Using Multiple-Criteria Decision Analysis to Simplify the Financial Planning Process

Suplee, IV, William Z.; Dzubow, Steven R.
March 2008
Journal of Financial Planning;Mar2008, Vol. 21 Issue 3, p66
Academic Journal
• This paper discusses a computationally simple heuristic decision support methodology (HDSM) that is of particular interest to financial planners who help clients analyze alternative choices over a broad array of financial planning events. It is a repeatable methodology that will help clients make better- informed decisions about problems that often have subjective, or not readily quantifiable, decision criteria. • The HDSM facilitates the analysis of decisions that involve multi-dimensional factors by using simple grid matrices to reduce complex decision-factor tradeoffs into a single score, thereby structuring and simplifying the client decision-making process. The paper illustrates how the HDSM works through the example of a client selecting a college for their child. • Unlike optimization and programming models, HDSM makes no assumptions about data relationships; instead, it allows the data itself to define the informational interactions that produce a solution defined solely by the needs of the decision maker. • The HDSM is client directed as opposed to planner directed, allowing the client to customize the HDSM model by incorporating the decision factors most important to a client's specific situation. The role of financial planners is to help clients with the decision-factor selection and guide them through the methodology of using the model. • The HDSM is equally useful as a model for group and individual decision-making. Weighting schemes can be easily adjusted to account for differences in group dynamics. The results indicate that we can develop a real-world problem-solving strategy useful for myriad financial planning decision analyses.


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