One of the first questions I'm asked by financial advisors is why any advisor needs to retain a consultant to help him or her choose the best financial planning software program. It's a fair question, and deserves a fair answer. I'll try, in the next few paragraphs, to provide one.

Let's get one thing clear at the outset. The short answer may be "You Don't". Choosing financial planning software isn't Rocket Science. Anyone possessing the skills and knowledge to practice financial planning competently can certainly "do it yourself". The keys, here, are to understand (a) what you need to know to do the job cost effectively and (b) whether, having determined same, you want to do so.

The First Key: What You Need To Know In Order To Make Good Choices

The first key isn't about software. It's about you and how you practice financial planning. It's best examined in the form of a question: How Will You Use This Tool? What tasks will you ask it to perform?

At first blush, this seems a fairly simple question. But it's often - it's usually - a bit tough to answer, simply because it requires us to have a clear picture, not only of how we do financial planning, but also of how we intend to do financial planning. Some practitioners look for a tool (or several tools) that will enable them to do planning just as they've always done. Others seek something that will let them expand what they do. Either mode will work, but both require that the objectives be defined up front, before the capabilities of the tools are examined. Which is why I always strenuously recommend that the objectives be defined as precisely as possible, and written down.

Here are some examples:

1. Do I need this program to use actual tax rates or will a user-supplied average or marginal tax rate do?

2. Will I use this tool to do estate planning? If so, how complex? What tax regimes will I illustrate ("Sunset", "No Sunset", "2009 freeze")?

3. If I'm projecting asset values, how precisely do I want to model the tax treatment of distributions? (Some packages treat any appreciation not distributed as "income" as tax deferred until liquidation. This has the effect of hugely overstating potential growth of non-qualified equity mutual funds).

4. How important is the printed output? Am I content with tables, or do I need "boilerplate" text? If I need "boilerplate", do I need to be able to customize it? Does the output include graphs? Can I customize those? Can I put them anywhere in the report I choose?

5. Will I use this software IN FRONT OF my client?

6. Will I use this software COLLABORATIVELY with my client and/or other client advisors, on the Internet?

7. How do I do "what if"? Do I want to present Present and Proposed scenarios "side by side"? Do I want to be able to change the value of a variable and see the impact of the change on Net Worth, Cash Flow, or some other item instantly?

8. What's my planning FOCUS? Do I want to "zero in" on year-by-year cash flow or look at the Net Present Value of any shortfall (where present resources won't produce required values)?

9. What's it like to INTERACT with the program? What is its 'look and feel"?

The Second Key: How You'll Go About Answering All Those Questions, with reference to All The Software You Want To Consider

I often use an Excel spreadsheet with my software consulting clients. In the spreadsheet, we've identified "key factors" (e.g.: "income tax modeling", "What If? Capability") and assigned a COLUMN to each. We list the various software programs we're considering (which is usually a "short list" we've derived from prior Q&A on The First Key) on separate ROWS. My client assigns a SCORE to each "key factor", on a scale of 1 to 9 (where 9 = "does the task perfectly" and 1 = "does the job miserably or not at all"), and then a WEIGHTING to reflect the RELATIVE IMPORTANCE of each "key factor" - as that particular client views these tasks.

The result is a "weighted score" for each software program. The higher the score, the better the program is likely to perform for that client, given that particular client's requirements. This "spreadsheeet exercise" may not be sufficient for a definite buying decision, but it generally results in a very useful "short list".

Now, how does the client know what score to assign to a particular program, for each particular task? The answer is simple: We have to have examined how each program does each task.

This takes time. Often, a particular functionality can be discussed quickly, because I'm very familiar with how each software package does that thing and can give my client a quick overview. Sometimes, we have to delve deeper, perhaps with a "hands on" example.

This takes considerably more time.

All of this can be done on a "do it yourself" basis, provided that you're prepared to acquire an understanding of how each software package handles each "key factor".

That takes a lot of time.

If you're willing to devote that much time (and the dollar value, to your practice, of that much time) to your software search, you don't need to hire a software consultant. If you're not, perhaps you should consider hiring expert help, just as you ask your clients to hire expert help - you.