REDMOND, Wash., Aug. 14, 2000 — Microsoft today released the newest version of its personal finance software, Money 2001 Deluxe. Many enhancements in this release of the product are based on contributions from American Express, which has been providing financial planning expertise for Microsoft Money since 1998. Money 2001 Deluxe is the third release of the product to which American Express has contributed.
To learn more about this alliance and how it has improved Money 2001 Deluxe, PressPass spoke with Rich Bray, general manager of the Financial Products Group at Microsoft, and Debra Rabe, vice president of Global Financial Advice at American Express.
PressPass: The ability to track finances was among the earliest selling points for personal computers at home. Is it fair to say that millions of people are managing their finances using their PCs and the Internet today?
Bray: If you look at the classic personal finance software like Money and Quicken alone, the number of users is anywhere from 15 million to 20 million. And on the Web, it has exploded over the past five years, primarily as a place for people to get help with their investment management. More and more, people are looking to the Web for assistance with other financial issues as well. So overall, there’s probably an equivalent number of people turning to the Web for personal financial management as well. It’s a huge number.
PressPass: Why has this been such a rapidly growing trend?
Bray: Before the Internet and connected PCs, personal finance software was primarily a set of bookkeeping tools, helping people keep track of where their money was going and handle accounting tasks. But now, with the Web and the ability to connect with any number of financial institutions, it becomes a much better way for people to handle transactions and do all the things they do with their finances every day.
Rabe: It’s critical, too, for any consumer to understand their overall financial situation, so the importance of connectivity is also in aggregating data from multiple accounts into one view. This makes it easier for people to get the overall picture of (a) their finances today and (b) where they’re headed in order to meet their long-term goals.
Bray: Over the past 10 years, there have been some real changes in the way people need to manage their personal finances. Things like 401(k) plans emerged and people started to have more control over their own retirement than they did in the days of pensions. Investing became a much more common scenario. Prior to the 1990s, a very small percentage of Americans actually invested. Now, the number of people who actively invest in the stock market is north of 40 percent. So it’s become much more of a mass-market issue.
And then we have increasing numbers of people who are in dual-income households or having to decide whether one parent stays home with the kids, plus a lot more job dislocation — it requires a level of financial planning that just wasn’t required in the past. So we knew we needed to adapt Microsoft Money to help people with this — because it was what they were really concerned about.
PressPass: Microsoft and American Express have collaborated on the past three releases of Money. How did this alliance come about?
Rabe: Microsoft came to us to help them on the content side. American Express has been doing formal financial planning with clients since 1979, and in fact we have a set of content experts as well as technology experts who have developed and built professional financial planning tools for our advisors. I think it was combination of those two areas of expertise that Microsoft was seeking to leverage.
Our content experts cover all six areas of financial planning and beyond, and because the decision was made to focus more on the financial planning tools within the product, they wanted to work with experts in that arena. The six areas, defined by the Certified Financial Planner Board of Standards, include financial position, income tax planning, protection planning [i.e., insurance], investment planning, retirement planning and estate planning. None of these stands alone. A decision in one area can have a profound effect on any other area of planning. Our knowledge of these areas and how they interrelate is where we’ve been able to bring the greatest contribution to the Microsoft Money product.
Bray: We looked for a partner in this effort that had experience with a lot of customers solving these financial planning issues, and that we thought we could develop good working relationship with. The objective was to combine their expertise in financial services and face-to-face financial planning with our expertise in software development to create something that was greater than the sum of its parts. And that’s what we feel we’ve done with American Express.
PressPass: Doesn’t contributing to Money 2001 represent a conflict of interest for American Express, actually reducing the market for professional financial advice?
Rabe: We actually think it contributes to the market. If you dig into financial-industry data, our customers are using both types — computer-based software as well as turning to an expert. The fact is, we want to work with educated customers. As people look at their entire financial picture and see how the decisions they make are integrated across all areas of financial planning, they can see the total impact, and it often leads to the request for advice from an expert. So, for example, I can look at my income tax situation and perhaps make some adjustments, but it may have a negative impact on my retirement plan, or vice versa. Our goal is to continue to educate consumers to look at the comprehensive view.
Bray: And by making it easy for people to pull their information together and do some of the basic financial planning themselves, we enable them to interact with a financial planner in a much richer way. That focuses the planner’s time on giving advice — valuable direction — rather than spending a lot of time with the data-collection task of financial planning. So while there are some people who decide they can do their financial planning on their own using these tools, we think there are going to be a lot more people who start doing this and then realize there are areas where they do need that face-to-face assistance. Or the ability to interact with an advisor online, which is where we really think this category is going.
PressPass: In what ways do Microsoft and American Express each benefit from the collaboration?
Bray: In general, we both benefit from having the
PressPass: What improvements will customers see in Money 2001 that result from American Express’s contributions?
Bray: We’ve taken the input of American Express and literally sprinkled it throughout the product. In Money 2001, we have enhanced our Advisor FYI capability, which essentially is an automated guidance tool within the product. For example, if you have a mortgage you’re carrying at 8 percent and rates drop to a point at which you should refinance, the Advisor FYI feature alerts you and points you to additional tools within Money and on the Web to make that assessment.
Rabe: People will also see a new Asset Allocation section in Money 2001 that includes a simple, 7-point questionnaire that will help them assess their risk tolerance and the time frame for using their investment dollars. It will show their current portfolio versus a model portfolio, and give them an easy summary of how to move from their current portfolio position to the model.
Another feature is the Budget Maintenance tool, which incorporates
“found money”
concepts that we provided to Microsoft. Found money principles have been used by our advisors for several years to help people take a look at their current financial position — in other words, what they own, owe, earn, spend and save — look at that holistically and find ways to either increase what they earn or decrease what they spend in order to redirect that money toward their goals. Examples include refinancing or consolidating debt, modifying spending patterns, accepting different risk levels to increase rates of return, adjusting tax withholding and dozens of other options, depending on the client situation. These are a core part of the budget planner built into this new version of Money.
PressPass: Do these improvements differentiate Money 2001 from competing products?
Bray: I think it’s been a series of releases over the past three to four years, but Money 2001 is a nice
“exclamation point”
on how we’ve been expanding this category beyond bookkeeping and basic accounting to something that’s a total-health financial manager. Because the average household doesn’t just think about expense management anymore; they think about investing and asset allocation and they think about the types of things we’ve beefed up over the years in Money. So over time, people not only make sure they’re not bouncing checks, but they’re keeping their long-term planning in order as well.
I think we do that far better than any other product on the market, whether it’s a Web site or Quicken or another product. No product ties your day-to-day finances together with long-term financial planning considerations nearly as elegantly as the Money product does. And I think that’s the reason that over the past couple of years Money has emerged as the product that consistently wins reviews in this category. So market leadership will come. Quicken is a strong brand with loyal customers, so it’s not something that happens overnight.
PressPass: So what’s left to improve in Microsoft Money? Have we exhausted the opportunities to make financial management easier and more powerful for consumers?
Rabe: I don’t think we’ve exhausted it by any means. The goal is to make it easier and easier, and that means more and more automation. The first step toward that is aggregating all your financial information into one place. What I think of as sort of a virtual filing cabinet. Until we get all the industry standards in place and allow the consumer to control that automated process, we still have work to do and will continue to see improvements in the coming years. But I think the technology is there to start delivering.
Bray: If anything, I feel like we’re just now starting to get to a point where the technology infrastructure is in place to start doing incredible things for people to make their financial lives more convenient — automating the things that help them avoid the
“gotchas”
in long-term financial planning. A lot of the developments going forward are going to be around the Web, taking advantage of the connectedness of the PC, cell phone, handheld devices and other devices that are connected to the Web — devices that know who you are and that can authenticate you to other people, merchants and the companies where you pay your bills. We’re just scratching the surface on that today.
I also think the one area that’s going to be super interesting is enabling more of a financial planning market — an advice market — to exist than has been enabled in the past 20 years. Until now, to get financial advice and have a full service brokerage firm to serve you and focus on you, you had to be a very high-net-worth individual. We think the ability to automate certain pieces of advice — to get people into a system where they’re doing some of the pieces themselves, but they’re also able to rely on an advisor who’s looking at the same information — will, in a sense, democratize financial planning, bringing it to a much broader range of households.
PressPass: It sounds like this collaboration is going to last a while.
Bray: We’re very happy with the American Express relationship. Overall, the kind of give and take we’ve had over the years — the discussions, the time we’ve spent understanding each other’s organizations — have helped us build a real alliance and start to look to other opportunities we can build out together. These are the types of business relationships that Microsoft tries to build, and it has worked great with American Express.
Rabe: Indeed. We’re also very impressed that Microsoft has pulled together the best possible solution for the consumer, in terms of incorporating the highest-quality financial planning expertise, putting together the automated features that make it simple for them to manage their current finances while aiming at their future goals, and tying those together into this one product. It’s a unique experience to work with a company that’s coming from such a customer-centered point of view.
