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A brief overview of how Wealth Plan assists your financial advisor in helping you is provided below.
In addition, this website provides services for your use in conjunction with your financial advisor.
They are listed in the yellow box.
Financial Advisors: Please select
to learn about the program and how it
can be acquired.
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How Does Wealth Plan Help Your Advisor?
How does your advisor formally measure your risk tolerance and tailor your portfolio to it and
your expected need for funds?
Wealth Plan provides a risk tolerance measurement tool and translates your score
into an optimum investment target model. It also asks questions which
will help your advisor tailor investments to your future need for revenue.
It supports discussion with your advisor to arrive at a risk tolerance
level which allows him or her to seek the maximum return available within your comfort
level.
How does your advisor measure the behavior of your portfolio?
Wealth Plan uses powerful research data provided by Morningstar, Inc. to give each
of your investments an asset classification that defines its actual behavior.
Before showing how this is used, let's look at the relationship between risk and
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Web Services At This Site
This website provides the following services for people working with financial advisors who use
the Wealth Plan program.
(Wealth Budget can be used by anyone.)
Wealth Information ~ Helps you gather the information needed by
your financial advisor and transmits it to him or her.
Risk Tolerance ~ Provides a questionnaire which evaluates your
tolerance to investment volatility.
Wealth Forecast ~ Let's you explore the impact of various factors
on a projection of your future net worth.
Wealth Budget ~ Let's you track your expenses in detail for budget
purposes and for estimating future expenses.
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Well chosen investments will generally fall along the curve on the right.
Risk in this case can also be thought of as volatility. In other words, one
can expect investments at the lower end of the curve to be quite stable while those
at the upper end can be expected to experience wild up and down excursions.
To reap their higher reward, one needs to be able to hold them over longer periods,
not forced to sell them in down cycles. It also requires patience to weather
the down periods without panic.
A conservative investor will want to operate towards the lower end of the curve.
A balanced investor who is willing to accept a certain amount of risk in return
for growth after inflation will want to operate further up the curve. An aggressive
investor will want to operate towards the top of the curve, opting to ride the excursions
for maximize growth.
This doesn't mean all investments should be focussed on the point of the curve corresponding
to your risk tolerance level. Modern portfolio theory has shown that diversification
along the curve is desirable. In simple terms, some riskier investment above
your comfort level can be offset by more conservative investments below your comfort
level.
Wealth Plan provides 11 target models, utilizing this principle, stepping from ultra
conservative to very aggressive. It then helps your advisor match your
portfolio to your optimum target model.
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Simplified Risk~Return
Relationship
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How does your advisor truly understand the behavior of your portfolio and manage
diversification for efficient, safe growth within your comfort level?
It's not good enough to treat stocks as high risk, mutual funds as lower risk, bonds
lower yet and so on. The behavior of each stock and fund must be considered.
As we stated earlier, Wealth Plan gives each fund and stock an asset classification
that defines its actual behavior. The asset classes shown on the right provide
the flexibility needed to define target models and manage asset allocation to match
them. The balanced target model shown actually contains some percentage of
each asset class, illustrating the form of diversification discussed above.
This diversification is further enhanced by introducing international and alternative
investments.
Wealth Plan then shows graphically
how well or poorly your portfolio matches the target model as shown by the bar chart on the right. The black bars represent
the target values for each asset class, the colored bars show current values and
the white bars show what the values would be if the advisor's recommendations are
followed. In this example, there is a large disparity between current and
target values and the advisor is moving the portfolio towards the target.
How does your advisor choose proven securities to rebalance your portfolio as opposed
to "hot" or current fad securities?
Once portfolio asset allocation monitoring is implemented, rebalancing towards the
target will permit your advisor to capture some of the return from overproducing
securities and nourish the shortfalls. Usually this means taking some of the
profit from aggressive investments and putting it into more conservative investments.
This tends to maximize growth while staying within your comfort level.
Wealth Plan helps this process by providing visibility on how each of your investments
is performing and by suggesting proven high performers within each asset class for
purchase recommendations.
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Balanced
Investor Target Model
Portfolio Asset Allocation Monitoring
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How can your advisor assess your financial independence by realistically projecting
your net worth throughout your career and retirement?
Wealth Plan supports a detailed analysis leading to projections of your net worth
based on a variety of assumptions. It can be used to show such things as:
~ Savings required for a secure retirement.
~ Spending flexibility during retirement.
~ Impact of college education costs, etc. on retirement.
~ Inflation or rate of return impact on retirement.
~ What estate might be available for heirs.
Wealth Plan also provides visibility on the impact of various estate planning strategies
for a spectrum of will probate dates. It shows where strategies are needed
to minimize estate taxes.
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Net
Worth Projection Example
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