In this case, the quick plan showed that the couple was on target to meet their goals at their desired retirement age of 65, with an 81% probability of success. The plan, to this point, took less than seven minutes to create. Fine-tuning the plan for clients and going over various scenarios takes additional time, but the point is that you can run some hypotheticals for a prospect or a simple case in minutes.
What if the couple wanted a higher probability of success? One option would be to run a "what-if" scenario whereby I locked all of the spending results (using the easy lock, yet another new feature), but moved the retirement age to 68 for both spouses. That would have boosted the probability of success to 94%. Another option would be to lock everything from the original solution and add $8,800 in annual taxable savings, which the couple indicated they were willing to do. That results in an 89% probability of success. Finally, we agree upon the savings, and agree to postpone retirement till age 66, resulting in a probability of 92%.
An easier way to accomplish the same tasks would have been to run these "what-if" scenarios using the improved version of PlayZone, which allows advisors and clients to simply move sliders on a screen. Clients can save a result to show it to their advisor in PlayZone, but only advisors can take a result within PlayZone and make it a recommended scenario.
MGP: G3 capabilities go way beyond the simple case we used for illustration purposes. Earlier we discussed the simplified retirement goal creation and the simplified asset data entry. If you instead use the retirement goal builder to create a retirement goal, the application displays a retirement time line to better visualize the various periods of retirement. This more detailed data entry methodology includes a life expectancy calculator as well. Why? Even though the MGP defaults are excellent, their accuracy for an individual can be improved upon by answering a few questions about each client's general health and family history.
The area where results are generated is improved. Formerly, moving between the results page, the PlayZone and the "what-if" section was not as seamless as it could be. Now, these areas are more tightly tied together. The way that plan scenarios in the results area are displayed has changed as well. The application only displays the high level details so they appear on a single screen. Clicking the details button exposes a menu of choices, so you can pinpoint the detail you wish to view or work on. These include bad timing, asset allocation, stress test and Social Security maximization.
Some of these tools are new and welcome. For example, under the Stress Test menu, there is the ability to generate a new Portfolio Probability matrix. This matrix displays all of the model asset allocations to help advisors determine if a lower risk portfolio can achieve all of a client's goals. In my sample case, I learned that a somewhat less risky portfolio would actually boost the plan's overall probability of success and reduce the downside risk in a bear market. The trade-off is that the projected terminal value of the portfolio would be less. The Portfolio Probability Matrix is a welcome addition; I just wish it were easier to find.
Another new addition, the special asset stress test, is also under the details on the stress test menu. This runs the scenario in question with the low, expected and high estimates for any special assets, and shows the probability of success under each condition.
Speaking of Social Security maximization, the application does a number of clever things in this regard. The default Social Security strategy is to take it at full retirement age for both spouses; however, when you pull up the Social Security maximization screen, you can compare a number of alternative strategies. Strategies are compared in total anticipated cash flows over life expectancy, but also by breakeven ages and probability of plan success. In the sample plan, the application indicated that if both spouses waited till age 70 to begin benefits, the odds of overall plan success would go up slightly, and the overall benefit received would be increased by approximately $150,000 over both lives , assuming all other plan assumptions were met. Armed with this information, planner and clients can discuss the potential benefits of this scenario and other alternatives. If a strategy other than the default one is selected, it will be incorporated into the plan. In many scenarios, the Social Security strategy that is projected to generate the most dollars is not the one that results in the overall plan's highest probability of success. This can lead to an interesting conversation with clients.
The new "What Are You Afraid Of?" section is a brilliant addition to MGP: G3. It allows you to uncover and address client objections to a financial plan. It addresses issues such as: "What happens if I live five years longer than we are projecting?" or "What if future Social Security benefits are cut by 10%?" Using the sliders in a fashion similar to PlayZone, you can model changes in inflation, Social Security benefits, longevity, returns or health-care costs and the application will calculate a return on the fly. If the current plan requires adjustments to address a client fear and the client is still years from retirement, the application can solve for a solution.
The final enhancement that we'll cover is Presentation Mode. This area has been enhanced so that you do not have to toggle back and forth between the planning mode and the presentation mode in most cases. That's because you can now access SuperSolve, PlayZone and details from right within the presentation mode.