wwe ea aal llttthhhpppllaannnnneerrr+++ mmooddduuulllaa...

10/07/13 P a g e | 1 Modular Goal Training

WWWeeeaaalllttthhhPPPlllaaannnnnneeerrr+++

MMMoooddduuulllaaarrr GGGoooaaalll PPPlllaaannnnnniiinnnggg UUUsssiiinnnggg PPPrrrooofffeeessssssiiiooonnnaaalll LLLeeevvveeelll 111

AAAdddvvviiisssooorrr WWWooorrrkkkbbbooooookkk


Table of Contents

Table of Contents .................................................................................................................................................2

Navigation and Orientation ..................................................................................................................................3

Case Study # 1 – Using the Modular Goal Process Flow for Retirement .............................................................7

Data Entry Using the Modular Goal Process Flow for Retirement ..................................................................8

Client Summary Report ................................................................................................................................. 16

Planning Alternatives .................................................................................................................................... 22

Including All Planning Alternatives in your Report ....................................................................................... 27

Other Report Options ........................................................................................................................................ 28

Presenting your Retirement Plan to Your Client ............................................................................................... 29

Report Presentation ...................................................................................................................................... 29

On Screen Delivery ........................................................................................................................................ 29

Case Study # 2 – Using the Modular Goal Process Flow for Education ............................................................ 30

Data Entry Using the Modular Goal Process Flow for Education ................................................................. 31

Case Study # 3 – Using the Modular Goal Process with Multiple Goals ........................................................... 38

Data Entry Using the Modular Goal Process Flow for 2 or More Goals ....................................................... 39

Exercise # 1 – Creating a Modular Retirement Goal Needs Analysis ................................................................ 47

Exercise #2 – Creating a Modular Education Goal Needs Analysis ................................................................... 48

Answer Key Exercise #1 – Modular Retirement Goal Needs Analysis .............................................................. 49

Answer Key Exercise #2 – Modular Education Goal Needs Analysis ................................................................. 53

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Navigation and Orientation

The first step in mastering any software tool is to become proficient at navigating the system so you can find what you are looking for. Let’s spend just a couple of minutes getting oriented to how you navigate PlanPlus Planit.

Topic Details

Login For Dundee and Dynamic users we have integrated to your internal web portal so users will come in using a single signon bypassing the normal login process. Link can be found on your portal as seen here.

Navigation Panel

Once you have logged in. you’ll see the navigation panel down the left hand side of the screen. Let’s quickly review each section of the navigation panel and see how each is used.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Topic Details

Selection Add Client: When you want to add a new client just click on Add Client. This will launch the <Personal Information> screen where you will enter client personal data. Client Search: If a client is already in your data base, you can look for them using different types of data – surname, government SIN etc. The most common search method is to do a Surname search.

Unselecting a Client: When you have finished working on your client, you will want to go back to the generic home screen. You do this by returning to the home screen and on the left hand navigation bar under Selection you will click on Unselect client. For privacy reasons, you should always unselect your client when you are leaving your work station unattended and you have a client’s data displayed.

Client Data Entry

Selecting a Work Flow: When adding a client, you’ll want to FIRST select the work flow you want to use. For PL1, the two most frequently used are “Modular Goal Process” and “Investment Policy Process”. Note: For advisors who upgrade to PL2 or PL3, the available workflows will expand to include “Life Planning” or “Integrated Planning”, depending on the access level.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Topic Details

Calculators Calculators: From the calculator drop down list you can choose from a series of calculators designed for specific calculations.

Documents & Reports

Your Working Documents: This is where you generate editable WORD client presentation documents. Safety Deposit Box: This is a permanent storage area, specific to each client, where you can store documents you have produced for this client. It also allows you to store different planning scenarios while you are working on a case for future reference. You can store unedited documents you’re working on or edited final documents that you are presenting to the client.

Administration Change Your Profile: This is the screen where you can set your preferences for your personal information such as language, planning jurisdiction, company name etc.

Change Your Password: Allows you to change your password at any time.

Favourite Products and Preferred Portfolios: This is an Advanced Investment Planning feature. This is where advisors can set up personal security selection product preferences.

Client Service Search: Provides some simple client criteria searches.

Event Log Browser: Allow you to identify your usage habits such as # of Clients added, number of documents generated etc.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Topic Details

Top Navigation Menu Bar

Language: You can choose the language your screen will be displayed in.

Home: Brings you back to the home screen Notes: Opens up a text field where you can keep client-specific notes. This can be accessed from any screen. You can also choose the “Date” field so that your notes are dated and saved. This is not editable afterwards, so it becomes defensible information on the client file.

Live Chat: Facility to ask questions of our support staff almost 24/7.

Help: Provides you with online help for any screen. It might be contextual assistance to help you understand the screen and the data to be entered or it might be more elaborate help on how certain information is used.

Training: Provides E-Learning, FAQ’s, and a wealth of support information.

Logout: You use this to exit the system.

In addition to these links you’ll also see your selected client displayed.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Case Study # 1 – Using the Modular Goal Process Flow for Retirement

Let’s consider the following situation. You have a couple that come in, Jeremy and Diane Brown. They are both age 50 right now. They indicated that their most pressing concern is to get some confidence that they can retire in 5 years. You further learn that they currently are spending about $70,000 after tax but feel they could reduce their expenses in retirement to about $60,000. They have accumulated $400,000 in Jeremy’s RRSP and $200,000 in Diane’s. In addition they have $100,000 in a joint investment account and $15,000 each in their TFSA’s. They are currently both maximizing their RRSP contributions, $8,000 for Jeremy and $6,000 for Diane. They are also taking advantage of their TFSA by saving $5,000 each. They have no pensions but Diane knows that she is in line to receive an inheritance at some point in the future. Her parents are age 78 and 79 and she conservatively estimates the inheritance to be around $100,000. They are both eligible for full CPP benefits and OAS benefits. They are fairly conservative investors and you determine that a conservative return assumption of 5% would be appropriate for your analysis. For inflation you’ll use 3%. Let’s look at Jeremy and Diane’s results given these assumptions.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Data Entry Using the Modular Goal Process Flow for Retirement

Personal Information

Family Members Tab: To complete a modular retirement analysis, you only need two things on the <Personal Information> screen. The client names and their dates of birth.

Address Tab: Optionally you may also enter your client’s address(s).

Administration Tab: On the Administration tab you’ll find a “Secondary Advisor” field. This is where a second advisor code can be added so you can share you data with a second person. This might be for two advisors collaborating on a client case or may be for support staff to gain access to the client to help a user understand a question or issue they are having.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Planning Assumptions

Jurisdiction: The jurisdiction willd default to the users jurisdiction from their user profile. It can be changed if necessary. The provincial setting will impact the various tax calculations in the system.

Inflation: The inflation assumption is a system wide default but can be adjusted for each client as needed.

Return Reduction: This drop down allows you to adust the portfolio returns for the target investment portfolios to make your various projections more conservatrive.

Discuss Retirement Flag: The “Discuss Retirement” flag tells the system you are doing a retirement anaysis vs. an educaton or other goal analysis. It impacts what fields you’ll see on some screens.

The light bulb beside the Mortality assumptoins allows you to see the mortality tables for the client and spouse given their gender and current age.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Add/Remove Benefits: The Government Benefits are included by clicking the “Add/Remove Benefits” button. Choosing the benefits on this screen will create the necessary records later on the <Pensions and Other Revenues> screen to incorporate CPP and OAS benefits into the retirement analysis.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Assets & Liabilities

Summary vs. Detailed Asset Entry: There are many options on this screen relative to how data is entered. It can be kept very simple and just high level “Summary” information can be entered, or holdings can be entered using the “Detailed” method. We’ll look at the detailed method later in this program. Portfolios: When you first enter this <Assets and Liablities> screen, a series of default accounts are created. These accounts are placed in a portfolio called the “Strategic Portfolio”. When doing a simple single need analysis for a client with one goal, you can leave these accounts all in one portfolio, however if you are going to be analysing more than one goal, or if you don’t want some of the money that the client’s have to be used for the current goal, you’ll move those accounts into a separate portfolio. We’ll learn more on this later when we look ad doing an Education Goal needs analysis.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Goals and Objectives

You can hover over the “Funded” lightbulb to confirm which portfolios are funding this goal. Or you can “Edit” the goal to change the portfolio assignment.

When editing the goal you can also tier the retirement goal to give the client’s more retirement income in the earlier years while they are young and healthy. Just use the “+” sign to add a tier or the “-“sign to remove a tier.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Pensions & Other Revenues

When you first arrive at the <Pensions & Other Revenues> screen, any government benefits you indicated the client’s were eligible for on the <Planning Assumpions> screen will be set up for you automatically. At this point you can then add any additiona revenues that are expected. This could include things like:

An Inheritance Residence downsize

A defined benefit pension Sale of othe personal use assets

In the above example we have added an inheritance that Diane is expecting.

Savings

On arrival the <Savings> screen is already populated with the savings you identifed on the <Assets & Liabilities> screen. This is where any employer “match” contributions are entered. Use the “Edit” button to modify any of these records.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results

Assumptions Tab

On the <Results> screen you first have a few assumptions to set up for this specific goal on the Assumptions tab. These include:

Full Tax Calculation: This flag is defaulted to being on when doing a retirement analysis. This means that during the retirement period, the system will use a very robust graduated tax calculation each year for the client and spouse.

Average Tax Rate: This identifies the taxation that will apply to the investment income from non sheltered investment accounts prior to retirement.

Portfolio: This is where you can specify what investment assumptions you want to make relative to this goal. This drop down will be populated with all of the standard portfolios available on the site, plus several other options, depending on what you have already done for the client. In this case we are going to use the “Custom” option which allows me to manually choose the return and standard deviation I want to use.

Return on Assets: As mentioned above, if you select “Custom” you can manually enter your return assumption to be used for your analysis. Or if you select one of the portfolio options, the return for that portfolio will be displayed. The portfolio returns will be adjusted based on the return reduction factory you used on the <Planning Assumptions> screen.

Standard Deviation: This number will be populated for you if you select one of the standard portfolios, but if you use a custom return, you’ll have to set a reasonable standard deviation for that rate of return assumption.

Investment Income Distribution: When you select a standard portfolio, the income distribution that is typical for the asset allocation of that portfolio will be displayed. You may then retain that income distribution or edit it to recognize your implementation approach.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results Tab

When you move from the “Assumptions” tab to the “Results” tab, the system will automatically launch the calculations to determine if the client has a surplus or a shortfall. In situations where the client has a shortfall, you’ll see how close they are to achieving their goal to the right where the “Percent of goal Achieved” is identified. In this case the client’s can’t quite achieve their goal of $60,000 after tax spendable income. This calculation helps to identify how big their problem is. Achieving 99% of the goal is a small problem. Achieving 33% of the goal is a big problem!

At this point you may elect to run a report. Let’s see what our options are in that regard.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Client Summary Report

The most commonly used report for clients is the “Client Summary Report”. It provides all the key details of the analysis, without becoming overwhelming for the client. Here are some highlights.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Introduction

Provides a general introduction to the process of doing an analysis on a regular basis.

General Information

Identifies the client’s personal information.

Retirement Profile

Identifies the target retirement age, the mortality assumptions as well as the target retirement income needed.

Financial Assumptions

Identifies the rate of return used in the analysis, the inflation rate and the tax assumptions.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Savings Assumptions

Identifies existing capital that the client has saved so far which has been identified as being designated for this goal. Also identifies any ongoing savings that are planned.

Resources to Fund Your Retirement

Identifies any expected revenue streams from Government Benefits, Pensions or other revenues that will help to fund this goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Summary Analysis

Shows year by year the impact the various assumptions will have on the client’s capital and their ability to fund their goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results

An illustration that both graphically and with summary numbers, shows any gaps the client has.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Reliability Forecast

Helps the client understand the sensitivity of their results to the two key factors they have no control over: 1. Mortality 2. Rate of Return Notice in this case that the client in this case has a shortfall based on a mortality assumption of 90 and a rate of return of 5%. They only have a 73% change of achieving their goal given a standard deviation of 4.36%. But notice if they only live to age 80 their success is 100%. Or if they achieve a 7% return they are in good shape even if they live to age 95.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Planning Alternatives As seen on the previous page, you can see the “Percent of Goal Achieved” right on the Results tab. Or you can go into the “Planning Alternatives” tab and see some more detailed calculations in several areas to help eliminate the gap.

“Income Available” Planning Alternative

The client’s goal is $60,000 but here we see a slider that will allow you to select a level of income that might be acceptable to the client. Once you have set the slider to the level you want, you can use the “Save” button to saved that number back to the “Goals” tab and become the client’s revised goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


“Rate of Return” Planning Alternative

Another option that can be used to reduce shortfalls it to recognize the need for the client to be somewhat more aggressive and target for a higher rate of return. Below we see that increasing the return is an option to totally eliminate the client’s shortfall. However if the client is not comfortable with this more aggressive assumption, you might pull the slider to the halfway point and use that as your assumption. A bit more aggressive, but not outside the client’s comfort zone.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


“Delay Until” Planning Alternative

Another option available is for the client to defer their target retirement age. This planning alternative identifies how much longer the client would have to work to totally eliminate the gap. However this might not be palatable to the client’s so you can move your scroll bar to the age you feel would be acceptable. If you then click on “Save” this new age will get pushed to the <Planning Assumptions> screen so it becomes the client’s new target.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


“Stop Need At” Planning Alternative

Another option available is for the client to plan for a shorter time horizon. Not a very easy thing to recommend to a client! This just helps the client to better understand at what age they start to have a problem. In this case we can see the planning horizon would have to be adjusted downwards with all other things being equal, for the shortfall to be eliminated. For clients who truly believe that the heredity in their family and health issues make it unlikely that they will reach age 90, may indeed be comfortable reducing the planning horizon somewhat.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


“Alternate Capital Savings” Planning Alternative

Another option available is for the client to plan to save more between now and retirement. When you select this alternative, you’ll be presented with a listing of the various accounts that exist and you then must pick which account you want to do the calculation for. In the example below, I asked the system to calculate how much new “Open” savings would have to take place to eliminate their shortfall. The amount was unrealistically high because the client only has 5 years to go before their target retirement age. However you could elect to plan for some smaller increase in their savings using the slider to only partially eliminate the shortfall as seen here.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Including All Planning Alternatives in your Report When you select a report to view, such as the “Client Summary Report” or the “Client Consolidated Report”, you have the option to include all of the planning alternatives is cases where the client has a shortfall. You do this by merely turning on the check box called “Include Alternatives” Here’s an example of what you’ll see inside the document when you use this check box. You’ll note that all of the alternatives we looked at one by one on the Planning Alternative tab get inserted into the report, with the exception of the savings. The reason the savings are not routinely calculated is the time required to do this calculation on multiple accounts make the report take quite a while to calculate. To prevent this we have just referenced more savings as a possible option that can be explored further.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Other Report Options

So far we have focused on the Client Summary Report, but when you are on the “Results” tab you’ll note that there actually are a series of different documents reports that are available.

Here’s a summary of these and what they each provide:

Client Summary Report: This is the report we saw earlier in this session. It’s the most commonly used report and provides a reasonable level of detail without being too overwhelming.

Summary Analysis: This is one of the sections from the Client Summary report that just provides a snapshot of the year by year the impact the various assumptions have on the client’s capital and their ability to fund their goal.

Analysis of Investment Accounts: This is a free standing report that allows you to see more detail relative to what is happening inside each of the client’s accounts. It’s much like the Summary Analysis but instead of seeing the rolled up totals of all accounts, you can look at the client’s RRSP account and see exactly the contributions, withdrawals and growth taking place in that specific account. When you request this report, you’ll receive details on all of the client’s accounts individually and one that shows the aggregate values.

Other Revenue Analysis: This is a free standing report that shows a breakdown of any revenues that are included in the analysis. For example you’ll see any government benefits, pensions or lump sum receipts over the client’s lifetime. Basically this comes from the Pensions and Other Revenues data entry.

Tax Summary: Free standing report that shows the taxes payable each year for the client and spouse.

Reliability Forecast: You saw this report as part of the Client Summary report previously. This option just allows you to look at this as a free standing report.

Client Consolidated Report: As the name suggests, this is a report that is a consolidation of all of the reports listed above. When requesting this report, you get everything all at once . . . which can end up being a fairly lengthy report.

Tax Audit: This is a spreadsheet style report that provides an audit trail of the tax calculations used when doing a full graduated tax projection. It’s used primarily when you have questions on how the taxes are calculated in any given year.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Presenting your Retirement Plan to Your Client

Report Presentation

When you are using the modular retirement analysis you have two options. First you can prepare your analysis for your client, print out the report that’s appropriate and present it as a printed document that can be given to your client as a permanent record of your discussion. Some advisors will run a short “Summary Analysis” of the client’s starting point illustrating their shortfall before implementing any planning alternatives, and then present a more detailed report, such as the “Client Summary Report” that illustrates the revised strategy you have modelled using one or more planning alternatives.

On Screen Delivery

Another option that some advisors use is to use the modular retirement analysis while the client’s are sitting with you. This approach requires that you are comfortable enough with the process to be able to use it without stumbling along, but that’s just a matter of some practice. Using this collaborative approach has some advantages, particularly in the process of using “Planning Alternatives”. You can show the client the how much income they can fund, and if it’s less than they desire, let them decide what they feel is acceptable. Or perhaps they will work 1 or 2 years longer. The modelling process with them participating can help make the final strategy resonate with them since they participated in its creation. When you are done you can then print out the “Client Summary Report” so they have a permanent record of strategy you built together. Regardless of the approach you use, modular retirement process can provide a good quality analysis and strategy for your client without taking a large amount of time.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Case Study # 2 – Using the Modular Goal Process Flow for Education

Let’s consider the following situation. You have a couple that come in, Rick and Tina MacDonald. Rick is 35 and Tina is 32. They have a son Aaron who is 8 years old and they want to make sure they have sufficient money for him to go to university. For this modular need it makes sense to do a quick analysis using the modular goal process flow. Rick and Tina live in Toronto and because Aaron is still young, they aren’t sure what school he might go to, but you agree to plan on annual expenses of $15,000 indexed using a 3% inflation assumption. They have just started to save into an RESP over the past couple of years and so far have accumulated $2,700. They are currently saving $1,500 per annum and getting the 20% $300 RESP grant. They want to invest fairly aggressively since they have 10 years before Aaron starts school so you are going to use a 7% return assumption for your analysis. Let’s look at Rick and Tina’s results for this education goal given these assumptions.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Data Entry Using the Modular Goal Process Flow for Education



Discuss Retirement Flag: The “Discuss Retirement” flag tells the system you are doing a retirement anaysis vs. an educaton or other goal analysis. It impacts what fields you’ll see on some screens. In this case we have turned it off because we are doing an education analysis.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Portfolios: When you first enter this <Assets and Liablities> screen, a series of default accounts are created. These accounts are placed in a portfolio called the “Strategic Portfolio”. When doing a simple single need analysis for a client with one goal, you can leave these accounts all in one portfolio, however if you are going to be analysing more than one goal, or if you don’t want some of the money that the client’s have to be used for the current goal, you’ll move those accounts into a separate portfolio. We will see an exmple of this later.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Goals and Objectives

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Savings

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results

Assumptions Tab

On the <Results> screen you first have a few assumptions to set up for this specific goal on the Assumptions tab. These include:

Average Tax Rate: This identifies the taxation that will apply to the investment income from non sheltered investment accounts.

Full Tax Calculation: Note that for the Education Goal type, the “Full Tax Calculation” option is not applicable.

Portfolio: This is where you can specify what investment assumptions you want to make relative to this goal. This drop down will be populated with all of the standard portfolios available on the site, plus several other options, depending on what you have already done for the client. In this case we are going to use the “Custom” option which allows me to manually choose the return and standard deviation I want to use.

Return on Assets: As mentioned above, if you select “Custom” you can manually enter your return assumption to be used for your analysis. Or if you select one of the portfolio options, the return for that portfolio will be displayed. The portfolio returns will be adjusted based on the return reduction factory you used on the <Planning Assumptions> screen.

Standard Deviation: This number will be populated for you if you select one of the standard portfolios, but if you use a custom return, you’ll have to set a reasonable standard deviation for that rate of return assumption.

Investment Income Distribution: When you select a standard portfolio, the income distribution that is typical for the asset allocation of that portfolio will be displayed. You may then retain that income distribution or edit it to recognize your implementation approach.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results Tab

When you move from the “Assumptions” tab to the “Results” tab, the system will automatically launch the calculations to determine if the client has a surplus or a shortfall for this goal. In situations where the client has a shortfall, you’ll see how close they are to achieving their goal to the right where the “Percent of goal Achieved” is identified. In this case the client’s can’t quite achieve their goal of funding $15,000 of education expenses indexed at 3% for 4 years. This calculation helps to identify how big their problem is. Achieving 99% of the goal is a small problem. Achieving 33% of the goal is a big problem!

At this point you may elect to run a report or you might want to use the planning alternative to identify a solution. With an education goal you also have the alternative to merely model maximuml RESP savings using the <Asset Allocation> screen and the <Savings> screen.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Maximizing the RESP Contributions

With an Education goal you might want to start off by first assuming the client’s maximize theire RESP contributions to get their full grant. So merely go to the <Assets & Liabilities> screen and increase the annual savings to $2,500 and go to the <Savings> screen and increse the grant to $500. See examples below.

Results

So we have gone from a shortfall of $18,731 to a shortfall of $1,615

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Case Study # 3 – Using the Modular Goal Process with Multiple Goals

Our last case study is designed to demonstrate the impact you’ll find when working with a client who has more than one goal. As mentioned previously, with a single goal you can use a single portfolio and any savings you enter will be used for that single goal. But when you have 2 or more goals, you have to start paying more attention to how accounts and savings are associated with specific goals, since you can’t use the same money twice for two different goals! So here’s our case study overview for this third case: Marty and Rene Black are 45 and 44. There goals are as follows:

Both want to retire at Marty’s age 60

They want $50,000 of after tax income

They have twins, Jimmy and Kendra (age 16) who they want to provide education funding of $10,000 per year for 4 years.

They have accumulated $150,000 in Marty’s RRSP with and $80,000 in Rene’s. In addition they have $15,000 in a joint investment account. Marty is saving $5,000 per annum into his RRSP and Rene is saving $2,500. They are also taking advantage of their TFSA by saving $5,000 each. The kids RESP plan has $25,000 in it and they are saving $5,000 a year and getting their full $1,000 grant. They have no pensions but are both eligible for full CPP benefits and OAS benefits. They are fairly average investors and you determine that you’ll use a return assumption of 6% for the retirement projection but want to be more conservative for the education goal, so you’ll use 4% for that analysis. You’ll use the default inflation rate of 3%. In the following pages, we will focus just on the issues that have to be handled differently from the previous two case studies we have done.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Data Entry Using the Modular Goal Process Flow for 2 or More Goals Personal Information


Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Edit and assign the RESP account to a new “Portfolio”.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Assets & Liabilities – Portfolio View

Goals & Objectives

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Edit the goals that need to have a specific “Portfolio” associated with them. Here’s Jimmy’s Education goal. Notice how 50% of the portfolio is associated with this goal. That’s because the other 50% is for Kendra’s education goal. The system will automatically pro rate the money when a portfolio is shared across more than one goal OR you can override that automated pro rating and set your own percentages. It’s exactly 50% because Jimmy and Kendra are twins. If their ages had been different or their goals different the pro rating of the portfolio would have perhaps been 60% for Jimmy and 40% for Kendra.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Savings

Initially all savings are associated with the retirement goal. On the savings screen you can associate any savings with any goal. Here’s how it’s done.

Notice the “Savings Associated with Goal” drop down. I’ve changed this to associate savings with Jimmy’s education goal. But notice the savings are NOT $5,000 and $1,000 for the grant. That’s because only half of the savings if for Jimmy’s goal. The other half is for Kendra. After saving these changes I can then add the other half of the savings and associated it with Kendra’s goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Change my “Active Goal” to Kendra’s education … where there currently are not savings. I click on “Add”.

I then describe the new savings, identify the type from the drop down and enter the amount and grand. Also double check the start and end years. Notice the “Savings Associated with Goal” says “Kendra’s Education”. Then Save.

So now savings are present for Kendra’s goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Assets & Liabilities Screen

One thing to notice when you split savings up across two goals like this is it affects the Assets &Liabilities screen. See above where originally we typed in $5,000. But notice that now the $5,000 is non editable. That’s because the detailed savings records behind the scenes have to retain their distinction so you now can’t edit them from this screen. You have to go back to the savings screen and do any edits there. This ensures the integrity of the savings you have associated with each goal.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results

ATR: 20% Return: 6% SD: 8%

ATR: 0% Return: 4% SD: 6%

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Exercise # 1 – Creating a Modular Retirement Goal Needs Analysis

Michael and Marnie “Yourlastname” are 45 and 43 respectively. They indicated that they want to retire at Michael’s age 60 and Marnie’s age 58. Both Michael and Marnie indicated they have very long living relatives and thus are concerned about outliving their capital. Thus you agree with them to use a planning horizon of age 95.

They have indicated that they would like to have an after tax spendable income of $85,000 which seems reasonable because they currently are spending about $100,000, but they plan to pay off their mortgage prior to retirement.

They have accumulated $75,000 in Michael’s RRSP and $125,000 in Marnie’s. In addition they have $80,000 in a joint investment account.

They are currently both maximizing their RRSP contributions, $1,000 for Michael because he has a pension plan and $7,500 for Marnie. They would like to start doing contributions to a TFSA, and have recently paid off some debt so feel they can do contributions of $5,000 per annum each.

Michael has a defined benefit pension plan through his employer and expects to receive a pension of $25,000 starting at his age 60. Marnie has no pension. They are both eligible for full CPP benefits and OAS benefits.

They also plan to move back to the small town they grew up in and thus can sell their current home for approximately $500,000 and buy one in their home town for considerably less. Probably round $350,000. This means they can convert $150,000 of their personal use residence value to invested assets. They will do this when they retire. They think their home will grow with inflation between now and when they ultimately sell. The home is owned jointly so they will have $75,000 each going into their investment portfolio. Of course these funds will be tax free since they are downsizing their principal residence.

They are moderately aggressive investors and their recommended portfolio that you’ll use is “Growth”. You’ll also use a Return Reduction factor of 1.5%. For inflation you’ll use 3%. When it comes to tax assumptions, you’ll use full graduated tax rates during retirement and use a 25% tax assumption pre-retirement.

Perform an analysis for this client identifying any shortfalls they have. Create a “Consolidated Client Report” and save it. Then model some possible solutions using the Planning Alternatives saving your changes until you have eliminated any shortfalls. (Work 1 year longer; reduce the Goal slightly etc.) Create a second “Consolidated Client Report” for this final strategy with all gaps eliminated.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Exercise #2 – Creating a Modular Education Goal Needs Analysis

Perform an analysis for the following client: Your client’s Michael and Marnie “Yourlastname” that you did the retirement analysis for in Exercise #1 also have a goal to provide education funding for their son Rory. Rory is currently 14 years old and will start post secondary school at age 18. They would like to fund a 4 year degree for Rory. They have indicated that they think Rory would go to an out-of-town university and expect that between tuition and room and board they would be looking at expenses of $16,000 per year. They have some money already accumulated in a RESP for Rory . . . $18,000 and are doing annual contributions of $2,500 in order to get their full $500 RESP grant. For this analysis they want to be more conservative in their return assumption because of the relatively short time horizon before Rory starts school. So you agree with them to use a “Defensive” portfolio. You further discuss the issues of inflation and all agree that you’ll assume inflation 3% on this goal. You also will set your tax rate to 0% since RESP capital grows tax sheltered. Note given these are the same clients that you did the retirement analysis for, you’ll use the same 1.5% return reduction factor.

Perform an analysis for this client identifying any shortfalls they have for Rory’s education goal. Because there are fewer options when it comes to education goals, determine how much more the client’ would have to save to achieve their goal. Run a “Client Summary Report” for the Education analysis and send it to your moderator if you would like feedback.

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Answer Key Exercise #1 – Modular Retirement Goal Needs Analysis

Below you’ll find instructional screen shots of all the data entry and results for Exercise #1. It’s strongly recommended that you NOT use this while doing your exercise unless you really get stuck and are not sure what to do. When you are done, is the time to compare your data entry and results to the screen shots below.



Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Goals & Objectives

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Savings

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Answer Key Exercise #2 – Modular Education Goal Needs Analysis

Below you’ll find instructional screen shots of all the data entry and results for Exercise #2. It’s strongly recommended that you NOT use this while doing your exercise unless you really get stuck and are not sure what to do. When you are done, is the time to compare your data entry and results to the screen shots below.



Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________



Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Goals & Objecitves


Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Savings

Notes:______________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________


Results