Fidelity unveils new planning tool aimed at advisers

In an effort to meet a growing demand, Fidelity Investments has introduced an online retirement planning program that can help financial advisers prepare a customized plan — in some cases, in 20 minutes or less.

Some advisers have just begun to use the Fidelity Retirement In-come Evaluator, and Fidelity will be running a separate pilot program with others very soon. By the end of the year, the product will be rolled out at no cost to the broader group of 135,000 Fidelity advisers.

The tool will also be available on Fidelity’s various adviser-oriented websites.

Boston-based Fidelity estimates that the assets of those 60 and older will double to $20 trillion over five years.

“Retirement income planning is the biggest opportunity and challenge facing brokers and advisers today,” said Gary Gallagher, senior vice president of Fidelity Institutional Wealth Services, formerly known as Fidelity Registered Investment Advisor Group.

The product, he said, is the first of its type within Fidelity and represents a collaborative effort that integrates information across three divisions of the company: Fidelity Investments Institutional Services Co. of Smithfield, R.I., and Fidelity Institutional Wealth Services and National Financial Services Corp., both based in Boston.

The program took 18 months to design.

The focus of retirement planning has shifted away from asset accumulation to a broader understanding of how individuals will spend money during retirement years, Mr. Gallagher said.

Advisers often work with a variety of investors with different goals.

“On one end, there are a lot of calculators where you can do a quick assessment,” Mr. Gallagher said. “At the other end, there are very complex saving tools to create a comprehensive financial planning package. This will serve the middle space.”

Planning software is frequently a topic when advisers meet, said Stuart Speer, a financial planner at Heritage Advisors LLC in Overland Park, Kan., who uses several types of planning software.

“I think this would be a good move for the mutual funds. It will be enormously popular in answering a need,” Mr. Speer said.

“In addition, there’s the issue of dropping a stitch somewhere. They’ll probably spot little inefficiencies,” he said.

After the adviser has entered basic client information, including income, expenses and assets, into the new Fidelity tool, the data are analyzed with at least 250 Monte Carlo market condition simulations to stress-test the portfolio.

The program allows for the planner to vary the expenses, ac-knowledging that some, such as college tuition or the desire to travel extensively, will not last indefinitely. It also has an em-bedded inflation rate, in-cluding a separate figure for health-care inflation.

Clients can monitor their ex-penses as they change and make modifications in spending be-havior accordingly.

“Many tools in the marketplace take a more static view,” Mr. Gallagher said.

The report demonstrates the likelihood that the client will be able to cover expenses and provides a year-by-year cash flow analysis.

With the initial projections in hand, the client can explore some “what if” scenarios, such as adjusting retirement age or selecting a different investment mix.

The program doesn’t include investment product recommendations. The final report allows the adviser to customize the report to their firm.

Advisers say that clients are demanding varying levels of analysis.

There are many products available on the market, said Jeff Waters, president of OFC Financial Planning LLC in Short Hills, N.J.

At the moment, he said, many advisers are focused on portfolio management software.

“This in-cludes performance management, record keeping and account reconciliation. That is really at the core of people’s business,” Mr. Waters said.

Once retired, many clients ask about how to manage or invest their distributions on a practical level, and are looking for some “what if” scenario analysis, said Martin Hopkins, president of M.L. Hopkins & Co. LLC of Princeton, N.J.

“Many people come into retirement with the traditional view that they can live off the earnings of their portfolio,” he said.

“You may have 25 to 30 years ahead of you, and that’s a long time in terms of the stock market. They may ask if they should take a year’s worth of distributions and put it into short-term [certificates of deposit].” Mr. Hopkins added.

Sue Asci can be reached at [email protected].