Financial Freedom by PIEtech, Inc. Helps Clients Budget and Manage Debt

PIEtech’s MoneyGuidePro is excellent financial planning software for advisors doing comprehensive planning with clients that have assets and who typically are not dealing with significant debt issues, however, they have never had a “lite” solution that addresses primarily younger prospects with debt issues or those who are spending more than they earn. Financial Freedom was created to address that gap in the PIEtech product line. It was designed as a mobile first app, but it can be used on a phone, tablet or on a PC.

The premise underlying Financial Freedom is that financial success starts with five goals, not necessarily in this order:

  • Paying off credit card debt
  • Paying off student loans
  • Building an emergency fund
  • Funding a “special goal”
  • Building your “freedom money”

BUILDING A MINI-PLAN TO ADDRESS CLIENT GOALS

The app walks the user through the steps necessary to build a mini-plan that addresses the above goals. Assuming that we are dealing with a couple, it asks for each partners income and their state of residence. By default, the app assumes that income will grow by an inflation rate of 2.5%, however the user can alter the assumed rate of income growth individually for each partners salary.

Next, it addresses credit card debt, but you can exclude paying off credit card debt as a goal if you wish. Assuming you want to address it, you provide a name for the account, ownership of the account, balance, interest rate and minimum monthly payment required. The app will generate a minimum value required per moth to pay all credit card debt, and the user inputs the monthly amount available to apply to all monthly credit card balances.

Student debt is handled the same way. You provide a balance due, minimum payment and interest rate. You supply the amount available to service the debt (presumably your current monthly payment, but it could be more).

For the emergency fund, the app asks how much you currently have saved in the emergency fund, how much you need to cover monthly expenses, including debt minimums, how many months of coverage you desire (the app points out that most experts suggest three to six months), and an amount available to apply to the goal.

A special goal is a major purchase that the clients may want to make. Typically, this might be a down payment on a house, the purchase of a new vehicle, or some other substantial purchase. If they choose to set a special goal, they enter a description, an amount needed to fund the goal, a future date for the goal, the amount already saved towards to goal (if any), and the monthly amount to be applied to the goal.

The Freedom Money is the retirement goal. The app asks if each partner is currently contributing to a plan, type of plan, current value, and employer match if any.

Once all of the goals are set, the app addresses risk tolerance. It does it in a way similar to the way MoneyGuidePro does it, but slightly abbreviated. The couple picks a risk score from 1 to 100 using a slider. As they move the slider, they see the asset allocation associated with the score. They also see the percentage loss and dollar loss that a similar portfolio would have incurred during the great recession. The users are asked if they would hold or sell should they incur a similar loss. If the answer is hold, the portfolio is judged to be within their risk tolerance.

PLAYZONE HELPS CLIENTS VISUALIZE TRADEOFFS

When the user hits the “next” button, they are taken to the Play Zone. Here, you can look at each of the five goals and, using sliders, see how paying more or less monthly for a goal will impact the payoff date in the case of debt, or total account value in the case of savings. When a goal is achieved, you can designate there the payment towards that goal should go in the future. So, for example, if you are paying $500 per month towards credit card debt, and that debt is paid off after two years, you can designate that the payment goes to pay off another debt until that debt is paid off, then any remaining payments can go to savings.

The other option, and perhaps the preferable one for most novices, it to use the Financial Freedom Optimizer to optimize cash flow to address all five goals. Financial Freedom algorithm optimizes the cash flow to help them reach all of their goals (if possible), and it gives a due date for each goal being met, except for the Freedom Money, which uses a ten-year time horizon.

With the optimized option, the program creates a solution that seeks to maximize the balance in the Freedom Fund. In this solution, the program defaults to paying off debts using the minimum payments for your debts and minimum amount available to fund the goals entered, while prioritizing the debts and your Freedom Money fund to accumulate as much as possible at the end of ten years.

  • Initially, the program uses any excess funds available to build the Emergency Fund up to 75% of the total goal amount, and then fully fund this goal after all your debts have been paid off. Each year, an additional amount will be added to the Emergency Fund to keep pace with the average rate of inflation, even after the Emergency Fund has been completely funded.
  • Once debts have been paid off and the Emergency Fund is fully funded, the program defaults to funding the Special Goal (if applicable) then applies all money that’s available to build the Freedom Money fund.
  • If the clients are currently contributing to a 401(k) or 403(b) retirement plan, the program shows the accumulation of contributed funds in the percentages indicated, and then adds any excess funds available to the Freedom Money fund.
  • Note that, in either the Optimized or Play Zone mode, the program defaults to putting excess money into the Freedom Money fund, after debts and the Emergency Fund are funded, even if a retirement account has not already been set up. This it to encourage users to think about creating a retirement account and saving for the future.
  • Once a plan has been optimized or tailored in the Play Zone, the last page of the program displays a detailed schedule of either payments or balances according to selections in the Play Zone or based on the program’s optimized solution. This detailed schedule will help users create a monthly approach to meeting goals, and can provide a basis for a discussion with a financial advisor about creating a more in depth financial plan.

Overall, I think that Financial Freedom is a wonderful addition to the PIEtech product line. It is intuitive, it requires minimal data entry, it provides meaningful results, and the optimization algorithm is well thought out.

DESIGN SUGGESTIONS

I had a few very minor design suggestions, at least one of which is highly subjective. The way things work now, when the data entry and the risk assessment is completed, you go first to the PlayZone and then to the optimization process. I think that it makes sense for the optimization process to go first, so that users can see what a good optimized result would be before they enter the PlayZone to look for alternatives. Apparently, early feedback from PIEtech clients prefer to see the PlayZone first.

Second, when you enter the PlayZone, it is not currently clear enough that users can click on an element to reveal sliders and additional information. I feel confident that PIEtech will address this issue in short order.

Finally, it occurs to me that some users may receive bonuses at year end that they would like to apply to their Financial Freedom plan. Currently, there is no way for a user to add a lump sum in the PlayZone or to add it to the Optimizer so that the application can apply the funds and show that the results would be. This is a feature I hope PIEtech will add.

ENGAGING WITH NEXT GENERATION CLIENTS

Who is Financial Freedom appropriate for? In the case of traditional RIA firms, this is ideal for the children or possibly the grandchildren of existing clients. It is a wonderful way to engage with future generations by providing a truly useful tool. For advisory firms in the 401(k ) space, this could also provide real value to an existing business line.  Advisors targeting millennials will also find this appealing.

Larger institutions targeting the next generation of investors will find much to like there. They can offer Financial Freedom digitally, and at scale, to engage with prospects and client.

If you are looking to engage with the next generation of prospects and clients, you should be thinking of a mobile first strategy. Financial Freedom is a good example of what a well-designed app targeting a well-defined demographic should look like. Financial Freedom by PIEtech should receive a warm welcome from firms targeting this market.

Joel Bruckenstein
Joel Bruckenstein
Joel P. Bruckenstein, CFP®, is Publisher of the T3 Tech Hub (formerly the T3 newsletter) and the producer of the Technology Tools for Today (T3) Advisor Conference, the only annual technology conference for independent advisors, as well as the Technology Tools for Today (T3) Enterprise Conference. Bruckenstein is an internationally acclaimed expert on applied technology as it relates to the financial service industry. He is the co-author of three books: Virtual Office Tools for a High Margin Practice, Tools and Techniques of Practice Management, and Technology Tools for Today’s High Margin Practice. Joel’s monthly technology columns appear in Financial Advisor magazine and Financial Planning magazine. In addition, he compiles the annual technology survey for Financial Planning magazine. Bruckenstein has for more than twenty years advised financial service firms of all sizes on improving their technologies, processes and workflows. For more information about Joel Bruckenstein and the services his firm offers, please visit www.JoelBruckenstein.com

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