U.S patent 7,765,138, filed by David Loeper in 2004 and approved a year ago, claims to have invented a new method of financial advising. Can Loeper sue you for using this method? Yes, you bet. But instead he sued UBS, MoneyGuide Pro’s biggest customer.
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Below is an excerpt from the incredibly hard-to-read 36-page patent issued by the U.S. Patent Office to Loeper. Pregnant with details, the excerpt below from page six of the Claims section of the patent begins with this description of the wealth advising method patented by Loeper:
A method of financial advising, comprising: determining by a computer an initial value of a client investment portfolio; obtaining by the computer a list of client investment goals, the list including ideal and acceptable values for each of the investment goals wherein the ideal value of each goal comprises the value for that particular goal that the client most prefers to achieve, and the acceptable value of each goal comprises the value for that particular goal that is less preferable to the client compared to the ideal value but that is still acceptable to the client; obtaining by the computer a relative value comparison between pairs of investment goals within the list of goals; simulating by the computer a plurality of model investment portfolio allocations over a predetermined time period using a capital market modeling technique, the simulation accounting for investments and expenditures planned to occur during the predetermined time period; determining by the computer a recommendation comprising an investment allocation and a recommended value for each investment goal, where the recommended value for each goal is not better than the ideal value and not worse than the acceptable value, wherein the recommendation is determined using the using the relative value comparison, the ideal and acceptable values for each goal, and the simulation of the plurality of portfolio allocations, wherein the recommendation has a measured confidence of exceeding the recommended value for each goal, and wherein the measured confidence is within a predefined range; and communicating the recommendation to the client.
That is the first of 36 claims specifying details of Loeper’s patented process for financial advising.
Loeper told me in an interview Wednesday that not all advisors using MoneyGuide Pro are violating his patent. Whether they are depends on how they use the software. But he singled out UBS because, he said, it’s MoneyGuide Pro’s largest client.
Loeper has no interest in trying to prevent the entire financial planning industry from using his patented methods. Nor is he interested in suing advisors around the country. He presumably just wants MoneyGuide Pro’s big clients.
I sure don’t know enough about patents to judge whether MoneyGuide Pro can prove in a trial that Loeper’s patent is invalid. I’ve covered financial advisor technology since 1996 and wrote one of the first stories in trade publications covering Wealthcare, which was originally called Financial Plan Auditors. But I can’t say if Loeper came up with his wealth advising process before Bob Curtis. I honestly don’t know.
UBS — the nominal target of Financeware’s lawsuit — is indemnified by MoneyGuide Pro against legal expenses related to Wealthcare’s claim. UBS may be willing to fight Loeper in court, but it is a legal risk and it has a real cost.
Apart from gaining publicity, causing MoneyGuide Pro to carefully evaluate how its largest clients use its software, and extracting some financial benefit from a settlement with UBS, I doubt Loeper is interested in pursuing the case further, and it will likely not become a public battle joined by the Financial Planning Association and other membership organizations for financial advice professionals.