Financial Planning Software – The Doors are now Open for Self-Directed Investors to use it! Financial planning software should be quick and easy to use. A holistic approach to cash flows will give you more insight to your future financial plans.
Are your Finances too Complex for Financial Planning Software?
I recently had an inquiry from a person who had a complex set of financial assets. For convenience, I will call her Mary. She wanted to manage her investments using our financial planning software. I offered to assist her over the phone. I wanted to suggest how she may use Financial Mappers.
She told me she had researched financial planning software. Our financial planning software was the best software she had found. We spoke for over an hour and she had an interesting story to tell.
About 12 months ago, Mary had discovered she was to inherit a very large sum of money from her grandfather. She decided to spend the last 12-months learning how to manage this money. Her plan was to be a do-it-yourself investor. She wanted to take control of her financial future. This was a once in lifetime opportunity to be secure in her finances. She felt she needed to honor the legacy given to her. This meant she needed to understand how to manage her money. This money had to last forty or more years. At the end of her lifetime, she hoped to pass on this inheritance to her children. She hoped the money would provide for her and she would have the skills to grow the value of the assets
Mary’s investments are complex. Our financial planning software will manage this complexity. The ease of use makes it very suitable for investors with simple investments. That is investments such as cash, shares, managed funds, property, and superannuation.
Mary’s investments are a good example of what you need in financial planning software.
Diversification is the key to a good financial plan
Mary’s study of how to invest brought her to the conclusion that diversification was the key. She decided to diversify outside the asset categories of cash, equities and property.
You need to remember that Mary has become a very wealthy woman. The options for her are much greater than those for the average “Mum and Dad” investor.
Mary decided to expand her investment portfolio to include gold and fine art.
She also wanted to diversify the country in which she invested. Australian investments did not give her the best investment potential. The aim was to buy shares through a managed fund of overseas equities. This would allow her more diversification and less risk than direct investment.
She also had a plan to buy property in both England and USA. She thought both these countries had better capital growth opportunities.
Investing in Precious Metals
Mary’s first inquiry was how this financial planning software would manage precious metals. She had decided to buy gold as a hedge against inflation. A simple Google search will give you other reasons for buying physical gold and silver. (https://www.apmex.com/why-buy-physical-gold) Our financial planning software does not have a specific account for gold. But Financial Mappers can manage this asset account. You could set up a Managed Fund account and call it “Gold”. The income from the gold would be 0%. You would then need to nominate anticipated long-term growth in the price of gold. If you sell the gold, Financial Mappers will calculate the Capital Gains Tax.
There are alternatives to buying physical gold. You could buy shares that mine gold. You could also buy an ETF for gold.
Gold is one of several precious metals. You may like to consider alternatives to gold. Market Watch (https://www.marketwatch.com/story/five-alternatives-to-gold-2010-10-08) suggests you could include silver, copper, platinum, and palladium.
Investing in Fine Art
Mary had decided to invest in Fine Art. This was to be an investment, not an expensive decoration on her office wall. She decided to have an art investment specialist invest on her behalf. She chose a company called Art Index. (http://www.artindex.com.au/) They selected the artwork and then rented the artwork to a suitable organization. This meant Mary was arm’s length from the investment. She was also earning an income from the investment. She expected to enjoy capital growth by holding this asset long-term.
Investing in Equities
Direct investment in overseas share markets can result in some complex tax arrangements. I have had many comments from people who took the direct investment path. Generally, they say the paperwork is not worth the effort.
You can leave the heavy lifting of taxation to the experts. To do this you can buy overseas equities through a managed fund or ETF. Vanguard (https://investor.vanguard.com/etf/how-to-buy) is one well-established company who will explain how to buy an ETF.
Financial Mappers has accounts to manage either direct investment or managed funds. You can nominate the dividend rate and percentage of imputation credits. You can also nominate the anticipated increase in share price. You refer to this as Capital Growth.
In the case of a share portfolio, you can also include a margin loan.
Investing in Real Estate
With our financial planning software, you are spoilt for choices. You can buy and sell a property in any of the 30 years of your plan.
Financial Mappers calculates non-cash deductions. These include depreciation on capital purchases and building write-off. You can include the depreciation for future capital purchases. If you intend future building renovations, you can calculate the extra building write-offs.
Debt management for investment properties is an important part of your financial plan. Choose financial planning software which gives you all the options. These options should include loan redraws and refinancing of loans. Make sure the financial planning software includes the following loan types:
- Interest Only Loans
- Principal and Interest Loans
- Interest Only Loan followed by a Principal and Interest Loan
Investment in Real Estate Overseas
Money laundering is not something one thinks about when investing. Mary told me that when she was buying a property in England. She had created a new family trust to hold the asset. But, the banking system would not let her buy the property until she could show a period of trading in the account.
Currency risk was a big factor for Mary. She was hoping that currency risk would work in her favour. She hoped that at the time of sale, she would benefit from the increase in property value. She also hoped the exchange rate will give her a tidy profit as well. She was aware there was a risk the change in the exchange rate, may take away some of her profits. It would all be in the timing of when she returned the money to Australia.
More Features for good Financial Planning Software
Financial advisers have the advantage of professional financial planning software such as X-Plan. Generally, this software is too complex to use with clients and too expensive for the investor to buy.
Financial planning software designed for the consumer tends to lose functionality. While it may do some things “OK”, once you get started you find a lot of options you would like to use are not available.
Here are some features you should consider when choosing your financial planning software:
- Can you include all your cash flows
- Choose relevant default rates
- Change the rates of return and interest rates
- Consider “What if?” scenarios
- Provide historical data for backtesting results
- Provide modulators to assess your sequencing risk
- Set financial goals or targets
- Display the results in easy-to-read graphs
- Give easy-to-read financial reports
Financial Mappers, our financial planning software has all these features. One advantage of Financial Mappers Pro is that both the adviser and the client can share plans.
How to choose the best financial planning software for you
I have explained Mary’s need for good financial planning software. She felt that Financial Mappers best suited her needs.
These are questions you need to ask before you buy your financial planning software:
- Is the software value for money?
- Can I get a refund if I don’t find the software suitable?
- Does the software company provide adequate security of my personal information?
- Am I asked to provide personal information which is not relevant?
- Have I seen adequate videos on how the software works?
- Does the website give detailed explanations of how to use the software?
- Can I share the results with your financial adviser, mortgage broker or accountant?
Financial Mappers has many videos on the website and our YouTube channel.
Are you ready to start your Financial Plan?
Glenis Phillips SF Fin – Designer of Financial Mappers