In this example, I’ve used the default assumptions of annual rebalancing and a 1.0% management fee; however, if I’d like to change those assumptions, there is another icon to the left of the screen that lets me set a different management fee. I can toggle the rebalancing period to do it annually, do it once every three years, do it once every five years, or not do it at all.
In the retirement section, there are two other graphs you can cycle through. For instance, you can show the relationships between management expenses and other selected variables—that allowed the success rate in my example to climb to 97% when the management expenses dropped to 0.4%. Conversely, if the management expense climbed to 1.6%, the probability of the scenario’s success dropped to 64%.
The third chart is a good educational piece. It displays a safe withdrawal rate for the selected $1 million portfolio with a 35-year time horizon from 1926 to the present.
For those clients in the accumulation phase, you can toggle to the “Saving for Retirement” view. Here, the variables are net monthly income (after tax monthly income in today’s dollars), the savings rate, the years to retirement, the initial investment, the savings goal, and success. This module works in a fashion similar to the retirement income module’s. Let’s say we set the savings goal at $1 million, assume the client is 25 years away from retirement, allow the client to save 15% of net monthly income, and assume the client has already saved or inherited $350,000. We further stipulate that the client wants a 90% probability of success.
The app will solve for the minimum required net monthly income needed to reach the goal ($7,234), assuming the asset allocation is the same as it was in the previous example. Or we could say that the client has a net monthly income of $8,000 with the same portfolio, the same savings rate, the same initial investment and years to retirement, the same savings goal and same required probability of success. We would then solve for the safe savings rate (which is 13%). Now let’s assume that the client is willing to save more to retire earlier—18% net. The app will tell us that the client can retire two years earlier.
The default graph in this section compares the portfolios in terms of the variable selected. For example, if we are solving for years to retirement, it will illustrate how many years the other default portfolios (conservative, balanced and aggressive) would require to meet the goal. If you solve for success rates, it will illustrate the probability of the other portfolios meeting the goal.
The other graph available in the savings module shows the relationship between the variable in question and management fees. So, the lower the management fee, the higher the success rate of the selected portfolio.
The app’s third module contains educational charts on the principles of investing, including charts on the difference in starting capital required to reach $1 million across various asset classes from 1926 to 2015; the time and risk; the duration of downturns and recoveries; the benefits of diversification; etc.
First Impressions
These is a lot to like about this app. It helps present Bengen’s research in an easy-to-use, consolidated format. This can help set client expectations. The app can also help explain concepts like safe spending levels and provide insights into the trade-offs clients can make with their retirement spending, the number of years they want to be in retirement and the legacy they want to leave.
Because the app’s designers have taken a minimalistic approach, there are not a lot of bells and whistles to master. When you log on for the first time, you are offered a brief tour of the app, which covers most of what you need to know. But there is a small information icon available throughout the program to help users understand the meaning of variables and graphs. For example, if you don’t know whether the saving rate is a percentage of gross or net income, just mouse over the info icon and a box will pop up with a full explanation.
While I’m generally in favor of a clean design, in this case the developers may have gone too far. The app lacks some controls that advisors will want. For example, you can’t do much customization of reports. On screen, you have only one choice in typing in your firm’s name, your own name or your client’s name. The intervals on the factors measured against expense ratios are not helpful for most advisors, and the intervals are fixed. You can’t illustrate your fee against that of a costlier competitor, and you can’t illustrate how consolidating more assets with your firm to reach a break point might improve the client’s financial picture.
There is no account aggregation, so you can’t pull in a client’s portfolio—instead you must create a model approximating the client’s current portfolio, using the 10 available asset classes. The good news is that you can create this hypothetical portfolio in a couple of minutes or less.
Overall though, we think that the Big Picture App has appeal. It is a great tool when working with prospects to rapidly illustrate your value and to run through some basic retirement savings or spend-down scenarios. You can quickly show them how saving more, retiring later or altering the portfolio composition affects spending during retirement. You can manipulate multiple variables with a few mouse clicks. At $29.99 a month for a single-user license, with discounts available for volume purchases, this is an affordable product. You don’t need to win over many prospects or educate many clients to get your money’s worth.