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.
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Financial planning helps weather any market Conversations with UBS
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
How has the financial crisis impacted you and your loved ones?
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
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
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
At its peak was 25%
By the low point in July 1932, stocks had dropped almost 90%
Stock market decline Great Depression
Strong, engaged Fed injecting liquidity into system
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
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
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 ?%
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
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%
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%
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.
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
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
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 "probability of success." 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.
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