Apparatus and method for exposing, evaluating and re-balancing risk for decision-making in financial planning

• US 6,684,190 B1
• Filed: 12/10/1998
• Issued: 01/27/2004
• Est. Priority Date: 01/07/1997
• Status: Expired due to Term

• Current Assignee: Advicent Solutions LP (InvestCloud, Inc.), Wells Fargo Capital Finance, LLC (Wells Fargo & Company)
• Original Assignee: Financial Profiles, Inc. (Zywave, Inc.)
• Inventors: Weber, Richard M., Powers, James G.
• Primary Examiner(s): CHILCOT, RICHARD E
• Application Number:
  US09/209,147
• Time in Patent Office: 1,874 Days
• Field of Search: 705/4, 705/35-38
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A dynamic, user-friendly financial and illustration system for evaluating, exposing and re-balancing, to the user'"'"'s appropriate risk tolerance, the inherent risk in such financial planning areas as retirement, insurance, estate decision-making and targeted financial goal funding, e.g., college education, long-term care decisions, etc. This system provides a basis for both calculating and visualizing the elements of risk, and the re-balancing of that risk in accordance with the user'"'"'s risk tolerance, in any financial decision when the underlying elements of risk are known and can be inputted or computed.

Claims

1. An apparatus for revealing to a user the risk inherent in financial planning, said apparatus comprising:

(a) a computer including a memory, a processor and a graphical user interface;

(b) input means coupled to said computer for inputting variables related to a financial plan into said computer by the user;

(c) a monitor display coupled to said computer for displaying the variables and future values of the financial plan;

(d) said memory including;

(1) calculation means, operable by said processor, for calculating said future values of the financial plan;

(2) at least one financial planning module, operable by said processor and coupled to said calculation means, for controlling said graphical user interface to generate said future values in graphical format; and

(e) means for modifying, coupled to said at least one financial planning module, said at least one variable of the financial plan by the user from a first value to a second value, said at least one financial planning module controlling said graphical user interface in accordance with said modification of said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the financial plan.

2. The apparatus of claim 1 wherein said graphical format comprises at least one of the group consisting of line graphs, area graphs and bar graphs.

3. The apparatus of claim 2 wherein said line graphs, area graphs and bar graphs are displayed in respective colors.

4. The apparatus of claim 3 wherein said at least one financial planning module generates a continuously changing display of said at least one of the group of line graphs, area graphs and bar graphs whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the financial plan.

5. The apparatus of claim 4 wherein said modifying means further comprises:

(a) at least one slider bar, displayed on said monitor display, that permits the user to modify said at least one variable; and

(b) at least one window, displayed on said monitor display adjacent said at least one slider bar, that displays the instantaneous value of said at least one variable.

6. The apparatus of claim 4 wherein said modifying means is further manipulated by the user to modify the financial plan and thereby re-balance the inherent risk in the financial plan to meet objectives of the user.

7. The apparatus of claim 1 wherein said at least one financial planning module is a retirement planning module and wherein the financial plan is a retirement plan.

8. The apparatus of claim 7 wherein said variables comprise value of qualified retirement plan assets, value of other retirement assets and assumed or desired rate of return.

9. The apparatus of claim 8 wherein said variables further comprise assumed rate of inflation, assumed effective income tax rate, desired retirement age, targeted monthly income, and necessary pre-retirement monthly user contribution.

10. The apparatus of claim 9 wherein said graphical format comprises at least one of the group consisting of line graphs, area graphs and bar graphs.

11. The apparatus of claim 10 wherein said line graphs, area graphs and bar graphs are displayed in respective colors.

12. The apparatus of claim 11 wherein said retirement planning module generates a continuously changing display of said at least one of the group of line graphs, area graphs and bar graphs whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the retirement plan.

13. The apparatus of claim 12 wherein said modifying means further comprises:

(a) at least one slider bar, displayed on said monitor display, that permits the user to modify said at least one variable; and

(b) at least one window, displayed on said monitor display adjacent said at least one slider bar, that displays the instantaneous value of said at least one variable.

14. The apparatus of claim 12 wherein said modifying means is further manipulated by the user to modify the retirement plan and thereby re-balance the inherent risk in the retirement plan to meet objectives of the user.

15. The apparatus of claim 14 wherein the retirement plan comprises an accumulation phase and a distribution phase, each having a respective rate of inflation, and wherein said retirement planning module utilizes the following factors for generating said graphic display:

future annual user contributions, anticipated investment rate of return, and the respective rate of inflation of the accumulation phase.

16. The apparatus of claim 15 wherein the retirement plan is a qualified retirement plan and wherein the user has assets outside of the qualified retirement plan which are dedicated in the accumulation phase for retirement and wherein said retirement planning module utilizes the following factors of said assets outside of said qualified plan for generating said graphic display:

future monthly user contributions, investment rate of return, anticipated rate of return on investment gains and the respective rate of inflation of the accumulation phase.

17. The apparatus of claim 15 wherein said retirement planning module utilizes the following factors for of the distribution phase for generating said graphic display:

user target monthly income, user retirement age, effective tax rate during user retirement and inflation rate during user retirement.

18. The apparatus of claim 1 wherein said at least one financial planning module is a specific financial goal funding planning module and wherein the financial plan is a specific financial goal funding plan.

19. The apparatus of claim 18 wherein said variables comprise value of beginning capital, value of additional periodic contribution by user and assumed or desired rate of return.

20. The apparatus of claim 19 wherein said variables further comprise assumed rate of inflation, assumed effective income tax rate, number of years until user-desired withdrawal, targeted periodic user-withdrawal amount, and targeted withdrawal period.

21. The apparatus of claim 20 wherein said graphical format comprises at least one of the group consisting of line graphs, area graphs and bar graphs.

22. The apparatus of claim 21 wherein said line graphs, area graphs and bar graphs are displayed in respective colors.

23. The apparatus of claim 22 wherein said specific financial goal funding planning module generates a continuously changing display of said at least one of the group of line graphs, area graphs and bar graphs whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the specific financial goal funding plan.

24. The apparatus of claim 23 wherein said modifying means further comprises:

(a) at least one slider bar, displayed on said monitor display, that permits the user to modify said at least one variable; and

(b) at least one window, displayed on said monitor display adjacent said at least one slider bar, that displays the instantaneous value of said at least one variable.

25. The apparatus of claim 23 wherein said modifying means is further manipulated by the user to modify the specific financial goal funding plan and thereby re-balance the inherent risk in the specific financial goal funding plan to meet objectives of the user.

26. The apparatus of claim 1 wherein said at least one financial planning module is an estate planning module and wherein the financial plan is an estate plan.

27. The apparatus of claim 26 wherein said variables comprise value of current user assets in the estate, or assumed value of future assets in the estate, assumed or desired rate of return, and assumed rate of inflation.

28. The apparatus of claim 27 wherein said variables further comprise assumed life expectancy and estate tax.

29. The apparatus of claim 28 wherein said graphical format comprises bar graphs for depicting estate assets, estate taxes, net distributed estate and life insurance proceeds.

30. The apparatus of claim 29 wherein said bar graphs for depicting estate assets, estate taxes, net distributed estate and life insurance proceeds are displayed in respective colors.

31. The apparatus of claim 29 wherein the bar graphs for said estate assets are displayed on said monitor display in order of liquidity.

32. The apparatus of claim 31 wherein said order of liquidity comprises the most liquid estate assets being located at the top of said display and the least liquid estate asset being displayed at a lower position on said display.

33. The apparatus of claim 30 wherein said estate planning module generates a continuously changing display of said bar graphs whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the estate plan.

34. The apparatus of claim 33 wherein said modifying means further comprises:

(a) at least one slider bar, displayed on said monitor display, that permits the user to modify said at least one variable; and

(b) at least one window, displayed on said monitor display adjacent said at least one slider bar, that displays the instantaneous value of said at least one variable.

35. The apparatus of claim 33 wherein said modifying means is further manipulated by the user to modify the estate plan and thereby re-balance the inherent risk in the estate plan to meet objectives of the user.

36. The apparatus of claim 35 wherein said modifying means permits the user to extend or contract each of said bar graphs in order to re-balance the inherent risk in the estate plan to meet objectives of the user.

37. The apparatus of claim 1 wherein said at least one financial planning module is a life insurance planning module and wherein the financial plan is a life insurance plan.

38. The apparatus of claim 37 wherein said variables comprise a user'"'"'s age, gender and rating class, face value of a life insurance policy, annual premiums, number of years premiums are paid and interest rate.

39. The apparatus of claim 38 wherein said memory further comprises expense tables and mortality tables that are used by said life insurance planning module for generating said future values of the life insurance plan in graphical format.

40. The apparatus of claim 39 wherein said graphical format comprises at least one of the group consisting of line graphs, area graphs and bar graphs.

41. The apparatus of claim 40 wherein said line graphs, area graphs and bar graphs are displayed in respective colors.

42. The apparatus of claim 41 wherein said life insurance planning module generates a continuously changing display of said at least one of the group of line graphs, area graphs and bar graphs whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the life insurance plan.

43. The apparatus of claim 42 wherein said modifying means further comprises:

(a) at least one slider bar, displayed on said monitor display, that permits the user to modify said at least one variable; and

(b) at least one window, displayed on said monitor display adjacent said at least one slider bar, that displays the instantaneous value of said at least one variable.

44. The apparatus of claim 42 wherein said modifying means is further manipulated by the user to modify the life insurance plan and thereby re-balance the inherent risk in the life insurance plan to meet objectives of the user.

45. The apparatus of claim 44 wherein said life insurance planning module generates a display screen that comprises a generic guaranteed values graph, a generic assumed values graph, a possible premiums graph and a life expectancy graph simultaneously and wherein all of which may continuously change whenever said modifying means modifies said at least one variable from said first value to said second value to provide a graphical representation of the risk inherent in the life insurance plan, said life expectancy graph comprising a graphical depiction of the actuarial chance of a user being alive at every age between a user'"'"'s current age and an older predetermined age and including indicia representing an age where 50% of those people in a risk group of the user have died.

46. The apparatus of claim 44 wherein said life insurance planning module further comprises an increasing death benefit sub-module, said increasing death benefit sub-module permitting the user to visualize the risk with electing an increasing death benefit for a desired number of years and permitting the user to re-balance the risk to meet user objectives.

47. The apparatus of claim 44 wherein said life insurance planning module further comprises a 1^st year extra premiums sub-module, said 1^st year extra premiums sub-module permitting the user to enter an extra premium to be paid into the life insurance plan during the 1^st year, in addition to a regular-annual premium, to see the effects of said extra premium on the death benefit and cash value of the life insurance plan.

48. The apparatus of claim 44 wherein said life insurance planning module further comprises a varying premiums sub-module, said varying premiums sub-module permitting the user to enter various premiums to explore the risk associated with paying said premiums for the life insurance plan and permitting the user to re-balance the risk to meet user objectives.

49. The apparatus of claim 44 wherein said life insurance planning module further comprises a withdrawals sub-module, said withdrawals sub-module permitting the user to determine the amount of additional premiums necessary to keep a policy in-force when certain withdrawals of cash value are made from the life insurance plan at predetermined intervals.

50. The apparatus of claim 44 wherein said life insurance planning module further comprises an in-force sub-module, said in-force sub-module permitting the user to test a current life insurance plan against original assumptions made on the life insurance plan.

51. The apparatus of claim 1 further comprising an alternative investment appreciation module, said alternative investment appreciation module being used by said at least one financial planning module to estimate future investment appreciation using a period of sequential years of historic S&

P500®

annual returns.

52. The apparatus of claim 7 further comprising an alternative investment appreciation module, said alternative investment appreciation module being used by said retirement planning module to estimate future investment appreciation using a period of sequential years of historic S&

P500®

annual returns.

53. The apparatus of claim 18 further comprising an alternative investment appreciation module, said alternative investment appreciation module being used by said specific financial goal funding planning module to estimate future investment appreciation using a period of sequential years of historic S&

P500®

annual returns.

54. The apparatus of claim 26 further comprising an alternative investment appreciation module, said alternative investment appreciation module being used by said estate planning module to estimate future investment appreciation using a period of sequential S&

P500®

annual returns.

55. The apparatus of claim 37 further comprising an alternative investment appreciation module, said alternative investment appreciation module being used by said life insurance planning module to estimate future investment appreciation for variable life insurance plans using a period of sequential years of historic S&

P500®

annual returns.

56. A method for revealing the risk inherent in a financial plan, said method comprising the steps of:

(a) providing a computer including a memory, a processor, input means, and a monitor;

(b) supplying said computer with user-particular data and financial plan data through said input means;

(c) supplying said memory with finance algorithms;

(d) calculating future values of the financial plan using said user-particular data, financial plan data and said finance algorithms using said processor;

(e) modifying at least one variable of the financial plan by the user from a first value to a second value;

(f) presenting a continuously changing graphical display on said monitor in accordance with said modification of said at least one variable, said changing graphical display revealing the risk inherent in the financial plan.

57. The method of claim 56 further comprising the step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives.

58. The method of claim 57 wherein said step of presenting a continuously changing graphical display comprises at least one of the group consisting of line graphs, area graphs and bar graphs continuously changing to provide the user with a visual depiction of the risk in the financial plan.

59. The method of claim 58 wherein said step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives comprises a continuously changing graphical display of at least one of the group consisting of line graphs, area graphs and bar graphs that depict a modified financial plan that meets user objectives.

60. The method of claim 59 wherein said step of presenting a continuously changing graphical display includes displaying said line graphs, area graphs and bar graphs in respective colors.

61. The method of claim 56 wherein the financial plan is a retirement plan and wherein said user particular data and said financial plan data comprise qualified retirement plan assets, value of other retirement assets and assumed or desired rate of return.

62. The method of claim 61 wherein said user particular data and said financial plan data further comprise assumed rate of inflation, assumed effective income tax rate, desired retirement age, targeted monthly income and necessary pre-retirement monthly user contribution.

63. The method of claim 61 further comprising the step of permitting the user to further modify said at least one variable to re-balance the risk in the retirement plan to meet user objectives.

64. The method of claim 63 wherein said step of presenting a continuously changing graphical display comprises at least one of the group consisting of line graphs, area graphs and bar graphs continuously changing to provide the user with a visual depiction of the risk in the retirement plan.

65. The method of claim 64 wherein said step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives comprises a continuously changing graphical display of at least one of the group consisting of line graphs, area graphs and bar graphs that depict a modified retirement plan that meets user objectives.

66. The method of claim 64 wherein said step of presenting a continuously changing graphical display includes displaying said line graphs, area graphs and bar graphs in respective colors.

67. The method of claim 65 wherein the retirement plan comprises an accumulation phase and a distribution phase, each having a respective rate of inflation, and wherein said user-particular data and said financial plan data further comprise future annual user contributions, anticipated investment rate of return, and the respective rate of inflation of the accumulation phase.

68. The method of claim 67 wherein the retirement plan is a qualified retirement plan and wherein the user has assets outside of the qualified retirement plan which are dedicated in the accumulation phase for retirement and wherein said user-particular data and said financial plan data further comprise future monthly user contributions, investment rate of return, anticipated rate of return on investment gains and the respective rate of inflation of the accumulation phase.

69. The method of claim 68 wherein said user-particular data and said financial plan data further comprise the following factors for of the distribution phase:

user target monthly income, user retirement age, effective tax rate during user retirement and inflation rate during user retirement comprise future annual user contributions, anticipated investment rate of return, and the respective rate of inflation of the accumulation phase.

70. The method of claim 56 wherein the financial plan is a specific financial goal funding plan and wherein said user particular data and said financial plan data comprise value of beginning capital, value of additional periodic contribution by user and assumed or desired rate of return.

71. The method of claim 60 wherein said user-particular input and said financial plan data further comprise assumed rate of inflation, assumed effective income tax rate, number of years until user-desired withdrawal, targeted periodic user-withdrawal amount, and targeted withdrawal period.

72. The method of claim 71 further comprising the step of permitting the user to further modify said at least one variable to re-balance the risk in the specific financial goal funding plan to meet user objectives.

73. The method of claim 72 wherein said step of presenting a continuously changing graphical display comprises at least one of the group consisting of line graphs, area graphs and bar graphs continuously changing to provide the user with a visual depiction of the risk in the specific financial goal funding plan.

74. The method of claim 73 wherein said step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives comprises a continuously changing graphical display of at least one of the group consisting of line graphs, area graphs and bar graphs that depict a modified specific financial goal funding plan that meets user objectives.

75. The method of claim 74 wherein said step of presenting a continuously changing graphical display includes displaying said line graphs, area graphs and bar graphs in respective colors.

76. The method of claim 56 wherein the financial plan is an estate plan and wherein said user particular data and said financial plan data comprise value of current user assets in the estate, or assumed value assets in the estate.

77. The method of claim 76 wherein said user particular data and said financial plan data further comprise assumed or desired rate of return, and assumed rate of inflation.

78. The method of claim 77 wherein said user particular data and said financial plan data further comprise assumed life expectancy and estate tax.

79. The method of claim 78 further comprising the step of permitting the user to further modify said at least one variable to re-balance the risk in the estate plan to meet user objectives.

80. The method of claim 79 wherein said step of presenting a continuously changing graphical display comprises bar graphs continuously changing to provide the user with a visual depiction of the risk in the estate plan.

81. The method of claim 80 wherein said step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives comprises a continuously changing graphical display of said bar graphs that depict a modified estate plan that meets user objectives.

82. The method of claim 81 wherein said step of presenting a continuously changing graphical display includes displaying bar graphs of estate assets, estate taxes, net distributed estate and life insurance proceeds in respective colors.

83. The method of claim 82 further comprising the step of displaying said bar graphs for said estate assets in order of liquidity.

84. The method of claim 83 wherein said step of displaying said bar graphs for said estate assets in order of liquidity comprises displaying the most liquid estate asset at the top of said display and the least liquid estate asset at a lower position on said display.

85. The method of claim 56 wherein the financial plan is a life insurance plan and wherein said user particular data and said financial plan data comprise a user'"'"'s age, gender and rating class, face value of a life insurance policy, annual premiums, number of years premiums are paid and interest rate.

86. The method of claim 85 wherein said financial plan data further comprise expense table data and mortality table data.

87. The method of claim 86 further comprising the step of permitting the user to further modify said at least one variable to re-balance the risk in the life insurance plan to meet user objectives.

88. The method of claim 87 wherein said step of presenting a continuously changing graphical display comprises at least one of the group consisting of line graphs, area graphs and bar graphs continuously changing to provide the user with a visual depiction of the risk in the life insurance plan.

89. The method of claim 88 wherein said step of permitting the user to further modify said at least one variable to re-balance the risk to meet user objectives comprises a continuously changing graphical display of at least one of the group consisting of line graphs, area graphs and bar graphs that depict a modified life insurance plan that meets user objectives.

90. The method of claim 89 wherein said step of presenting a continuously changing graphical display includes displaying said line graphs, area graphs and bar graphs in respective colors.

91. The method of claim 90 further comprising the step of permitting the user to visualize the risk with electing an increasing death benefit for a desired number of years and permitting the user to re-balance the risk to meet user objectives.

92. The method of claim 90 further comprising the step permitting the user to enter an extra premium to be paid into the life insurance plan during the 1^st year, in addition to a regular-annual premium, to see the effects of said extra premium on the death benefit and cash value of the life insurance plan.

93. The method of claim 90 further comprising the step of permitting the user to enter various premiums to explore the risk associated with paying said premiums for the life insurance plan and permitting the user to re-balance the risk to meet user objectives.

94. The method of claim 90 further comprising the step of permitting the user to determine the amount of additional premiums necessary to keep a policy in-force when certain withdrawals of cash value are made from the life insurance plan at predetermined intervals.

95. The method of claim 90 further comprising the step of permitting the user to test a current life insurance plan against original assumptions made on the life insurance plan.

96. The method of claim 56 further comprising the step of estimating future investment appreciation by applying a period of sequential years of historic S&

P500®

annual returns during said step of calculating future values.

97. The method of claim 61 further comprising the step of estimating future investment appreciation by applying a period of sequential years of historic S&

P500®

annual returns during said step of calculating future values.

98. The method of claim 70 further comprising the step of estimating future investment appreciation by applying a period of sequential years of historic S&

P500®

annual returns during said step of calculating future values.

99. The method of claim 85 further comprising the step of estimating future investment appreciation by applying a period of sequential years of historic S&

P500°

annual returns during said step of calculating future values for a variable life insurance plan.