Checking Out AdvisorVision 7.0 - Morningstar Advisor

Morningstar Advisor Magazine June/July 2010 Issue

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Checking Out AdvisorVision 7.0

by Joel P. Bruckenstein | 07-09-09

Continued from page 1.

Once all the data is entered, the user enters the "goal assumptions" section. Here, you can fine tune the way the automated planning engine approaches the plan. Depending on the nature of the goal, you might be asked to assign it a level of importance. If it is a retirement goal, you are asked if you would like to include a margin of safety (defined as a dollar amount). For the retirement goal, you can also override the default retirement age and life expectancy assumptions. For long-term care, you can select a type of care (home care, for example), a maximum coverage period, estimated costs, and projected LTC inflation rates over time. Next comes automated strategies. Here you can instruct the program to automatically consider some optional strategies in order to achieve the client's stated goals. Right now, the strategies are devoted to retirement. They include annuitization, postponing retirement, and expense reductions. If you allow for expense reductions, you can choose to make either preretirement expenses, post-retirement expenses or both eligible for reduction. For both periods, you can choose from discretionary expenses and fixed expenses. For any category open to reduction, the advisor can set a maximum reduction threshold. Finally, assuming you choose more than one optional strategy, you can then rank them by preferred order. Once this section is completed, the program will start making recommendations.

First, the program generates asset-allocation recommendations. Based on the inputs, it will, if possible, achieve the client's goals within the client's risk tolerance (the application comes loaded with default asset class risk/return assumptions, but credentialed users can alter them as needed). In an enterprise environment, the software can be programmed to recommend specific investments tied to each asset class or asset subclass based upon the firm's current investment recommendations. The application will generate a list of recommended investment as well as a list of proposed trades. It can even create a trade file in Excel.

Next, the software generates a summary page that gives a nice overview of the client's overall financial situation. It includes graphic depictions of ability to achieve goals, net worth, cash flow, and investment by asset class plus investment by account type (taxable account, retirement accounts, etc.). A more detailed analysis, which includes cash flow and disposable income projections, comes next. This is followed by planning recommendations, including Monte Carlo simulation to determine the probability of the client running out of cash during a specified time period under the parameters laid out. There is also the possibility to create alternate plans and scenarios on the fly for comparison.

Although I only had a limited amount of time to try out the program, I found much to like. First, it is a credit to Advice America that every successive version of AdvisorVision is substantially better than the last, so clearly they continue to move in the right direction. Overall, navigating the program is simple and intuitive. For the most part, tabs, menus, and the overall flow of the program work well. For those who need help, a number of free online tutorials are available that should keep the novice user on track.

Data entry is easy. Better yet, Advice America offers numerous ways to automate the flow of data into the software, minimizing the need for manual entry. This is particularly true in the case of enterprise installations. It also holds true for those that choose to use AdviceAmerica's ClientVision, who get the added benefit of tight integration between their financial planning and their CRM application.
Overall, the automated planning tools are better and more sophisticated than those available in previous versions. The program now automatically allocated asserts and income streams to goals based upon priorities. The ability to optionally allow for alternate strategies like reverse mortgages and the ability to quickly illustrate alternate scenarios are also major improvements.

While this version of AdvisorVision is clearly the best one yet, some annoyances remain. For example, when you want to enter individual assets into the program, you have to navigate through a few menus or screens to do so. I found this process to be somewhat cumbersome. In addition, I ran into some curious deficiencies when I entered individual ticker symbols. In some cases, I would enter a mutual fund ticker and all would be fine. In other cases, I'd enter a find ticker such as ARTIX (Artisan International), and the asset class would come back as "unclassified."

I found that AdvisorVision worked fine with the latest version of Microsoft's Internet Explorer, but I ran into occasional difficulties with the latest release of Firefox. Although I did not try the application with other browsers such as Safari or Chrome, I would not count on 100% compatibility just yet.

Personally, I'm somewhat conflicted about my evaluation of the Automatic Resource Allocator. On the one hand, the addition of this functionality is an improvement, and it clearly makes this latest version superior to the last one. On the other hand, it seems to me that some other applications (MGP:G2 immediately comes to mind) offer a much better execution of this concept.

For those who already use AdvisorVision, this latest version is sure to be greeted warmly as a worthy upgrade. The AdvisorVision/ClientVision bundle will also appeal to some. Whether there is enough new here to persuade users of competing programs to defect is still an open question.

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Joel P. Bruckenstein, publisher of T3: The Newsletter, is the industry's expert on applied technology for financial professionals. In addition to his monthly columns, Bruckenstein consults with companies large and small to help them achieve higher returns on their technology investment. For more information of Bruckenstein's consulting services, or to have him speak at your upcoming event, please visit www.joelbruckenstein.com.

The author is not an employee of Morningstar, Inc. The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar.

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