Smart Tool for Understanding Clients' Money Habits
Every new technology brings intended and unintended consequences. Some unintended consequences are a bonus like personal financial portals.
My firm, Life Planning Partners, began using eMoney Advisor 15 months ago. We wanted cash flow-based financial planning software, and our old software had switched to a web-based application that we found unsatisfactory. In addition, we loved the idea that we could truly help clients track spending with a portal, and that this information would result in more realistic financial plans.
A disclaimer: while my firm uses eMoney, there are other portals available. The company did not know I was writing about their product. At the time of our decision, eMoney best fit our needs; the beauty of the industry is that software companies keep upping their game, and it pays to shop around for the best service at the best price.
One of the top priorities at my firm last year was to enroll all of our clients in the eMoney portal and help them set up connections for all of their accounts. We worked through two to three clients per week, and had the majority of our approximately 70 client families connected by mid-year. Most loved the portal, while some were very wary. When we were done, all but a handful of clients were engaged and connected.
The financial planning part has been telling, as most clients were indeed spending more than they thought they were spending. Although we have to spend more time than anticipated to maintain the integrity of the links to client accounts, the software has performed very well in providing better financial plans.
In addition, we have discovered a number of benefits the software provides that has further cemented the value of our new offering to clients:
1. Cash flow management for the elderly.
We have an elderly client with minor cognitive decline, yet shes still independent and takes care of her own finances. Our policy for elderly clients in general is to simplify their financial life, put credit freezes in place, put bills on auto-pay and pay close attention to unusual cash flow requests. With the permission of this client, weve given access to the portal to her durable power of attorney and back-up (in her case, her daughters). They are delighted to monitor their moms finances from afar, and this has given us all peace of mind while at the same time allowing the client to maintain her independence.
2. Monitoring fraud.
The software is trained to classify expenses. For the most part, the classifications are correctly recognized just from the name of the expense. However, there are glitches. For example, a meal at a Japanese restaurant was classified as education, not restaurant. Once this adjustment is made, the classification of an expense does not require further management.
When we originally connected clients, we helped them classify the major expenses and recurring expenses. Checks also have to be individually classified, which isnt much of a problem, since people now write so few checks. Before updating a plan, we again review all the spending classifications. It takes just minutes.
During a plan update with one client, we noticed a recurring software expense on a credit card and recognized it as sham protection software fortunately, our client services expert who classifies expenses happens to be a tech geek. We pointed this out immediately to the client, who had no idea about the recurring expense and was grateful to save the $30 a month.
3. Tax preparation.
Many clients come to us for the organization we provide in their financial lives. We focus on gathering all the information needed by an accountant. One client in particular is a challenge. He travels the world doing speaking engagements, has a radio show and is involved in multiple companies. Although successful professionally, his organizational skills leave much to be desired. During our tax information gathering, he would bring in bags of receipts, pull scraps out of his wallet and forget half the information we needed. Ive always been concerned he was losing out on many deductions and was at high risk of audit. Worse yet, he would have sketchy information to back up his claims.
In the portal, we set up a business section to classify his business expenses. We encouraged the use of one credit card for these expenses, and provided a nice plastic folder to use for receipts. A couple of times throughout the year, we checked the expenses and classified accordingly. At the end of the year, we took his nice folder and downloaded the transactions from the portal. We then matched the expenses to the receipts. It was beautiful. Our intern did all the work, our client received the appropriate deductions, and I felt much better knowing he could likely withstand any audit.
4. Estate management.
Two of our clients died in the past year. One was elderly, yet his death was sudden. The other died quickly from a newly diagnosed cancer. These times are painful for us and the clients family, and we do whatever we can to ease administrative issues. The portal was very useful in a number of ways:
- We were quickly able to determine what bills were on auto-pay, and help the family cancel those services.
- All credit cards were identified and canceled quickly.
- Beneficiary form copies were in the vault, and we helped the family process claims without any surprises.
- One client was very charitable, and the family wanted to continue her charitable intentions. We identified all of her charitable gifts and connected the family with the charities involved.
There have been negative unintended consequences, too. A major barrier is the uncoupling of connections due to password resets or website changes by account providers. Also, some accounts refuse to download. Weve developed workarounds, and are gradually reducing the time and costs involved in upkeep. Overall, we are happy with the progress and have found the pain is well worth the gain.
Carolyn McClanahan, a CFP and M.D., is director of financial planning at Life Planning Partners in Jacksonville, Fla.