Monitoring A Financial Plan in the Digital Age

By Michael E. Kitces, Nerd's Eye View Blog on Friday, March 30th, 2012

Historically, the update of a financial plan has been a somewhat arduous process, as new data is gathered manually from the client, entered into financial planning software, analyzed for problems or opportunities, and then finally delivered to the client. Perhaps even more challenging is the fact that it's never quite clear when or how often to do the plan update; annual updates are proactive but often produce a lot of work when nothing has actually changed, yet waiting for the client to request an update can be too reactive. In the digital age, though, monitoring a financial plan will be very different. As integrated technology allows plan details to updated automatically and continuously, we will reach the point where you don't notify the client that it's time for a plan update; the planning software will notify you!

The inspiration for today's post is an extension of my recent blog discussions about How The Digital Age Will Change Financial Planning. While last week was about How the Delivery of Planning Will Change in the Digital Age in terms of the delivery of the initial financial plan, this week we turn to a look of how the plan monitoring and update process will change in the future.

No More Data Gathering 

The first major change to anticipate in the digital age is the elimination of most data gathering for the update process. Historically, updating a plan involved a somewhat arduous process of getting current values for all accounts, which put a lot of work on the client to gather the information. This was often problematic not only because it was quite literally work for the client, but also because the client's investment of time and effort were often unrewarded by a plan update that had no material changes or recommendations.

As a result, many planners have eased away from doing a rigorous annual plan update schedule in recent years, opting instead for a multi-year process, or simply waiting until the client expresses an interest in an update or reports a change in life circumstances... but unfortunately that means several years could pass where the client is off track before an update reveals that a material adjustment of savings or spending is in fact required. Nor does it necessarily leave in place a process for the planner to be aware if the client simply isn't doing the saving and spending committed to be done in an earlier version of the plan!

In the digital age, though, updating a plan is not a client-driven data gathering process, but a technology-driven data gathering process. Updated account values are aggregated automatically through the client's financial dashboard software - such as or ByAllAccounts - and pulled into the advisor's financial planning software. As a result, the only thing that needs to change with the client's input are the actual goals, which can be done live and interactively with the client on the spot.

In fact, in a world where technology allows for a client's plan to be continuously update to date - at least with respect to financial information - any client meeting can immediately turn into a plan update meeting on the spot, as the only thing required is to turn on the planning software and show the client's current financial position, including not only a balance sheet but where the client stands on the path to completing goals. 

Proactive Plan Monitoring 

However, the real value of a technology-driven plan monitoring process in the digital age is not simply the ability to share updated financial projections with the client as requested or on-the-spot at a meeting. The real value is the ability to configure the financial planning software to monitor key metrics itself, and notify the planner (and/or the client directly) when something relevant to the plan has occurred.

For instance, if the client has committed to save at least $10,000/year into an investment account, the software would automatically notify the planner if the net inflows to the account at the end of the year did not reach $10,000; the software might even be configured to provide a 'warning' if $7,500 of contributions haven't been made by the end of the 3rd quarter. Another possibility would be planning software that monitors current interest rates, and generates a notification to the planner for any client that would potentially benefit by refinancing; thus, if rates dip down another 0.25%, the planner is automatically notified about the 3, 6, or 10 clients who should be contacted about a potential refinance because the current rates are now "low enough" compared to their original rates.

Another way an ongoing technology-driven process could generate proactive actions by the planner is with respect to monitoring the financial plan for risks. For instance, if the plan is continuously updated with a nightly download in a similar manner to how portfolio investment statements, then the software could automatically run an updated projection and notify the planner if the probability of success had declined below 80%, 90%, or some other pre-determined threshold. Thus, instead of periodically running a plan update manually to "check" and see if a client's plan is in trouble, the software would notify the planner automatically, which in turn could prompt a meeting or phone call with the client to discuss whether any action should be taken.

Technology, Now and In The Future 

Notably, some parts of this digital age monitoring process are available now. Planners and/or their clients can aggregate account information using systems like or ByAllAccounts. Financial planning software programs like eMoney Advisor and MoneyGuidePro have some capabilities to import data from outside providers (although not necessarily comprehensively or fully automated; at least, not yet). Some proactive financial plan monitoring tools have been built into the new (and free!) software platform inStream.

But ultimately, expect far more integration than even what these tools have achieved so far, which in turn will make many aspects of the financial planning process easier. Imagine if financial plan updates could be done in minutes, live in a client meeting, instead of via a multi-day back-and-forth data gathering process followed by data input to the planning software and an 'updated plan presentation' meeting! 

So what do you think? Is your firm an early adopter of the new technologies that will dominate plan monitoring and updating in the future? Do you or your clients use account aggregation software? Imports to your financial planning software? Have you tried inStream? Are you concerned that this automation will impact or change your value proposition with clients?

Michael Kitces, MSFS, MTAX, CFP, CLU, ChFC, is a Partner and the Director of Research for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Maryland that oversees approximately $1 billion of client assets, and Pinnacle Advisor Solutions, a firm that provides outsourced investment management services for financial advisors. He is the publisher of the e-newsletter The Kitces Report and the blog Nerd’s Eye View through his website Kitces is also one of the 2010 recipients of the Financial Planning Association’s “Heart of Financial Planning” awards for his dedication to advancing the financial planning profession. Follow Kitces on Twitter at @MichaelKitces. 

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