True innovations in financial planning software don't occur all that often. Zywave, formerly EISI, changed the way advisors did planning in the 1990s with wizards, artificial intelligence, automated report generation and a host of other features. About 10 years ago, MoneyGuidePro erased the stigma of goal-based financial planning by introducing an intelligent, sophisticated approach that continues to be refined.

While it's early in the game, inStream Solutions might be next in this line of financial planning software innovators. It's a free, goal- and cloud-based planning solution for financial professionals. That's right, free.

The inStream platform is still being built out, of course. But it's not too early to highlight the shortcomings of traditional planning software that inStream is trying to address, and the tools they are building to differentiate their product.

MEETING A NEED

Like Junxure, Orion, PowerAdvisor, ProTracker and several other applications used by advisors, inStream grew from the needs of one RIA firm - McLean Asset Management of McLean, Va. - that were not being met by the products available in the marketplace. What McLean was looking for, and what inStream is designed to provide, is a more proactive approach to planning that incorporates, among other things, goal-based planning, best practices and a system that allows advisors to play a more active role in their clients' numerous financial decisions.

In a short period, Alex Murguia, CEO of inStream, has assembled an impressive team. They include Scott Appleby, who's worked at Deutsche Bank, Robertson Stephens, ABN Amro and Paine Webber in various capacities, including as Internet and software services analyst; Bob French, director of advisor services, formerly of Dimensional Fund Advisors; Rajeev Dharmapurikar, CIO, who's worked at AT&T Labs, CTP, Fidelity and the Oak Ridge National Labs; and Andrew Mahon, an honors graduate of the Parsons School of Design who developed the user interface for Make History, a project of the National 9/11 Memorial and Museum. Their top-notch technical know-how, combined with McLean's practical experience servicing high-net-worth clients, makes it seem that inStream is well positioned to execute on its vision.

THE INSTREAM DIFFERENCE

The company's slogan is "Life Cycle Tools for the Financial Advising Industry." What does that mean?

There are three major principals of the system that differentiate inStream from other solutions, Murguia says. They are proactive planning, the ability to easily coordinate and deliver the appropriate products and services, and crowdsourcing.

Most financial planning software is reactive. You enter data, analyze it, create a report and present the results to the client. That's it. Until the next client meeting, which might be six or 12 months later, it's doubtful you will have any additional interaction with the plan unless the client has contacted you to report a major life change.

But why not put the data lying dormant in the planning software to some use? That's what inStream does. By updating asset values constantly and running Monte Carlo simulations nightly without user intervention, the application can generate alerts that allow an advisor to contact a client whenever a plan moves out of an acceptable range. For example, you can set the program so that any time a computed probability of plan success fall outside of a range of 78% to 93%, you will be alerted.

Maybe a client can benefit from refinancing a mortgage, but only if rates drop another 25 basis points. Or perhaps a client has agreed to refinance whenever the breakeven point after all costs is 12 months or less. Once the alert is set, an advisor would be informed automatically when the preprogrammed conditions were met.

This proactive approach serves multiple purposes. Foremost, it helps an advisor stay up to date on planning opportunities that can drive measurable benefits.

It also creates more opportunities for meaningful client touches. Murguia cites CEG Worldwide research suggesting that 24 client touches per year are optimal, but the quality of those touches matters just as well. Rather than pick up the telephone merely to say hello, an advisor calling with a concrete, proactive suggestion should be better received. It reinforces the notion that a financial advisor is looking out for a client's best interests.

Another differentiator is the ability to deliver appropriate products and services. Perhaps a client is willing to purchase an immediate fixed annuity with a lump sum of $250,000, but only if the annuity can generate at least $1,500 of income monthly from an AAA-rated carrier. An advisor would enter the goal in the system and, when an annuity with the required characteristics became available, the system would alert the advisor.