Microsoft Excel has been a staple of the finance industry for decades with its ease-of-use and computational power. But recently, a growing number of tech companies have launched software solutions aimed at reducing Excel’s many pain points. These software solutions simplify many aspects of financial planning and present the data in a way that’s easy for clients to understand. Of course, the downside is that these tools often lack the power and flexibility of Excel, which is agnostic enough to handle nearly any data type.

In this article, we’ll take a deeper look at some of these concerns and help financial advisors decide whether they should stick with Excel or move on to something new.

Sales vs. Operations

Excel was originally launched in 1987 and eventually replaced Lotus 1-2-3 as the industry standard for spreadsheets. The introduction of Visual Basic in 1993 was a tipping point for the software, enabling companies to automate tasks and develop user-defined functions. While many critics have voiced concerns over the accuracy of statistical functions or modulo errors, few would argue that there’s a better spreadsheet application on the market. (For more, see: 10 Best Tools for Financial Advisors.)

Excel’s biggest strength is the power to run highly flexible and custom calculations that can account for nearly any scenario imaginable. With countless free and commercial add-ons, financial advisors can also access tools to import financial data, run Monte Carlo simulations, or even use artificial intelligence to predict future performance. The reporting functionality also enables advisors to generate somewhat attractive charts and other reports.

Of course, clients aren’t necessarily looking for a detailed analysis, but rather, a simple answer that makes sense. Many new financial advisor software solutions provide easy client access and beautiful reporting that’s simply not possible with Excel. The data in this reporting is also kept up-to-date and secure through the use of application programming interfaces (APIs) and secure cloud-based storage rather than being kept in file-form on a single computer.

For example, Riskalyze helps advisors perform portfolio analyses in order to build client portfolios that are optimized to their risk tolerance levels. The idea behind the software is to more accurately and easily quantify risk and map out a plan for clients with attractive visualizations and unique tools (like stress tests). While these things are possible to accomplish with Excel, Riskalyze makes the process a lot easier and more streamlined. (For more, see: Managing Client Risk: A Look at Riskalyze.)

The key takeaway is that Excel is great for operations with the ability to address a wide range of client needs, but for sales advisors may want to consider using newer software solutions that present up-to-date information to clients in a much more attractive interface.

Reporting Alternatives

Financial advisors that aren’t ready to kick Excel by the curbside and/or invest thousands of dollars into the latest and greatest advisor software do have some other options. Several companies have developed Excel add-ons that make it easier to accomplish basic tasks and even make presentations a lot more visually appealing. Advisors that are hesitant to adopt new technologies may want to explore these options as an alternative.

For example, ModelAdvisor provides an Excel add-on that makes it easy to accomplish what-if scenarios on the fly and create visually appealing charts, like heat maps, spark lines, bump charts, and other charts to help clients better understand their financials. These tools are even available on tablet devices using Excel’s new iPad and Windows tablet functionality, which means they also offer the portability of many new software solutions. (For more, see: Top Tools Every Financial Advisor Needs.)

Companies like theXLGrid provide additional tools that can be purchased on an a la carte basis to accomplish tasks like managing a portfolio, optimizing portfolios or forecasting. Advisors may want to consider implementing tools like these in order to augment their existing Excel tool sets in order to improve the client experience.

Financial advisors may also want to consider hiring someone with experience building custom Excel models and presentations to improve their existing offerings. Using tools like VBA, Excel has become a very powerful platform with virtually unlimited extensibility. The problem is that many advisors aren’t necessary proficient at developing data visualizations – a skill that’s necessary for sales – as much as they are at crunching numbers.

The Bottom Line

Microsoft Excel has been a staple of the financial services industry for decades with few direct competitors since Lotus 1-2-3. While Excel remains among the most powerful computational tools, specialized financial advisor software solutions have sprung up in recent years to make these calculations a lot easier for advisors, as well as to make the results a lot easier to understand and visually appealing for clients.

The decision of whether to migrate away from Excel or not depends largely on the individual financial advisor. On one hand, Excel offers much of the same functionality with a lot more power for those experienced enough to harness its capabilities. On the other hand, clients are increasingly expecting tools like online portals and visually appealing charts, which are a lot more difficult to implement using tools like Excel alone. (For more, see: Essential Software for Financial Advisors.)

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