Method for managing financial accounts by a preferred allocation of funds among accounts

• US 5,852,811 A
• Filed: 07/25/1994
• Issued: 12/22/1998
• Est. Priority Date: 04/15/1987
• Status: Expired due to Fees

• Current Assignee: Home Account Network Incorporated
• Original Assignee: Proprietary Financial Products, Inc.
• Inventors: Atkins, Charles Agee
• Primary Examiner(s): Voeltz, Emanuel Todd
• Assistant Examiner(s): Hughet, William N.
• Application Number:
  US08/280,096
• Time in Patent Office: 1,611 Days
• Field of Search: 364/401, 364/408, 705/35, 705/36, 705/37, 705/38
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G07F 9/002 Vending machines being part of a centrally controlled network of vending machines

Abstract

A personal financial program is disclosed incorporating means of implementing, coordinating, supervising, planning, analyzing and reporting upon investments in an array of asset accounts and liability accounts within a client account. Through a prioritization function, the client specifies his financial objectives, his risk preference, a forecast of economic and financial variables, and budgetary constraints. The prioritization function suggests to the client a portfolio of asset and liability accounts that may be credited and debited to form investments and borrowings to best realize his financial objectives over a defined time horizon. In the preferred embodiment a central structural element of the financial account is a liability account secured by the client'"'"'s home and one or more asset accounts. Client funds that would normally be used to amortize the mortgage may be alternatively used according to a prioritized allocation of funds to asset accounts and liability accounts. The client account is imbalanced if the client'"'"'s borrowing power is less than the minimum borrowing power specified by the financial institution. If the account is imbalanced, the client may reallocate the assets and liabilities within the client account and/or modify a set of constraints on the client account. If the client account is still not balanced after modification of the account, the system initiates a liquidation procedure.

Claims

1. A method for using a computer to operate at least one client financial account comprising the steps of:

maintaining on said computer system data for each financial account, each financial account comprising at least one investment asset account which receives funds for investment purposes and has an account balance that is periodically updated, a first liability account comprising a loan which is secured with a lien on at least one home and one or more of said investment asset accounts, and at least one additional liability account;

determining client preferences for operating the account;

determining an allocation to the investment asset account(s) and the liability account(s) based upon the client preferences;

allocating funds received in said financial account to pay interest on the loan with at least a portion of the remainder of said funds being allocated based upon the determined allocation rather than amortizing the loan; and

updating the allocation in accordance with changes to financial and economic variables.

2. The method of claim 1 wherein any additional liability account(s) are paid off before applying any remainder of said funds to increase at least one of said investment asset accounts rather than amortizing the loan.

3. The method of claim 1 further comprising a step of prioritizing the allocation of said investment asset accounts and said liability accounts through the use of a computer-based programming function.

4. The method of claim 3 wherein said programming function is linear.

5. The method of claim 3 wherein said programming function in nonlinear.

6. The method of claim 3 wherein said programming function is an integer function.

7. The method of claim 1 further comprising the step of executing transaction orders on said investment asset accounts and said liability accounts.

8. The method of claim 7 wherein transactions are ordered to be executed by instructions given by the client through a machine interface including an automatic teller machine (ATM), a facsimile machine, or an interactive telephone.

9. The method of claim 7 wherein transactions are ordered to be executed by mail requests from the client.

10. The method of claim 1 further comprising using said computer system for screening said financial account for the purposes of marketing additional products comprising the steps of:

reviewing a customer data base including client customer information files to determine parameters including the client'"'"'s assets, liabilities, credit history, cash flow, age;

matching these parameters to said additional products; and

notifying the client of the availability of said product(s).

11. The method of claim 1 wherein said at least one additional liability account comprises one or more of a home acquisition loan, a home improvement loan, a home rehabilitation loan, a home equity line of credit, a personal line of credit, an automobile loan, a vacation loan, a student loan, and at least one personal credit account.

12. The method of claim 1 wherein said at least one additional liability account further comprises a margin account.

13. The method of claim 12 further comprising the step of utilizing a portion of said funds received to pay off said margin account.

14. The method of claim 1 wherein said at least one investment asset account comprises a pension and deferred compensation plan, an insurance plan, an annuity, a real estate investment, a trust account, equities, bonds, mutual funds, commodities, futures, options, a margin lending account, a brokerage account and/or a bank account.

15. The method of claim 14 wherein said bank account comprises one or more of a savings account, a NOW account, a checking account and a money market account.

16. The method of claim 1 wherein the funds received into said account are payments made by the account owner.

17. The method of claim 1 wherein the funds received into said account are derived from earnings on said investment asset accounts.

18. The method of claim 1 wherein the funds received are received periodically.

19. A method for using a computer system to operate at least one client financial account comprising the steps of:

maintaining on said computer system data for each financial account, each financial account comprising at least one investment asset account which receives funds for investment purposes and has an account balance that is periodically updated, and at least one liability account including a loan which is secured with a lien on at least one home and one or more of said investment asset account(s);

maintaining on said computer system data for funds received into the financial account through loan payments, account cash flows, and account transactions executed on said investment asset account(s) and said liability account(s);

determining client preferences for operating the account;

determining a preferred allocation of said received funds to said investment asset account(s) and said liability account(s) based upon the client'"'"'s preferences;

allocating said received funds to pay interest on the loan, and using the remaining portion of said funds according to said preferred allocation of said funds; and

updating the preferred allocation in accordance with changes to financial and economic variables.

20. The method of claim 19 further comprising ordering account transactions by instructions given by the client through a machine interface including an automatic teller machine (ATM), a facsimile machine or an interactive telephone, or through mailed requests.

21. The method of claim 19 further comprising the step of using said computer system to screen said financial account to detect irregularities comprising the steps of:

reviewing recent account transactions;

maintaining a record of past account transactions;

comparing said recent account transactions with said past account transactions; and

notifying the client if any unusual transactions are detected.

22. The method of claim 21 further comprising performing said screening step continuously.

23. The method of claim 21 further comprising performing said screening step in predetermined periodic intervals.

24. The method of claim 19 further comprising using said computer system to screen said financial account for the purposes of marketing additional products comprising the steps of:

reviewing a customer data base including client customer information files to determine parameters including the client'"'"'s assets, liabilities, credit history, cash flow, age;

matching these parameters to said additional products; and

notifying the client of the availability of said products.

25. A method of using a computer system to operate at least one client financial account comprising the steps of:

maintaining on said computer data for each financial account, each financial account comprising at least one investment asset account which receives funds for investment purposes and has an account balance that is periodically updated, and at least one liability account including a loan secured by a lien on a residence;

allocating funds received in said financial account to pay interest on the loan and to increase at least one investment asset account or decrease at least one liability account other than the loan secured by the lien, rather than amortize the loan;

calculating an asset loan value for at least said residence equal to the product of the value of the residence and a loan to value ratio; and

comparing the asset loan value to the amount of the loan; and

if the asset loan value exceeds the amount of the loan then increasing the loan and if the asset loan value is less than the amount of the loan then decreasing the loan so that the loan, does not exceed the asset loan value.

26. The method of claim 25 wherein the steps of calculating the asset loan value and increasing the loan are performed on a regular basis so as to maintain the loan at a substantially constant ratio relative to the value of the residence.

27. A method of using a computer system to operate a client account at a first financial institution when periodic payments are being made to a second institution, a first portion of which pays interest on a loan to a client secured by a residence of the client and a second portion of which amortizes said loan, said method comprising the steps of:

maintaining on said computer system data for an investment asset account at the first financial institution;

maintaining on said computer system data for a credit line at the first financial institution secured by a lien on the residence of the client; and

debiting the credit line and crediting the investment asset account by an amount equal to at least the second portion of each periodic payment as said periodic payments are made to the second institution.

28. The method of claim 27 wherein the amount that the credit line is debited is such that the sum of the principal of the loan from the second institution and the credit extended by the first institution is equal to or greater than the principal of said loan at the time the credit line is first debited.

29. The method of claim 27 wherein the client pays to the first financial institution the periodic payments due to the second financial institution and the first financial institution pays the periodic payments to the second financial institution.

30. The method of claim 27 wherein the client pays directly to the second financial institution the periodic payments due to the second financial institution.

31. A method for using a computer-based system to operate at least one client financial account comprising the steps of:

storing in a database information concerning each financial account, each financial account including at least one investment asset account which receives funds for investment purposes, said asset account having an account balance which is updated by the computer system upon receipt of said funds, and at least one liability account including a loan;

determining client preferences for operating the account;

determining a preferred allocation of received funds to said investment asset account(s) and said liability account(s) based upon the client'"'"'s preferences;

allocating said received funds to pay interest on the loan and allocating the remaining portion of said funds according to said preferred allocation of said funds; and

updating the preferred allocation in accordance with changes to financial and economic variables.

32. The method of claim 31 wherein said preferred allocation of received funds to said investment asset account(s) and said liability account(s) is generated by utilizing a computerized financial optimization function based on client risk analysis, account constraints and forecasted econometric and account variables.

33. The method of claim 31 further comprising the steps of:

analyzing said preferred allocation of received funds to said investment asset account(s) and said liability account(s);

generating an improved allocation of received funds to said investment asset account(s) and said liability account(s); and

allocating received funds to pay interest on the loan, and allocating the remaining portion of said received funds according to said improved allocation of funds to said investment asset account(s) and said liability account(s) rather than amortizing the loan.

34. The method of claim 31 further comprising the step of maintaining on said computer records of funds received into the financial account wherein said funds comprise loan payments and additional cash flow.

35. A method for using a computer-based financial system comprising the steps of:

establishing at least one client account on said computer system, each client account comprising a loan secured by a mortgage on a home, and at least one more asset or liability;

investing funds received in said client account(s) in said assets or liabilities;

calculating a net asset value for the account equal to the value of any assets including the home less any liabilities including the loan;

comparing the net asset value for the account with a minimum net asset value established for that account;

calculating an expected net asset value at some time in the future for the assets including the home and the liabilities including the loan;

comparing the expected net asset value to a forecasted minimum net asset value established for that account for that future time;

indicating an account imbalance to a user of the system if the client account'"'"'s net asset value is less than the forecasted minimum net asset value; and

automatically allocating funds between said assets and liabilities to endeavor to correct the account imbalance.

36. A method for using a computer-based system to process and supervise at least one client account, each said client account comprising a plurality of sub-accounts including at least one type of asset and one type of liability, said method comprising the steps of:

storing data files and information pertaining to each client account;

investing funds received into the account in said assets and liabilities; and

utilizing a computer program for;

(a) establishing for each type of asset a loan to value ratio;

(b) calculating a borrowing power for said client account by calculating for each asset an asset loan value equal to the product of an asset value and a loan to value ratio, summing such asset loan values and deducting all liabilities;

(c) comparing the calculated borrowing power with a minimum;

(d) indicating an account imbalance to a user of the account if the calculated borrowing power for the account is less than the minimum; and

(e) automatically allocating funds between said asset and liability sub-accounts to correct the account imbalance.

37. The method of claim 36 further comprising the steps of:

calculating an expected borrowing power for the client account at some time in the future;

comparing the expected borrowing power calculated for the client account to a forecasted minimum for that account at that future time; and

reporting the results of the comparisons.

38. A method in combination with a computer-based system for processing and supervising a plurality of client accounts at an institution providing financial services or financial processing each of which comprises a plurality of financial accounts comprising at least one asset account and one liability account and a liability secured by a mortgage on at least one home and one or more asset accounts comprising the steps of:

inputting and outputting information relating to the client accounts including data relating to values in each client account'"'"'s asset account(s), liability account(s), and any liability secured by a mortgage;

establishing for each client account a present borrowing power and an expected fixture borrowing power;

allocating funds received in mortgage payments for a client account to pay interest on the liability secured by the mortgage in said client account with at least a portion of the remainder of funds received being used to increase an asset account in said client account rather than amortize the liability secured by the mortgage;

checking that a present borrowing power and an expected future borrowing power for each client account is at least equal to respectively a minimum present borrowing power and minimum the borrowing power specified for that client account by the institution;

indicating an account imbalance to a user of the system if the client account'"'"'s borrowing power is less than the minimum borrowing power or if the client account'"'"'s expected borrowing power is less than the minimum future borrowing power; and

automatically allocating funds between said asset and liability accounts to endeavor to correct the account imbalance.

39. A method for using a computer system to operate at least one client financial account comprising the steps of:

maintaining a database comprising for each client account at least one investment asset account which receives funds for investment purposes and has an account balance that is periodically updated and at least one liability account including a loan secured by a lien on a residence;

determining for each client financial account a preferred allocation of funds received in said financial account to said investment asset account(s) and said liability account(s);

storing for each client financial account the preferred allocation of funds received;

allocating funds received for the benefit of a client account to pay interest on the loan with at least a portion of the remainder of funds received being used to increase an asset account or pay down a liability account in said client account rather than amortize the loan secured by the mortgage;

calculating a new borrowing power for said financial account by calculating for at least said residence an asset loan value equal to the product of the value of the residence and a loan to value ratio at some time subsequent to establishment of the loan; and

comparing the new borrowing power with the amount of the loan, and if the new borrowing power exceeds the amount of the loan then decreasing the loan; and

if the new borrowing power is less than the amount of the loan, then increasing the loan, so that the loan does not exceed the new borrowing power.