SBIR Phase I: A Holistic and Robust Personal Financial Planner

This Small Business Innovation Research Phase I project aims to develop a financial expert system that considers the totality of a household's current and projected financial situation (income, taxes, expenses, assets, liabilities, financing options) to automatically create a highly personalized multi-period savings and spending plan designed to achieve the household's financial goals. The proposed research is innovative in two fundamental ways: it takes a holistic view of financial planning and explicitly addresses market uncertainty and the risk of households falling short of reaching their goals. Based on state-of-the art mathematical programming techniques and in particular recent advances in robust optimization, the proposed system will make the appropriate use of special tax treatment of different accounts, recommend new accounts to open based on the client's unique needs over time, fund them and use them for distributions, and finally determine robust asset allocation solutions across all accounts. The resulting tool with its actionable comprehensive plan will represent a substantial improvement over the current state of the art which consists of illustrative calculators that do not propose strategies but merely project the potential outcomes from plans supplied by the user, and tools which solve one aspect of the interconnected planning problem in isolation. The broader impact/commercial potential of this project is to develop an empowering and educational tool that can be marketed to households through their employers or their financial service institutions. The proposed technology will be able to serve a wide range of economic and age demographics strengthening their financial future. Users will be able to apply the tool throughout their life: from wealth accumulation years, to the years of achieving home-ownership and funding education, and into retirement when they will create a retirement paycheck. There is no such tool in the market today and the need is urgent. Recent surveys show that retirement confidence has plateaued at the lowest level in two decades, and less than half of parents who expect their kids to go to college can fund their education. A well designed and executed personal financial planning tool can enable people to see the long-term effects of increased savings, and better evaluate the trade-offs between different goals that occur during their life so that they stay in the path to success. In the long term, it can lead to a population who is better prepared to deal with financial complexities and as a result more confident in its future.