Getting a financial plan is often viewed as a free service in the personal finance biz.
You can generally get an adviser or licensed planner at a major financial institution to run your financial figures through some computer software to come up with a rough outline, for example, of what your retirement assets and income will look like in 20 years.
But the plans aren’t really free. You’re already banking at the financial institution or holding assets there, frequently proprietary funds of that bank or credit union.
So for that "free plan," you’re paying over the long term ongoing fees associated with mutual funds you own, or by simply having an ongoing service relationship.
But if you’re looking for a truly free financial plan — or something close to it — there’s a new option for you called Planswell, which launched last year. Consider it the financial-planning equivalent of the robo-adviser.
Don’t know what a robo-adviser is?
It’s an online service that builds you an investment portfolio of low-cost, exchange-traded funds (as in ETFs, which are like mutual funds, only much cheaper because there’s no expert paid to pick stocks, bonds and other investments).
And this portfolio is automatically rebalanced to suit your goals (most likely saving for retirement).
With Planswell (and another interesting entrant that we’ll get to later), Canadians now have :robo-planners" at their disposal.
And like robo-advisers, they’re bound to reshape the already fast-changing landscape of financial advice in Canada.
"The problem we’re trying to solve is nobody knows what they need to do on a monthly basis to maintain their lifestyle in the future," says Eric Arnold, CEO of the fintech (financial technology) firm Planswell, based in Toronto.
Hold on… isn’t financial planning widely available (as previously mentioned)?
Well, Arnold notes that’s true on the surface. But the services many Canadians have access to, he argues, may not be all that helpful because they can be fairly rudimentary.
He further contends thorough, detailed financial planning is often reserved for people with at least six figures in assets.
Plus, the traditional financial-planning process can be time-consuming.
As Arnold asks: who can fit in a series of meetings and coffees to chat about their future, dig up a bunch of personal financial numbers and potentially sign a series of regulatory forms?
Leveraging new advances in technology, Planswell aims to overcome these irritants and obstacles and provide a free financial plan in roughly three minutes.
Arnold admits robo-advisers provide similar services, such as how much you need to save in an RRSP to be able to retire at a certain date. But they don’t consider the whole picture, such as the need for a mortgage, life and disability insurance, and budgeting to find the money to save for the future.
"There is really a strong need for doing something more comprehensive that can tell you exactly what you need to do," he says
Fintech industry analyst Brett McDonald, with Strategic Insight in Toronto, says it’s hardly surprising to see robo-planners sprout up in the Canadian marketplace.
"When we look across developed markets and the evolution of robo-advice, financial planning has been a growing component. But there have been varying approaches."
Many robo-firms offer access to certified financial planners (flesh-and-blood ones) to clients through online chats or over the phone.
Now, Planswell simply does it in an automated, more self-directed manner, he says.
Mind you, Planswell also provides access to products. It may give you the plan for free, but it makes money through its mortgage and insurance brokerage arms. As well, it has a robo-adviser service offering managed, low-cost portfolios of ETFs.
Essentially, Planswell wants users to be able to "put a plan into action in an unbiased way, rather than having to speak to an adviser (somewhere else) who might want to change up the recommendations into something more profitable" (for the adviser, not you).
Arnold says Planswell is designed to provide impartial advice. Otherwise, its business model will fall flat due to increasingly savvy consumers leery about the financial industry overall, he says.
Yet Planswell isn’t the only robo-planner game in town.
Another offering, launched just a few weeks ago, is also providing free financial plans — at least to start.
Money-Ready is an online, mobile-based planning app developed for kicks by a retired computational scientist, who previously helped design genomic models for cancer research.
"I thought it’d be fun to create a program that could provide a complete and accurate financial plan, because I couldn’t find anything similar on the web," says Elisabeth Tillier, head of Money-Ready.
That eureka moment came to her about three years ago. And she’s been working on the software since. So while Planswell beat her to the market, Tillier isn’t worried about competition, because she’s not out to make money.
"I think of this as an educational tool to get people to learn to do their own financial planning," she says. "They can basically learn by doing — that’s what this site offers."
The service does charge users for ongoing use of their financial plan on a subscription basis, either $50 a month or $150 a year. But users can get a plan and then use Money-Ready’s "Time Machine" three times for free. Time Machine is the software’s forecasting engine, projecting future income — often in retirement — based on spending, savings contributions, debt levels, taxation and investment portfolio performance. And users can adjust inputs to tweak their plan.
If they want to do it more than three times, it will cost them.
"I had intended to make this entirely free, but I do need to recoup my costs," Tillier says.
Tillier’s expenses include fees for a Fundata Canada subscription, which provides daily tracking of users’ investments, such as mutual funds, stocks, bonds and ETFs.
To date, Money-Ready just has a few dozen users.
By contrast, Planswell has done more than 150,000 plans so far. And its ambitions extend beyond Canada.
"This is a universal problem," Arnold says.
"When you offer ‘Click here and get a plan in three minutes,’ that’s an attractive proposition everywhere to everyone."
Do-it-yourself financial blogger Mark Seed (My Own Advisor) tried Planswell, and had the following thoughts for the Free Press.
• He “really liked the simplicity of the approach” where within minutes you get what he considers “financial plan-light”;
• It’s an “online solution whereby you’re not forced to purchase a product or service,” and that “is a great step in the right direction.”
• The “Assumptions” tab that includes market returns, inflation, salary increases and real estate value growth, allow users to adjust these factors, which can dramatically affect a plan over the long-term.
Seed also examined Money-Ready, but he has not used it yet. He has had contact with its creator, Elisabeth Tillier, who had asked him to review her ebook manual for Money-Ready. He calls it “comprehensive” and based on what he has seen, the app “will cover a host of financial planning elements.”