Updates to Monte Carlo Simulations

What defines a client’s success? Well, it depends on who you ask. It could be the ability to support their families, send their kids to college, and retire on time… or in some cases, it’s a multi-million dollar mega-yacht with a helipad.

While there are a variety of ways clients measures their own success, our Monte Carlo simulation has historically determined a plan a success if a client’s total portfolio assets are greater than the defined asset goal in the final year of the simulation run.

The Monte Carlo simulation allows you to stress test your clients’ plans. By fully integrating your clients’ complete financial pictures, including their growth rates, asset mix, and cash flow, into 1000 simulations, the eMoney system calculates their probability of success.

We’re changing the definition of success in the Monte Carlo simulation.

Our new “Definition of Success” focuses not only on your clients’ end-of-life assets, but their entire life spans. By looking at the total portfolio assets in the final year, in addition to each year over the course of the simulation, the new updates ensure that a success means your clients’ total portfolio assets remain positive throughout their lifetimes and that they meet their asset remaining goal in their final year.

This new definition will have little to no effect on a vast majority of cases.

The only difference would be on cases where the client runs out of money temporarily and then – through something like a large inheritance or insurance benefit – has enough assets at the end of the simulation to pass the desired asset requirement. While this type of case is rare, that situation will result in a failed simulation using the new definition.