for most software programs that deal with financial planning is as follows:

  • Setting goals and objectives
  • Assessing assets, resources and debts (this is where the organization of finances usually occurs)
  • Anticipating future needs and variances in your financial environment
  • Determine your risk tolerance
  • Organize a strategy based on all the previous input to achieve a specific financial target (whether that target is retirement, college funds, a new car, or just saving money in general)

The first step of setting goals and objectives sets the path for how to achieve them. Once you have that point established then it is possible to begin determining how much you need to save on a daily, weekly, monthly, and yearly basis and how to best utilize your assets and manipulate your debts to achieve that goal. If you simply want to save money and do not have a specific amount in mind that is ok. But remember you have the computing power of a software program designed specifically for this job at your fingertips; set a goal of a million dollars for retirement and see what it tells you. If the path to get there seems impossible, lower the goal until it seems achievable.

Assessing your financial situation is where any financial planning software really starts to shine. This is where the madness can be turned into method and made to work for you. For those that do not have an overly complicated financial environment, you will still be amazed at how convenient it is to see all your expenses and incomes laid out in one place, often in bar graph or pie graph form. For those that have IRAs, CDs, Medicare, social security, etc the benefits of having an organizational utility is obvious.

Part of the organization of almost every financial planning program on the market is to give you a central location from which to view all aspects of your finances. This means integrating your bank account(s), credit card accounts, portfolio, and all others so you can see them all from the financial planning program you are using. This gives you real time values of the current state of all your accounts and will compare them in a way of your choosing. Perhaps you want to see the numbers side by side, or maybe you prefer charts or graphs. Whatever the case you now have control over all that information and can situate it in a way that is most convenient and easily understandable for you.

There is the obvious contention that it might be dangerous to link all the various accounts with regards to identity theft. However, there is no absolute way to prevent identity theft from happening. The emphasis would be better put on discovering and correcting it as soon after it happens as possible. By having all of your accounts linked and accessing that information on a frequent basis, you will be very well appraised on every dollar you interact with and therefore in a much better place to handle any potential identity theft.

One really nice aspect of financial planning software is that, as the name suggests, it plans. Once all of your financial information is contained within the program, you now can manipulate the data in ways not possible without a software program (or at least not nearly as immediate and convenient). Based on your portfolio performance you can adjust your expenditures to stay aligned with your financial goals. So if your portfolio experiences a bad quarter you can see precisely what you need to do to stay on track for your target and in that way never lose sight of your end goal. There are also programs designed to play out scenarios allowing for economic downturns, stock slumps, or other unforeseen circumstances (such as disability). This will help to develop insulation for your plan against future losses.

Based on all the information you have given your software program and taking into account your risk tolerance (i.e. how aggressively or conservatively you intend to do things), you can now develop strategies that best suit your needs. Keep in mind that there is not going to be just one way to achieve your financial goals. Financial Planning programs can be constantly tweaked and updated; that is the whole point. If you have been cutting back extensively on recreational spending but would now like to focus more on tightening other areas of your budget so that you can have more fun, you have all your expenditures laid out for comparison so that you might see what areas can be cut. Some programs will even suggest credit cards with cheaper interest rates or banks with a higher interest rate on savings accounts.

In the financial environment of today where online banking is the norm and most people have a few credit cards and a few children, it only makes sense to have a program to organize all the other programs in a way that makes sense for you.

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