Transcript:
AdviserGo Global Training
Hello, and welcome to today’s global training.
Today, we’re going to walk through how to model a market crash using the Market Crash Insight in Voyant.
This insight is useful when you want to stress test a client’s plan and answer questions such as:
What if the client experiences a significant market downturn right before or during retirement?
Or:
Will the client still be okay if their invested assets drop unexpectedly?
For this example, we’re using clients Martha and John. This will help us demonstrate the impact of a market crash and show how their invested assets may be affected if a major loss were to occur.
Before we get started, I want to show where you can review and adjust the market loss settings.
To do this, go to Plan Settings, then select Major Loss.
Here, you can see the default age, which in this example is set to 60. You can also choose the number of years for the major loss event, from one to five years.
In this example, I have selected a 35% loss in year one and a 45% loss in year two. You can also choose the allocation percentile used for the simulation.
Once those settings have been reviewed, select Done.
Now, we’ll navigate to the Insights tab and select Market Crash.
From here, we’ll select Get Started.
You can choose a different age if needed, but for this example, we’ll model the market crash at age 55.
Now that we have added the market crash, we can see a new icon on the timeline indicating that an event has been created at age 55.
In this example, we can see that no shortfall is found from this single market crash event.
However, if we want to show the client what may happen if there are additional market loss events, we can model that through a What-If Plan.
To do this, we’ll create a new What-If Plan and give it a name, such as Second Shortfall Event.
Once the plan is created, we’ll select the plus button and go to Events. You can also access this from the Timeline.
Under Events, we’ll select Major Loss Event.
For the first major loss event in this What-If Plan, we’ll leave it at age 60 and select Done.
To model another major loss event, we’ll repeat the same steps.
This time, we’ll add another Major Loss Event at a different point in the timeline. For this example, we’ll set the second event at age 74 and select Done.
Now that we have two major loss events entered, we can see that a goal that was previously being met is no longer being met.
If we go back to the Dashboard, we can now see that there is a shortfall in the plan caused by the additional major loss events.
To review this in more detail, we’ll go to Year View.
From here, we can scroll over to the Investments tab.
As we use the slider bar to move through the years, we can see the first major loss event being applied. In this example, we can see negative growth reflected in the investment accounts, including the brokerage accounts.
As we continue moving forward, the accounts begin growing again until we reach the next major loss event.
At that point, we can see another drop in the invested assets, which is now contributing to shortfall in the plan.
You can also review this by going to the Assets chart to see how the plan is affected over time.
Another helpful view is Compare Plans.
To do this, go to Compare Plans and select Chart View.
Then, compare the Base Plan against the Second Shortfall Event What-If Plan.
Once we are in the Assets chart using the dual chart view, we can see how the assets are affected year by year.
This is a helpful way to show the client the difference between their original plan and a scenario where multiple market loss events occur.
This can support a broader conversation with the client around how they may recover from a market downturn and what strategies could help reduce the impact of a major loss event.
For example, this may lead to conversations around withdrawal strategy, cash reserves, asset allocation, retirement timing, spending flexibility, or overall risk tolerance.
As always, if you have any questions while working in a client case, you can use Request Support.
To do this, click on the client’s name, select Request Support, and enter your question.
Thank you for joining today’s training.