There are two types of accounts in the Prospera system.
1. Modelling Accounts; and
2. Tracked Accounts
Modelling Accounts:
Modelling Accounts are the accounts we set up on the Accounts page within our model.
Modelling Accounts are notional accounts, and do not necessarily
represent a real account like Tracked Accounts do. There can in fact be many
Modelling Accounts to each Tracked Account.
Example: A client may have 6 Savings Accounts, in which they keep small amounts of money for different expenses. It is not necessary to model all of these Savings Accounts. They can simply be modelled as one Savings Account which is essentially a Consolidated Cash Savings Account.
Tracked Accounts:
Tracked Accounts are only required if you will be tracking the client's progress. It is not necessary to create the Tracked Accounts until you are ready to Implement the client for the ongoing tracking service.
Tracked accounts are best thought of as "real" accounts (i.e.
accounts that have a BSB and account number).
They are called Tracked Accounts because they are the account balances
that you are going to track in the "Track to Plan" report.
You do not need to set up Tracked Accounts until you are ready to convert
your model to commence tracking.
EXAMPLE
Sam and Samantha Sample may have an Investment Line of Credit with the
ABC bank. This is a Tracked Account. Sam and Samantha may have used
$200,000 to purchase an investment apartment in joint names, and $10,000 from
this account to purchase some shares in Sam's name only. They may also
have used $20,000 from the account to purchase some managed funds in Samantha's name.
In this example, for the purpose of modelling, you would create 3 Modelling Accounts, as follows:
- An ILOC in joint names for the investment apartment,
- An ILOC in Sam's name
for the shares in his name only, and
- An ILOC in Samantha's name for the managed
funds in her name only.
When modelled in this way, all tax deductions for interest on borrowings will be assigned to the correct taxpayer.
Although there are three Investment Accounts in your modelling, you would only need to create one Tracked
Account for ongoing Actual Monthly Monitoring. The 3 Modelled Accounts can all be linked to the one Tracked
Account in this example.
Strategic Cashflow Management (Conditional Transfers [aka. Flow of Funds])
Strategic Cashflow Management (maximising use of all cashflow) to ensure interest costs are minimised is very important to the success of a client's financial plan. This is explained in more detail in this article.
Prospera goes to great lengths to
calculate the individual components of income as they apply to each member, and
any corresponding tax deductions.
Link to Next Article - Creating Accounts
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