I Love (absolutely, positively must have) Detailed Cash Flow
Most advisors, particularly those with CFP® designations, were taught that detailed cash
flow is always the right way to plan. In fact, many are convinced that it's the only valid way
to provide professional planning. We beg to differ (rather vociferously, as it turns out).
This is a somewhat long discussion, but can be one of the most important considerations to many
advisors when choosing financial planning software.
It's what you think that matters
If you're open to the possibility that there might be a
better way to plan, it's worth trying MoneyGuidePro to see if it works for you. And I promise,
no one will take away your CFP® designation if you switch. But, if you're already certain that
the old way is the only right way, why waste your time? The last thing we want is for you to buy MGP,
and then be dissatisfied because you can't (even after 10 calls to support) find a way to turn it
into the kind of detailed cash flow program you're used to.
So, if you're open to a different approach, read on...
We think... Detailed Cash Flow is the wrong way to plan BEFORE Retirement
Here's an example of what we mean by Detailed Cash Flow before retirement. The client is age 40, and wants to retire at 65.
It takes only 8 "simple" steps: (Please note the sarcasm.)
1) Create a 25-year budget of income, including expected future raises.
2) Create a detailed 25-year expense budget.
3) Grow assets individually to determine interest, dividend and capital gains earnings.
4) Estimate deductions for 25 years.
5) Calculate annual taxes, including AMT.
6) Calculate an annual surplus or shortfall.
7) Assume the surplus is added to Investment Assets (that's her savings for the year)
and that any shortfall reduces Assets.
8) Along the way, you may amortize mortgages, refinance, take out and repay loans, or borrow
from your 401 (k). Of course, you'll enter assumptions for all future loan rates.
So, what's the problem?
More
Only that none of it makes any sense. It requires predicting the future of multiple financial factors with great
precision over many years. It's impossible. I'm sure all of you know this (at some level), and have been uncomfortable
at times with doing so. Clients struggle to budget for one year, no less 25. Do you really know how individual stocks
will perform over 25 years? Are you confident enough about future tax laws that it's worth the effort to make such
precise forecasts? We don't think so.
Fortunately, there's an alternative. What matters before retirement is not how much the client earns and spends, but
how much he needs to save each year to meet his future Goals. The MGP approach is to set an appropriate saving goal,
and then manage to that goal. Yes, sometimes the client needs budgeting help to find the savings he needs, but it's
a one (not a 25) year budget.
Finally, you don't need to grow individual assets. That creates more detailed assumptions that are unsupportable
and needlessly complicated. And, even more important, it creates a huge problem by skewing the portfolio allocation
in both accumulation and distribution phases. In MGP, assets are grown as a single portfolio (properly reflecting
tax categories) using long-term return assumptions based on the portfolio's asset class make-up. It simulates keeping
the portfolio in balance. When you're predicting returns for 30, 40 or 50 years, simpler is not only better, it's
also more valid.
The MGP approach also simplifies tax assumptions. Since we're not basing the plan on annual cash-flow calculations,
the only taxes we must handle are on the growth and liquidation of Investment Assets. Before retirement, this is
accomplished by using the marginal tax rate and adjusting for capital gains and deferrals. It's easier to
understand and usually more accurate.
And we think... Detailed Cash Flow is the right way to plan AFTER Retirement
Things change at retirement. There are fewer "moving parts"
and fewer years over which to plan. Now Cash/Flow
planning is the right way, and that's what MoneyGuidePro
does, including:
Accounting for all income and all expenses
Using full progressive tax tables and standard deductions
Calculating RMD
Spending assets by tax category groups, in a tax-efficient order
Taxing appropriately by Tax Category
Providing detailed year-by-year charts (just the way you like them)
Planning Can't be Fun
Do you believe that high quality, professional Financial Planning - is not - cannot - should not - be FUN?
Do you think, "Hey this is serious business, and I'm a serious planner. There's no place for FUN here".
We think - Maybe it's time to Have Some Serious FUN
Financial Planning should be an enjoyable process
for you and your client. People really like to dream about their
future. And you're the one who can help make those dreams come
true. That should be fun for both of you. Unfortunately, the combination
of poorly designed, analytically-focused software and out-dated perceptions
in the profession has made planning anything but fun. We're committed to changing all that.
We also think - Clients want something different
Clients are put-off by the complexity and intimidation of traditional financial planning. That
makes your job unnecessarily difficult.
How different would it be if your clients enjoyed the planning process? With MGP they will.
When clients enjoy the process, they're more open to your recommendations and more likely to
follow them over the long-term (even through down markets).
But, of course, it's what you think that matters.
If you're convinced that FUN has no place in planning, or that it really
must be detailed and complicated to be professional, then MoneyGuidePro
may not be a good fit for you. Fortunately you have all the other financial
planning programs to choose from.
Detailed Tax Planning
This is a simple one. If most of the planning you do requires detailed tax planning, such as calculating
taxes at the Form 1040 level, then MoneyGuidePro is not for you.
What We Do
MGP has a sophisticated tax system that is appropriate for long-term planning. It includes:
Calculation of marginal tax rates before retirement
Full progressive tax-tables after retirement
Automatic calculation of RMD
Tax calculations by Tax Category (e.g. IRA, Roth, Taxable, etc)
Taxation of the growth or liquidation of specific assets
Maybe you Need Both
We have many advisors who use MoneyGuidePro for their
primary planning needs, and have a specialized program for
clients who need detailed tax planning. There's one thing we know for certain:
No program that's designed to calculate detailed taxes in the short term can be as good as MGP at long-term Goal planning.
Advanced Estate Planning
If advanced Estate Planning for very high net worth clients is the core of your practice,
MGP is probably not a good fit. If basic Estate Analysis is sufficient for most of your
clients and you only need the "advanced stuff" for a few, then we may well fit your needs. Read on to see.
What We Do
MGP makes it easy for any advisor to provide a basic, high quality Estate Analysis that is
understandable to clients. The MGP Estate section:
Calculates Federal Estate Taxes (but not State)
Illustrates the value of a Bypass Trust
Creates a simple, clear Estate Flow Chart
Shows the impact of gifting
Illustrates the benefit of an ILIT
Lets you model multiple Estate Scenarios
Shows the impact of changing ownership of Life Insurance Policies
Indicates if more detailed estate planning is needed
We have many advisors who use MoneyGuidePro for their
primary planning needs, and have a specialized program for
advanced Estate Planning. There's one thing we know for certain:
No program that has been designed to provide sophisticated estate
planning can be as good as MGP at long-term Goal planning.
It's Not Cheap - But it IS a Great Value
A MoneyGuidePro license is priced at only $1,295 per year. And, if you're affiliated with a
participating B D, you'll pay even less. We think that's a bargain for what you get, but
if you're looking for the cheapest software in town, we're not it.
What you Get for Your Money
A one-year License FOR ONE ADVISOR ONLY.
This is important. Each advisor in an office must purchase his/her own license.
No sharing allowed - except by sales and administrative assistants.
All features and all functionality
Standard Set of Model Portfolios
> Created and maintained by Harold Evensky CFP®
> Includes Historical and Projected Return Assumptions
All future updates at no charge
FREE Training - live and on-demand
FREE Support
Delighted Clients
Less Work
More "A Clients"
FREE Trial
Try the full, production version of MGP free for 14 days. Be sure it provides the great value we claim before you buy it.
30-Day Money Back Guarantee
If, within 30 days of when you purchase, you're not satisfied that MGP is worth your money, we'll give you a full refund.
2 Year Price Lock
When you renew your license fee for the second year, your price will be the same as the first year, even if MGP has had a price increase
We Can't Think of a 6th Reason
Since we had 6 Reasons to Buy, we thought we should have 6 Reasons Not to Buy,
but could only think of 5. So, if you know of a good sixth reason, please let us know.