Essex Corp., the New York-based third-party marketer, is getting into the financial planning software business.
After thinking about launching its own product, Essex has licensed a program from one of the Big Five accounting firms, Ernst & Young, also in New York.
Investment Professional, or I-Pro, lets bankers plug in certain variables and create asset allocation plans tailored to individual clients, said Frederick S. Nicholas, an Essex executive vice president.
I-Pro is based on a software package developed in 1995 by Ernst & Young. That product, called Prosper, also let users plan for their future by factoring in several variables, such as retirement and education costs, insurance, a home or car purchase, and income tax. However, Prosper is aimed at individuals and sold off-the-shelf.
Essex paid Ernst & Young a licensing fee to tailor Prosper for financial professionals, and I-Pro was born, said Mr. Nicholas. The terms were not disclosed.
Essex is gearing up to provide the software at cost-about $65-to its 200 bank clients for their brokerage operations. Three or four banks have already expressed interest, Mr. Nicholas said, but he declined to identify them.
Since reaching the agreement with Essex, Ernst & Young has started to market a revised version of Prosper aimed at financial professionals at 100 of the country's largest banks and brokerages. ProProsper lets account representatives factor in more variables - such as stock options-than the previous model did.
Essex and Ernst & Young executives said that there may be some overlap, but that they do not think they will be fighting for market share.
"We're not really targeting their clients," said Richard F. Hinton, an associate director of Ernst & Young's financial planning division. Ernst & Young is going after the country's 100 largest banks and brokerages, Mr. Hinton said. The majority of Essex's customers are small or midsize banks, according to a study by American Brokerage Consultants, St. Petersburg, Fla.
But Mr. Hinton conceded, "Anytime you partner with someone on a software project, there's a potential ... to compete." He said Ernst & Young has seven large-bank clients and is negotiating with 27, though he declined to identify them.
Ernst & Young is not the only large accounting firm to offer financial planning software and services. For example, Chicago-based Arthur Andersen offers banks that use its services about 80 financial planning software programs.
"It's unlikely that we would sell them just the software because that would not accomplish their goals in most cases," said Randy D. Robason, the national director of private client services at Arthur Andersen.
Another one of the Big Five firms, KPMG Peat Marwick, Montvale, N.J., provides bank customers with financial planning reports based on information collected by branch account representatives, said Brian Rivotto, the partner in charge of KPMG Acumen, a division of the firm's personal financial planning practice.
The 50- to 70-page reports include an individual's balance sheet, cash flow statement, retirement analysis, and education funding analysis. Reports take five-to-eight business days to process, and can be written in foreign languages, Mr. Rivotto said.
KPMG had considered using software but decided that upgrades would incur too many administrative hassles, Mr. Rivotto said.
For example, banks with 1,000 representatives have to distribute 1,000 disks and ensure that all earlier versions are destroyed. "What happens if someone uses an older version?" he asked. "It always comes back to haunt you."
