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Sportsfreak View Drop Down
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Wise Old Perv and CTO of AH

Joined: Mar/09/2010
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Sportsfreak Quote  Post ReplyReply Direct Link To This Post Posted: Sep/12/2014 at 8:24am
Like I said, I'm a financial advisor, not a scientist
WHO IS LEADING OUR COUNTRY
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Moraen View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Sep/12/2014 at 9:11am
Originally posted by Sportsfreak Sportsfreak wrote:

Like I said, I'm a financial advisor, not a scientist


It's important information SF.  If you get a client that is at a 90% success rate on MGP and you tell them that, you are not telling them a good story.  10k sims are not enough.  If you actually look at the detail, you'll see that large downward movements don't happen nearly often enough.  Even on an intuitive level, you should not count on it.

A good financial advisor should know how the tools they are using can be terribly wrong.
I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fuck with me, I’ll kill you all. - General James Mattis

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Sportsfreak Quote  Post ReplyReply Direct Link To This Post Posted: Sep/12/2014 at 6:13pm
So what do you suggest that is better. Seems to me that there is no way to account for every possible sequence of returns over a 30 year retirement. 
In addition, aside from the  Monte Carlo analysis every single output in any financial plan is very dependent on inputs that are variable to the nth degree, and nothing more than assumptions. Example: predictions (i call them guesses) on rates of return of various asset classes, on future inflation, on length of retirement. I think a good financial advisor is going to explain this to every client they sit down with to do a plan, so they understand this is not a plan, but an analysis (words i use) based on assumptions that may or may not come trUe.

In all honesty, i often think about the fact that because of this, financial planning in general has a big bullshit quotient built into it. Most of the time, i can intuitively tell a client if he has enough money to retire without doing a plan. But you can't do that, its not a "process" and doesn't cover our ass in arbitration, so we can't "sell" it

But again, whats the alternative. At least it provides some sort of glidepath, or guidance.


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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Sep/12/2014 at 7:36pm
You can simulate the right distribution - but you won't like the results.  It will be harder and harder to tell clients they will meet their goals. 

Although, this could be the opportunity to ask for more money (DCAs, etc.). 

The guy on here who does RetireUp, that software does something similar - they account for large market drops and what impact it has on income in retirement. 
I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fuck with me, I’ll kill you all. - General James Mattis

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Rhys View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Rhys Quote  Post ReplyReply Direct Link To This Post Posted: Sep/18/2014 at 7:39pm
Excel has been the best financial planning software for me. I have eMoney pro, but find it overwhelming for not only myself, but also clients. I use eMoney as a glorified balance sheet, that's about all its' good for. 

Most clients don't want 100 pages of numbers and random scenarios. 


Edited by Rhys - Sep/18/2014 at 7:40pm
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