Summary:
The chart uses historical economic data from 1915 for asset returns and inflation.
The chart displays all historical scenarios tested against the client's plan.
The chart helps determine the plan's sustainability in different scenarios.
The balance chart considers real-world events that have affected the stock market and the level of inflation in each scenario.
The balance chart enables us to have meaningful conversations with clients about the sustainability of their financial plans.
Full video:
Description:
As a financial advisor, you want to help your clients achieve their financial goals and ensure their plan is sustainable. One of the best tools at your disposal is the balance chart. This chart overviews the historical scenarios tested against your client's plan.
The balance chart is like a map of your client's financial journey. It shows all historical scenarios tested against their plan, from the best to the worst-case scenario. You can quickly see if your client's plan is sustainable in different circumstances.
The balance chart also considers the level of inflation and asset returns in each scenario and how it affected the client's portfolio. This means that you and your client can see the real impact of inflation on their financial plan.
The chart considers real-world events that have affected the stock market over time, so you can see how your client's plan would have performed during these events. For example, the chart shows how their plan would have been affected by World War I and World War II.
Example 1:
Suppose you have a client who is retiring in the next few years. Their financial plan has a 94% success rate, meaning it is sustainable in most scenarios. However, in the worst-case scenario, their plan would only last until the age of 87. Despite this, their plan still has a 94% success rate, which would provide them with a comfortable retirement in most circumstances.
Example 2:
Another client might have a balance chart that shows scenarios where they end up with much more money than they need, even after considering their financial goals and legacy plans. This is a great position to be in, showing that the client's plan is on track to provide them with a comfortable financial future.
The balance provides an overview of the sustainability of the financial plan in different scenarios, taking into account various real-world events that have affected the stock market over time and inflation.
You can use the balance chart to have meaningful conversations with your clients about their financial plans and make any necessary adjustments. Whether your client is looking to retire in the next few years or is planning for a long-term financial future, the balance chart is a tool that will help you provide value to your clients and ensure that their plans are on track.