Next year is shaping up as a pivotal one in the realm of technology for advisers. In 2006, a number of trends will continue to evolve which could have a widespread impact on the way advisers practice for years to come. The new products coming to market are based on three emerging themes that are transforming the financial planning universe: the rise of distribution planning for retirees, the need for a one-stop shop software system and the proliferation of portfolio management alternatives.

BABY-BOOM BOOM: The Year of the Distribution Planner

The baby boomer business is where the money is. "In 2006, $10.9 trillion in retirement assets will be held by individuals over 60 years of age," says David McClellan, vice president of Advisor Business Development at Morningstar. Most experts estimate that more than $20 trillion will be held by retiring baby boomers within a decade or so.

The top concern of these retiring boomers is managing their assets to insure a steady stream of income they won't outlive. So it's no surprise that developers of financial planning software are rushing to supply new tools to help advisers serve these clients.

NaviPlan

NaviPlan, the leading distributor of financial planning software in North America with more than 70,000 licensees, recently released Version 10.0 of the NaviPlan Suite of products (NaviPlan Standard and NaviPlan Extended), which contains a number of retirement income-related enhancements. These include the ability to designate expenses as fixed or discretionary, a new scenario planner with predefined retire-early and retire-late scenarios, Social Security planning enhancements for retired clients and support for immediate annuities.

Version 10.1, due in Feb. 2006, will significantly expand the scenario planner by adding scenarios for annuitizing to need at retirement or to a need at a given time after retirement, alternative asset-withdrawal orders at retirement, a comparison of alternative Social Security start-date strategies, a Monte Carlo analysis of scenarios to determine success probabilities and enhanced retirement-distribution reporting capabilities.

Financial Profiles

Financial Profiles, with over 50,000 users in North America, will introduce retirement-income planning capabilities in the summer of 2006. David Oates, director of marketing, says these will include the ability to model phased retirement, distinguish between fixed and discretionary expenses, detail coverage of healthcare costs, allocate assets for income, take control over liquidation orders and analyze a plan's probability of success.

Morningstar

Morningstar plans to release a standalone Retirement Income Planning Tool in the second quarter of 2006. It will target the mass affluent, defined as clients with $250,000 to $2 million in financial assets. The program's function is to rapidly identify key variables that can affect a client's financial situation and present alternative scenarios for consideration. Clients will be able to express goals, such as the desire to generate a specific income (in real terms), limit volatility or leave a bequest. Advisers can then illustrate the impact of altering the withdrawal rate, the asset allocation or the product selection. In addition, wizards will walk advisers through the process of modeling the impact of taking early Social Security, accessing home equity, working part-time and other scenarios. The Retirement Income Planning Tool will offer probability analysis to gauge the likelihood of a scenario's success and produce a short report tied to each scenario. Pricing has not yet been finalized.

ADVISORY IN A BOX: The One-Stop-Shop Providers

A number of relatively new third-party providers are offering one-stop shopping for advisers who want to outsource their entire support process, from back-office operations to investment selection and monitoring. These firms could really take off in 2006 due to two trends that are stoking the sector.

First, the exodus of reps from wirehouses and broker-dealers will continue. As more of these advisers go independent, they will seek to replace the infrastructure provided by their broker-dealers with a broad suite of tools that includes everything necessary to run an advisory practice. The quickest and least painful way to do that is to buy software from one provider.

Second, awareness of the inefficiencies in independent RIA firms-which has been widely publicized in industry studies and reports-is likely to prompt some advisers to try to improve their practices by outsourcing some or all of their needs to third-party providers. From both a cost and operational standpoint, a single provider will be more convenient than multiple providers. Two of the most promising products in this niche are coming from Engagement Systems LLC and BridgePortfolio.

Engagement Systems

When it's fully built out, Skill Weighted Portfolio from Engagement Systems will offer a total "investment advisory firm in a box." Currently, Skill Weighted Portfolio offers a sales tool, a client education tool, portfolio construction and management combined with a workflow tool that can effortlessly guide the adviser through each step of the process. But Skill Weighted Portfolio's stand-out feature is that it can help advisers differentiate their practices with a methodology that is widely accepted in the institutional world, but still underutilized by those counseling individuals: the core/satellite portfolio.