This video will walk you through how to stress test your plan against a major loss.
Transcript
In this video, I’ll walk you through how to stress test your client’s plan using a Major Loss scenario.
From your dashboard, go to Plan Settings and select Major Loss. You can model a major loss event lasting anywhere from one to five consecutive years, and you can set a default age for this to occur. I’ll leave it at age 60 for now.
Next, I’ll change the duration to five years so we can see how it looks over the course of five consecutive years. As I adjust the fixed growth rate numbers, you’ll notice that the allocation percentile automatically adjusts.
Major Loss on assets using asset allocation relies on the allocation percentile. For example, if you enter a loss of 20, the software will translate this into a percentile figure. This works slightly differently for assets modeled with fixed growth versus allocation percentile, so just keep that in mind. I’ll leave the rest of the settings as they are and click Done.
From here, I’m going to create a What If scenario and call it Stress Test Major Loss.
Next, I’ll go over to the Timeline section, click the plus button in the bottom right, and select Events. Under Special Events, you’ll see an option for Major Loss. I’ll add that into this scenario. It defaults to age 60, but you can adjust it directly on the timeline. Once that’s set, click Done.
Now we can see the major loss event included in the client’s plan starting at age 60.
Back on the Dashboard under Year View, we can look at age 60 and see how the losses appear over five years. If we go into the Investments or Retirement sections, we’ll see the negative returns applied for those five years, followed by a return to positive growth in year six.
Another way to evaluate the impact of this stress test is to switch to Chart View. Here, you can compare the stress test scenario against the client’s base plan, and see clearly how a major loss event over five years would affect their assets over time.
I hope this has been helpful. If you have any questions, feel free to reach out to us at support@planwithvoyant.com, or click your client’s name in the top right and select Request Support.