The Performance insight allows users to adjust assumed returns on investments incrementally upwards or downwards to see the results of higher or lower than expected returns in the plan’s charts.
Note: By default AdviserGo will not include Current or Savings Accounts in the performance slider unless they are set to grow with 'Portfolio/Holdings' as discussed below.
Accounts that are set to be grown using asset allocation, are handled differently. When you view the Growth screen for a Savings, Investment or Money Purchase Pension, you will see the option to grow the account by “Portfolio/Holdings”.
When this option is selected, rather than using a fixed growth rate, the account's growth will be derived from market assumptions based on the account's asset allocation.
The Performance slider can be used to adjust capital growth upwards or downwards in 1% increments from their starting position, when Entered Growth Rate has been used. For example, if you have an account that is set to grow at a growth rate of 2% (net of any account fees) and you move the performance slider up a notch from midpoint, the growth rate would be 3%. Move the slider a notch down from midpoint and the growth rate would be 1%.
When accounts are set to grow using Asset Allocation, the growth rate for the account will move closer to the Upside or Downside return rate, depending on the direction you move the slider. E.g. moving the slider one increment towards the higher end moves the return rate closer to the upside return rate of the portfolios the client is invested in.
A portfolio with a higher proportion invested in asset classes with high standard deviation e.g. equities, high yield bonds will have a larger range of potential returns, and a higher upside return rate (95th percentile) and downside return rate (5th percentile), than a portfolio invested more heavily in investment grade bonds, for example. This means the increment for a portfolio invested more heavily in equities will be greater than the increment for a portfolio more heavily invested in investment grade bonds. When using asset allocation therefore, the increment is a product of the underlying market assumptions in the plan and asset allocation of the client's portfolio.
Once you have adjusted the slider and run the simulation, you can then compare the plans with the Simulation (Insight results) and the original Base Plan.
You can view the adjusted return rates while using the Performance slider and also by double clicking any bar of the Let's See chart. The annual chart details legend will display. Click the Investments or Pensions tab. These tabs will show the adjusted growth rates for savings and investments (the Investments tab) and for money purchase pensions (the Pensions tab). The growth rates shown will be net of any fees set for the given account.
Also note that the Performance slider only adjusts capital growth. Natural income, dividend and interest yield, are not adjusted by the slider apart from adjustments made to interest earned on cash accounts grown using 100% cash asset allocations.