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Financial Planning Helps Weather Bear Markets
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Financial Planning Helps Weather Bear Markets

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Financial Planning a solid way to westher bear markets

Financial Planning a solid way to westher bear markets

Published in: Economy & Finance, Business

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  • As people gather at event: Ask attendees to fill out cards at each table with basic contact information so that you (the Financial Advisor) can follow up – name, address, best contact phone, best contact time. Advise all attendees to also fill out the Goals Worksheets at each table, which will get them thinking about their concerns for today and the future.
  • Transcript

    • 1.  
    • 2. A global leader focused on you   Global presence The world’s leading wealth manager Wealth management focus Wealth management is our core business Historical perspective 140-year tradition serving individuals and families in Europe and the U.S. UBS Financial strength Well-capitalized bank with strong credit rating Source Company second-quarter earnings reports for 2008.
    • 3. Providing perspective   New York São Paulo Tokyo London & Frankfurt Zurich Hong Kong Singapore
      • Wealth Management Research
        • Designed specifically for private clients
        • Provides global perspective
      • UBS Investment Research
        • Focused on institutional investors
        • Also available for individual investors
    • 4. Financial planning helps weather any market Conversations with UBS
    • 5. So, what is happening in the markets? The S&P is down by 41% at its lowest point through October 31 Global equity markets have performed even worse Fixed income provides no refuge Investors are fleeing to cash positions
    • 6. How has the financial crisis impacted you and your loved ones?
        • Have you delayed…
        • Retirement?
        • Planned home renovation?
        • Paying off mortgage early?
        • Children's college funds?
    • 7. Having a financial plan can make a difference
      • Because a financial plan takes into account uncertain times, clients who have a financial plan:
        • Feel 50% more comfortable with their situation
        • Have a clearer sense of direction
    • 8. Gaining perspective: what history tells us Data source: Standard and Poor’s. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Stocks in this example are represented by the Standard & Poor’s 500 ® , an unmanaged group of securities and considered to be representative of the stock market in general. -86.19 Great Depression -36.64 WWII -48.20 1970s Oil Crisis -31.47 1987 Crash -49.15 Dot com and 9/11 -41.34 Today’s Credit Crisis
      • The average downturn for the five post-1929 events is 41.36%. Today, we are at a comparable decline.
      Sept 1929- June 1932 Jan 1973- Oct 1974 Oct 1939- Dec 1941 Oct 5– Oct 19 1987 March 2000– Oct 2002 Jan 2008- Oct 27 2008 U.S. stock market downturns, 1929-2008, S&P 500 returns
    • 9. Is it 1929 all over again? Sources: Stock Decline: Bloomberg; Unemployment: U.S. Department of Labor; Foreclosures: St. Louis Federal Reserve (Great Depression) & Mortgage Bankers Association (Today); UBS Banking Support Systems & World Trade: UBS Wealth Management Research
      • No insurance, so bank runs and panics resulted
      U.S. banking support systems
      • Protectionism choked trade
      World trade
      • At its peak was 25%
      Unemployment
      • By the low point in July 1932, stocks had dropped almost 90%
      Stock market decline Great Depression
      • FDIC
      • Strong, engaged Fed injecting liquidity into system
      • World Trade Organization provides safeguards
      • As of October 2008, was 6.5%
      • Markets down just over 41% as of October 31, 2008
      Today
    • 10. Historically, markets recover from crises Source: Underlying data is from the Stocks, Bonds, Bills, and Inflation® (SBBI ® ) Yearbook , by Roger G. Ibbotson and Rex Sinquefield, updated annually. Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Large stocks are represented by the Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. Underlying data is from the Stocks, Bonds, Bills, and Inflation ® (SBBI ® ) Yearbook , by Roger G. Ibbotson and Rex Sinquefield, updated annually. Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value. Small company stocks are generally more volatile than large company stocks. Government bonds and treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while corporate bonds are not guaranteed. Compound annual return 1926 – 2007: Great Depression WWII 1970s Oil Crisis 1987 Crash Dot com and 9/11 Sept 1929- June 1932 Jan 1973- Oct 1974 Oct 1939- Dec 1941 Oct 5– Oct 19 1987 March 2000– Oct 2002 0.10 1 10 100 $10,000 1,000 1926 1946 1966 1986 1936 1956 1976 1996 2006 Large company stocks 10.4% Government bonds 5.5% Treasury bills 3.7% $3,246 $79 $20 $12 Inflation 3.0%
    • 11. Regardless of market conditions, here’s what you should do Revisit your financial plan periodically Create a financial plan to guide your decisions Discuss and outline your short- and long-term goals
    • 12. A 360° view of your financial life A financial plan can: A financial plan is not set in stone Coordinate all your goals and finances Evaluate where you stand today versus your goals Identify potential insurance needs Assess your cash flow needs Review your investments and asset allocation strategy Address estate planning needs
    • 13. A financial goal analysis can help determine the likelihood of reaching your goals What happens if you get average returns? What happens if you experience bad market conditions? What is your probability of success? Are you in your confidence zone? Important: The projections or other information generated by FGA regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Likelihood of funding all goals Estimated % of goals funded Average return ?% Bad timing ?% ? Confidence zone Probability of success ?%
    • 14. Meet Michael and Susan Clark (They do not yet have a financial plan) Case study
        • Ages 53 and 50
        • Investable assets of $1.5 million
        • 14 year-old daughter
      • Here are their financial goals:
        • Retire at 62, but willing to delay until 66
        • Target $175k a year for annual expenses, but okay with $140k
        • Fund four years of college
        • Travel every year in Europe or Asia in first 10 years of retirement
        • Committed to fundraising for college alma mater
    • 15. Here’s what we found—Michael and Susan are likely to fall short of reaching their goals Current scenario Ideal age Michael 62 Susan 62 Ideal amount total spending for life of plan $5,130,791 Current savings $20,250 this year Current: $1,493,000 65% Stock Return 7.55% Risk 11.08% Important: The projections or other information generated by FGA regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Likelihood of funding all goals Estimated % of goals funded Average return 95% Bad timing 75% Below confidence zone (85% – 99%) Probability of success <40%
    • 16. Max aggressive: $1,493,000 67% Stock Return 7.47% Risk 10.42% Savings $45,250 this year Total spending for life of plan $4,275,840 Michael 64 Susan 64 2% more stock Increased $25,000 Reduced 17% Michael & Susan retire 2 years later What Susan and Michael could do to improve their probability of success What if scenario 1 – All values are within your acceptable range Results Suggested changes Investments Savings Goals Retirement age Important: The projections or other information generated by FGA regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Likelihood of funding all goals Estimated % of goals funded Average return 100% Bad timing 100% In confidence zone (85% – 99%) Probability of success 87%
    • 17. The power of financial planning: using a wide range of potential returns $18,000,000 $16,000,000 $14,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $0 $12,000,000 $2,000,000 2010 2020 2030 2040 2050 Safety Margin $14,476,008 $6,020,937 $4,161,962 Ran out of money $138,153 Sample of 100 Trials All trials Average return Bad timing Michael retires Susan retires Michael’s plan ends Susan’s plan ends Important: The projections or other information generated by FGA regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.
    • 18. We can help you shape your future Your financial goals   Grow your wealth now and into the future Grow your assets Access your funds when and where you need to Manage your cash flow Take on new opportunities and enjoy life to the fullest Maintain your lifestyle Safeguard what you’ve worked so hard to build Protect what you’ve achieved Do your best for the people and causes you care about Care for others
    • 19. Once we present your financial plan, our team of specialists will support your wealth planning needs   You Your Financial Advisor can draw on a team of specialists Your Financial Advisor Retirement services Asset management Brokerage services Estate planning Financing Cash management Insurance
    • 20. What’s next?  
    • 21. Create a plan for your future
    • 22. Results using Monte Carlo—probability of success
      • IMPORTANT: The projections or other information shown in this report regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.
      • Monte Carlo results use probability simulations to show how variations in rates of return each year can affect your results. A probability simulation calculates the results by running it many times, each time using a different sequence of returns. Some sequences of returns will give you better results, and some will give you worse results. These multiple trials provide a range of possible results, some successful (you would have met all your goals) and some unsuccessful (you would not have met all your goals). The percentage of trials that were successful, given all the underlying assumptions, is shown as the probability of success. Analogously, the percentage of trials that were unsuccessful is shown as the probability of failure. The results using Monte Carlo indicate the likelihood that an event may occur as well as the likelihood that it may not occur. In analyzing this information, please note that the analysis does not take into account actual market conditions which may severely affect the outcome of your goals over the long term.
      • This analysis is not a guarantee, prediction or projection and the results shown can change over time and with each use if any of the underlying assumptions are changed. In addition, please note that this probabilistic analysis does not take into account actual market conditions that may severely affect your portfolio results over the long term. This analysis neither evaluates the future performance of specific securities nor presents the results that could occur from an extreme market event, either positive or negative, due to the low probability of such an occurrence. You should understand that there may be asset classes not presented that have characteristics similar or superior to those analyzed in this analysis.
      • Financial Goal Analysis (FGA) uses a specialized methodology called Beyond Monte Carlo TM , a statistical analysis technique that provides results that are as accurate as traditional Monte Carlo simulations with 10,0000 trials, but with fewer iterations and greater consistency. Beyond Monte Carlo TM is based on sensitivity simulations which rerun the plan only 50 to 100 times using small changes in the return. This allows a sensitivity of the results to be calculated which, when analyzed with the mean return and standard deviation of the portfolio, allows the probability of success for your plan to be directly calculated. A scenario is counted as unsuccessful if any of the goals is not fully funded. The percentage of successful scenarios is shown as the &quot;probability of success.&quot; The highest calculated probability of success is 99%. Even a probability of success of 99% does not constitute a guarantee that your actual outcome will be as shown.
    • 23. Important considerations
      • It is important that you understand the ways in which we conduct business and the applicable laws and regulations that govern us. As a firm providing wealth management services to clients in the U.S., we are registered with the U.S. Securities and Exchange Commission as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services. Though there are similarities among these services, they are separate and distinct, differ in material ways and are governed by different laws and separate contracts. We make financial planning services available to you in our capacity as a registered investment adviser. Our financial planning services terminate when the plan is delivered to you and your receipt of this service does not alter or modify in any way the nature of your UBS accounts, your rights and our obligations relating to these accounts or the terms and conditions of any UBS account agreement in effect. You are not required to establish accounts, purchase products that we distribute or otherwise transact business with UBS Financial Services Inc. or any of our affiliates to implement any of the suggestions made in connection with the financial planning services we provide. Should you decide to implement an investment strategy with us, we will act as either a broker-dealer or an investment adviser, depending on the investment product or service that you select. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at www.ubs.com/workingwithus.
      • Wealth Management services in the United States are provided by UBS Financial Services Inc., a registered broker-dealer offering securities, trading, brokerage and related products and services. Neither UBS Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement.
      • Attorneys in the Attorney Network are independent of and unaffiliated with UBS Financial Services Inc. These attorneys may refer clients to us, but receive no compensation for these referrals. UBS Financial Services Inc. does not provide tax or legal advice. You should consult with your legal and tax advisors regarding your personal circumstances.
      • For more information, please visit our website at www.ubs.com/workingwithus.
      • © 2008 UBS Financial Services Inc. All rights reserved. Member SIPC. UBS Financial Services is a subsidiary of UBS AG.

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