![]() ![]() And not merely by brute-force projecting out the growth of an account balance over time, line by line, but simply by using an Excel function – a shortcut, that simply takes the key terms as inputs, and solves automatically for the remaining one. Similarly, the same opportunity exists in Excel. (Or once payments are included, if you know four out of five, you can solve for the fifth.) In the CFP curriculum, prospective CFP certificants are typically taught that if you know three out of the four, you can solve for the fourth. r = rate of return (you may know this as “i” from HP calculators or “I/Y” from TI calculators).While it can be expressed in several forms, all advisors should be familiar with the basic TVM formula: In the real world, you are much more likely to be using a desktop or laptop computer with a spreadsheet or possibly working on it collaboratively with others (e.g., via Google Drive, Office 365, or Dropbox), but you may not have experience applying the same TVM formulas through Excel.įortunately, the mechanics are all the same and Excel is even faster and more powerful once you get the hang of it, but there can be a learning curve. While most advisors learn to do TVM calculations using a physical financial calculator like the TI BII Plus, HP 10bIl+, or HP 12C, the unfortunate reality is that these tools aren’t very common or useful outside of a classroom or testing environment. Being able to quantify the fact that a dollar today is worth more than a dollar tomorrow is useful in a wide range of applications, including helping clients compare investment alternatives, projecting the value of wealth accumulation over time, and even making important career decisions. ![]() Time-Value-of-Money (TVM) calculations are one of the most fundamental building blocks of financial planning and investment management analysis. ![]() Doing Time-Value-Of-Money (TVM) Calculations The goal of this post is to serve as an introduction (or refresher) on some of the more common uses of Excel among financial advisors, including common formulas and keyboard shortcuts to use it more efficiently. However, like all tools, how effective and efficient Excel is in helping you get your work done depends on your skills and knowledge using it. Whether it is the primary means of conducting financial planning and/or investment management analysis, a tool for ad hoc planning, or simply used for other business management purposes, odds are almost every financial advisor will use an Excel spreadsheet from time to time.Īnd there are good reasons for this, as Excel is an incredibly powerful tool. Using Excel As A Financial AdvisorĮxcel is a tremendously popular spreadsheet software among financial advisors. in Personal Financial Planning at Kansas State University. Derek is a Certified Financial Planner and earned his Ph.D. In addition to his work on this site, Derek assists clients through his RIA Conscious Capital. candidate in the financial planning program at Kansas State University – provides a few Excel productivity tips for financial advisors, including how to quickly do time-value-of money calculations using built-in formulas, discounted cash flow analyses for evaluating Social Security and pension strategies, as well as some practical keyboard shortcuts for navigating Excel more efficiently.Īnd so, whether you are relatively new to Excel and want to learn some things for the first time, use it regularly and might want to polish up on some shortcuts to gets things done more efficiently, or need a resource to pass along to associate planners and other individuals in your firm who may have less experience with Excel… I hope that you find this guest post from Derek to be helpful!ĭerek Tharp, Lead Researcher at and an assistant professor of finance at the University of Southern Maine. In this guest post, Derek Tharp – our Research Associate at, and a Ph.D. Despite the availability of financial planning software and CRM tools, Excel spreadsheets are still incredibly popular amongst financial advisors to do everything from a "specialized" analysis of a particular client situation (e.g., evaluating internal rates of return when choosing between a pension or lump sum), to keeping track of certain task workflows or even important business metrics. ![]()
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