Ian McKenna: Apps for financial advice
Regular readers will know that I believe tablet computing has massive potential in our industry but even I was surprised by recent research identifying the full extent to which the public are embracing tablet devices.
According to research carried out by Mintel on behalf of Sky, nearly one in four of all UK adults either received a tablet device for Christmas or intend to buy one this year. Add this to a report from Ofcom published last year that indicated that 9 per cent of the population already own a tablet and you could reach the conclusions that as many as a third of consumers will have a tablet device by the end of the year.
New technology adoption is generally far higher among the wealthy, with one US study last year suggesting that tablet adoption doubles among individuals earning over $75,000 a year, so it is not hard to conclude that as many as one in two IFA clients may be using these devices by the end of this year.
I am also seeing increasing evidence that large numbers of IFAs who have resisted adopting PC-based technology in the past are embracing the tablet format and especially the iPad.
With this in mind, I thought it was time to take a look at a few of the leading apps that are available to help with pension planning. All the following are available to download from the Apple app store and unless otherwise indicated are free.
Aviva has produced an excellent app called Time to Act which works on the iPad and the iPhone. This enables the user to generate projections of the benefits per month, year or lifetime values by entering date of birth, gender, salary, existing pension fund value, contribution from the individual and the employer as either a monetary amount or percentage, retirement date and which of five investment styles are required.
The results present the amount paid in and the additional return that might be achieved. This is broken down to indicate how much is generated by the employer’s contribution, tax relief, any tax rebate for higher-rate tax if applicable to the investor and the individual’s own contributions.
A further page presents a simple stochastic graph indicating various ranges of return and an indication of the probability of achieving these.
A countdown page will tell the user how long it is until they retire and provides a simple Faq section to encourage consumers to take action. The execution is very neat and I think it is a great tool for advisers to demonstrate simple concepts with consumers, although I would have liked to have seen the ability for users to carry out calculations without the need to return to the original input screen.
This latter functionality is provided by BenPal, an app produced by JLT Benefit Solutions, which is available for advisers and consumers to download. I know a number of advisers who have adopted this to use with their own clients. It lacks the ability to choose different investment options and the stochastic modelling component but the shortfall illustration is outstanding. Simply by toggling between the retirement age, contributions and percentage tax-free cash required and moving a slider, the user can see the effect of a series of what-if options and the impact they will have on the annual pension and taxfree cash at retirement.
Using the advanced settings users can set the growth rate required, charges to be allowed for pension escalation level and any requirement for their partner’s pension.
Finally advisers prepared to pay £2.99 for a more detailed pension app may want to look at Retirement Dashboard Plus from appsrocket software. This captures a similar range of data to the above apps, including allowing the adviser to select from five investment strategies with stated assumed annual rates of return and standard deviation, as well as allowing the selection of various levels of probability of either good or bad markets.
This does not separate out individual and/or employer contributions and makes no reference to tax relief or taxfree cash. In some areas it does allow users greater control, however, and unlike the others, it does allow a summary report to be e-mailed.
This captures a simple summary of the results but does not carry any regulatory warnings. I find this latter app interesting, as in some ways it is more advanced than the above although there are obvious omissions and it needs work to make it compliant if it is intended for any professional use.
Overall, each of the above has valuable content but equally it is clear they could be significantly evolved and become even more valuable to advisers and consumers.
In providing a summary of current pension apps, it is also important to give credit to two apps that have been created to address pension reform. Any IFA will find viewing Aegon’s Pension Reform app and the Jargon Free Pensions app time well spent. Both can be accessed from Apple’s app store.
From current conversations, I know that the above, while providing an excellent start, are just the beginning of a wave of applications that are on their way to the personal finance market.
Considering the extent of consumer adoption, I believe there is a strong case for these and the level of sophistication and content will increase considerably in the coming months.
For those interested in following the emerging financial apps marketplace, I have created a LinkedIn group on the subject here. I will post links to the above and others on this group.
Ian McKenna is director of the Finance & Technology Research Centre