Good retirement income planning software can help demonstrate value while giving the client peace of mind and instilling confidence in you as their advisor .
2 Stress Testing
In many retirement income software solutions , Monte-Carlo simulations are the determinant of whether or not a planning option offers value over a client ’ s current course of action , and whether or not a plan suggestion is likely to meet a client ’ s needs . The results of a set of simulations are expressed as a probability of success . One major challenge in communicating with clients this way is that the typical client has no foundation for determining between two courses of action with different probabilities of success .
For example , a client could spend $ 90,000 per year after taxes with a 95 % probability of success or $ 100,000 with a 90 % probability of success . How is the client to choose between the two ? Further , what if the consequence of failure in the first course of action were a lifestyle cut of $ 30,000 but the consequence of failure in the second course of action were a lifestyle cut of only $ 10,000 per year . Most people are incapable of weighing these two options .
Instead , people think in terms of scenarios , so stress tests ( also known as scenario analysis ) can be extremely valuable both from a planning and a communication perspective . A stress test process applies a specific what-if to a client situation to determine whether the long-range projection is still reasonably on track . If not , then smaller changes now can prevent major difficulty later . Since financial planning is necessarily an iterative process across a number of years , re-performing key stress tests on a frequent basis can provide clients with practice for what they would do if a risk event actually materialized and help them visualize the impact of such an event in a way that helps them understand and manage the risk now .
Good retirement income planning software can help you plan for the unexpected by testing the strategy against a wide variety of events : Market down-turns Need for long-term care Impact of a Social Security benefit cut Or a variety of other potential situations .
It can also help you demonstrate the value to the client if they were to move forward with the strategy you ’ ve developed . This gives the client peace of mind and instills confidence in you as their advisor .
3 Client-Friendly Graphics
The best financial technology will help you illustrate the complicated interactions caused by current tax laws , Social Security rules and other issues with simple graphics , charts and narratives that are easy for the client to understand . With the right illustrations and explanation from you , clients will start to see how you can save them from an otherwise unforeseen tax jump or a less-than-optimal Social Security claiming decision . They will see the value of working with you .
Fundamentals for success
Technology should be a fundamental part of your financial planning practice . Using a good retirement income planning software can help you adopt processes that allow you to serve your clients better and more efficiently . It can save you a great deal of time , help you wow clients to boost referrals , and allow you focus on strategies that add meaningful value to your clients ’ financial plans . www . nailba . org 23