1 November 2016
There is an increasing need for people to plan for their futures, and they want to work closely with their financial advisors in order to best prepare. While it’s not quite possible to foresee every circumstance that will arise, Tolerisk® is getting closer. The latest version of our risk tolerance assessment software — Tolerisk® 4.3 — allows you to scientifically calculate the probability that your clients will run out of money prior to death.
It might sound morbid, but it’s a reality that many of your clients are considering as they create an investment strategy that will provide them and their family with financial stability in the years to come. As you review their investments and their assets, it’s quite possible that you will get the question: “Will I run out of money before I die? Will my spouse run out of money after my death?”
Prior to the release of the latest version of Tolerisk®, it was challenging to provide your clients with a precise answer. With Tolerisk® 4.3, you will be able to use a simple output to provide your clients with an accurate percentage. How? Tolerisk® utilizes an intricate calculation that takes into account the mortality probabilities for every year from your client’s current age until the age of 110, using the IRS Unisex Mortality Probability Data.
Ultimately, each client receives an individual and accurate percentage chance that they will have sufficient assets through death or the death of their spouse. For example, based on the current assets and savings behavior, coupled with John and Sue’s retirement horizon and spending habits, as well as their personal life expectancy, Tolerisk® computes a 9% probability of running out of money. This means that in the 1000+ historical scenarios dating back to 1926, 9% of them ended with John AND/OR Sue still alive and their money gone. And, if a client isn’t comfortable with their probability of running out of money, you can discuss the possibility of working longer, saving more, spending less, or downsizing some assets in the future such as their home or vacation property. Tolerisk® easily recomputes the new probability of running out of money and simultaneously adjusts the right current risk level as well (The Tolerisk® Score).
As the cost of health care continues to rise and life expectancy continues to increase, planning for a longer life is becoming an important consideration for the average investor. While it’s never easy to face one’s own mortality, it’s critical that clients partner with financial advisors who understand their unique circumstances and can help them make the best decisions based on realistic expectations rooted in good science and math.
This is just one of the new features of Tolerisk® 4.3. There are more recent enhancements available, all of which are designed to help you as a financial advisor provide your clients with the most personalized and precise investment plan. In addition to helping your clients determine whether they have sufficient wealth for their lifetime and for their spouse’s lifetime, you also will be able to provide them with a customized risk tolerance assessment that helps to shape their overall wealth management plan.
Tolerisk® 4.3 is the tool that you need in order to increase your client’s confidence in you, to boost your customer satisfaction ratings and to increase your referrals. Find out more information about Tolerisk® 4.3 by contacting us today!