Wednesday, July 22, 2009

Review of SimpliFi: Virtual Financial Advisor




We wrote in the Winter about SimpliFi—a winner of the “best of show” award at Finovate Startup. SimpliFi is in private Beta right now and available to test drive so I took it for a spin this afternoon.

SimpliFi is a financial health assessment tool and bills itself as a “virtual investment advisor.” SimpliFi is even registered with the SEC as a Registered Investment Advisor.

The Web site is well organized, easy to use and clear. It doesn’t confuse the reader with mumbo-jumbo and I think would be accessible for individuals with any level of financial knowledge.

“Sophie,” the “virtual advisor” gives you the impression of a consultation, rather than working with a calculator, but ultimately to me, the results felt far more like a calculator.

After entering annual incomes for each member of our family and annual retirement account amounts, I was surprised to see that “Sophie” calculated the take-home-pay and taxes, and then returned a monthly take-home amount which was way off base. The system assumes that our retirement accounts are 401Ks with a monthly amount contributed. That is true for one job which has two retirement accounts drawn from it (there was only an option to show one), but for my retirement account, I write a check for $5,000 at the end of the year to fully-fund my IRA. I’ll have to fudge the numbers on this by saying I don’t have a retirement account, but instead have a short-term savings account depositing $416/mo, but I’m not sure how to record interest or growth except for to log in and empty the virtual “savings account” and manually adjust-up the 401K account.

Sophie doesn’t know we claim two children as deductions (you can enter this, but it’s not in the location you would expect to find it, nor is there a prompt to ask the question).

It took me a little monkeying around to discover I’d made a data-entry error in my account set up that made my monthly mortgage payment greater than the outstanding balance of my mortgage. I could tell that something was wrong (who has an annual budget shortfall of over $400,000…besides Congress?). I’d love to see a balance sheet that would allow me to check my data-entry work. Instead I flipped through every screen to try to tell where I’d made the mistake. Additionally, the automatic conversion from my annual data entry to the monthly result was confusing to me, because it didn’t tell me that it was going to do that.

The confusion continues when I see that SimpliFi promises to never sell me anything, but then provides free service by advertising products I might need. Maybe it’s the copywriter in me, but those two messages shouldn’t appear in the same collateral for any product.

Finally, I’m no professional, and I’m not registered with the SEC, but I respectfully disagree with Sophie’s investment advice. I’ve worked with several investment planners and they all scream bloody murder when they see how much life insurance I carry (about 4x the recommended amount). What they don’t know is that I have a special needs child, and want to ensure she has care if anything happens to my husband and I. Sophie didn’t bat an eye—or send a digital protest that I was over-insured (seeing as how eye-batting is a digital impossibility in her domain).

Also, Sophie recommended a massive reallocation of investments, including moving 32% of our investments to bonds. Are you kidding me? A two-income household with both adults under the age of 30, not planning to retire until 72, and we should have a third of our investments in bonds? I’ve certainly never heard *that* one from either of my planners.

Sophie also suggested I increase my monthly payment on my credit card to roughly 2/3 of my monthly income. Since Sophie doesn’t have to eat or feed children, perhaps that would be a reality for her, but my budget can only tolerate a payment of 1/6 of that. Sophie’s recommend “emergency fund” would keep our household operational for just six weeks. Perhaps she doesn’t live in the Pacific Northwest, where the economy comes and goes with volcanoes, earthquakes and tides?

All of this aside, Sophie gives me a B+ in my “Goal Point Average” for my 20 minutes of effort. I’m afraid I’ve got to give Sophie a D-, mostly for cool graphics and ease of use. The investment advice just isn’t my style. That said, I guess her plan is better than none at all, and I can see many potential improvements that could make this system very useful (for instance, I’d love to see it integrated with my actual balance sheet in Mint (then Sophie might know what it costs to feed my kids…).

Jessica Ward is a full-time freelance writer in the Seattle area. She writes on family and personal finance. You can follow her on Twitter as @jessc098 or read more about her family’s penny-pinching adventures at www.pennywisefamily.blogspot.com.

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