The Inside Storey: My quest for the ultimate automated advice

The first in our new blog series, Andrew Storey, Propositions Director at EV, discusses the development of our new financial planning software for advisers, EVPro, his approach to innovation, and his personal quest to find a “one-click” problem-solving solution that improves your clients’ financial planning outcomes.

 

My “thing” is finding better ways of working.

When redesigning our planning and suitability tools, I wanted very much to create the holy grail of advice. The ultimate experience. That is, to be able to identify problems of suitability, planning and tax efficiency - and fix them in one go.

In this nirvana world, an adviser’s “first thing in the morning” job would be to log in to see today’s list of clients to review. Clients who either need to adjust their plans or need a comforting call. However, the system has already worked out what changes, if any, should be made to make their financial plans better.

That might seem a long way off, but it’s not.

I’ve been working on the intermediate problems that have to be solved first, and our launch of EVPro is a step towards that holy grail.

Here’s how I have solved some of the key problems of automating advice, which is now available through the new features in our recently launched EVPro planning system.

Identify success or failure in an objective way

How do you know if your clients are on track or not? Cash flow graphs are a start, but whilst they help you explain what’s happening to clients, they can’t compare themselves to last year or immediately tell you how close you might be to there being a problem.

 

"A rethink on cash flow planning is needed"

 

This means we need a metric (or two) that can tell you if you’re OK or not. And that means a rethink on cash flow planning is needed.

The answer - the probability of meeting your expenses every year taking into account market fluctuations. This can’t be achieved using the traditional deterministic assumptions but we had a good starting point as we’ve been providing advisers with the probability of meeting investment targets since 2003.

The challenge here was to increase the difficulty level from what we’re all used to - a simple target of a single investment - up to a full financial plan and checking the expenses are met every year, not just at the end of the plan.

We now take into account joint lives, multiple assets, debts, incomes and expense targets that not only vary every year through changes to lifestyles but also increase through inflation and could be either essential or luxury expenses. And we mustn’t forget tax which applies differently to different sources of income.

Click here to book your one-to-one demo of EVPro today with one of our experts.

Show that a plan is better or worse

Probability works until you’re good and the plan is OK. But it doesn’t help optimise a good plan where there is enough money already.

 

"For the first time you now have a really objective

measure of capacity for loss"

This is a tricky one to solve. How do you put all the ins and outs in a client’s finances into a measurable outcome in a situation where it’s working? How do you take into account money you haven’t even got yet (like a future state pension), and the potential change in the order of withdrawals from products?

Our model already had a really powerful backsolve on it - how much do I need to invest to ensure that the plan will work with a given probability.

Once again we increased the power.

Instead of a simple “How much do I invest in this one product to achieve this one amount after a single term given a certain probability?”, we need to make it work much harder.
What we actually need is to be able to check if you’ve got enough money in your multiple products (each invested in multiple funds, of course) together with income both now and in the future, to achieve expenses being met every single year.

So what we ask is “what proportion of the value of each product you currently hold would you need them all to be adjusted by to meet expenses in every year of your plan?”.
That’s a whole lot of work for a manual solution. Imagine changing every fund on every product for your client by the same proportion. Then run market scenario drops across 1,000 different simulations. Then repeat this adjustment of values again and again until you meet the plan target. If you can do that in a day you’d be lucky, and you’d not want the client to adjust their plan after it!

Or you can bear with us and wait a few seconds for our asset adequacy number to do just that for you. It’s worth it.

The result is a single asset adequacy check figure that you can use to check how efficient your advice has been.

A convenient side effect of this is that it can be used to check if you have the capacity for a drop in values for funds. That is - for the first time you now have a really objective measure of capacity for loss.

Click here to book your one-to-one demo of EVPro today with one of our experts.

Ensure your plan is robust

So the plan works if all goes to plan or if the markets change, and you’ve checked it’s as good as it can be. But what about if something else happens? To give a robust advice solution, particularly for an automated process, you have to be sure that the client still meets their lifestyle even if other factors out of your client’s control happen. For example, large increases in fuel bills, checking if they live longer than discussed or if they have unexpected emergencies.

 

"A single overall check on whether the plan is

robust"

 

Just checking market risks is not enough. All good compliant services will tell you that you need to consider what-ifs for your client. And all good cash flows allow you to do this manually yourself.

But to get to the automation of the holy grail we need this done in a way that is both quicker, less prone to mistakes and of course, can be done with a click of a single button.
The answer? Use the power of the stochastic model again, to run 1,000 market simulations, but add this to pre-prepared “what-if-things-go-wrong” checks.

Once again, we’ve increased the power for you. Our first release has 4 such stress tests but there are plenty more on the way. This gives you another check on your clients’ capacity for loss as well but expanded not just to market conditions but also to other uncontrollable factors.

The result? A single overall check on whether the plan is robust, and - just as importantly - where it might benefit from changes.

Click here to book your one-to-one demo of EVPro today with one of our experts.

Find a solution quickly

The issue here is being able to automatically find a way to improve the plan. It's not enough to just copy the data, fiddle with it, and then check the results. Cash flow tells you there's a problem but not how to fix it - and certainly not with a single click. Specific questions need answering and this needs to be done through calculations in order to speed up the process.

 

"All solutions available as single button clicks"

 

As with most cash flow planning, the design for our revised plans allows revised plans to be created by users.

But how to do this automatically? This additional support is created using yet more improvements on our back-solve functionality.

This means some seriously powerful back-solves, once again taking into account all the cash flow items but answering questions like “When can this event happen?” or “How much do I need to invest in this product” or “How should funds be invested to meet the risk profile?”.

These are all solutions available as single button clicks for our users. And once again they are stepping stones to not only identifying problems automatically but also fixing them.

Check all clients are on track

To get to the full holy grail of being able to process all clients in bulk we need to have a way of understanding where they all are in their plans.

This process of “normalising” all outputs to check in a blink of an eye if everyone is on track is the purpose behind my Review module. The metrics apply equally to the most complex client or the simplest, and in due course, as the data feeds improve will enable a real-time check on cases.

A review allows you to filter on your clients to check to see who is on track and who is not. Not just useful for individual advisers, but also across a firm to check plans are being set up and monitored.

Update data regularly

Data is the toughest part of this solution to crack. Integration with back-office systems is a start, but there are still improvements needed in the feeds and integrations to allow a full data refresh across the wide range of information that is needed.

Separate cash accounts, off-platform assets or legacy products, are typically awkward to keep updated on a rolling basis.

The back office integrations we've implemented mean that the data is the best it can be at the moment. We are, of course, always looking for better solutions for the data provision into a cash flow plan. We've seen some potentially great new developments that when joined together with EVPro could make a huge difference to the lives of both advisers and their clients.

Click here to book your one-to-one demo of EVPro today with one of our experts.

Are we there yet?

The elements for the holy grail are in place within EVPro. For now, this means that advisers have the flexibility to use these steps in the best ways to improve outcomes for both them and their clients.

It won't be long, however, before these can be combined into a 2 step process - firstly automatically identify the problem and potential solutions, then allow the advisers to adjust the resulting plan to provide that human touch overlay.

This will further enhance the advice experience, reduce costs, and expand the range of customers that can be successfully and viably supported by advisers.

So what next?

Our EVPro software is designed to deliver consistency to your advice journey from start to finish, negating the need to integrate multiple third-party tools. So, why not book your one-to-one demo of EVPro by clicking the image below.

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