Financeware.com, a developer of online wealth management tools for financial advisors and their clients, recently released the WealthSimulator module on its site for Monte Carlo simulations.
Financial advisors and their clients registered on the site can use the new WealthSimulator to gauge the odds of meeting their financial goals, in addition to using the site's other probability tool, called Financial Plan Auditors.
"The Monte Carlo simulation brings a whole new methodology of assisting clients in setting their goals and objectives," says Bill McVay, executive vice president and business development officer at Financeware.com. Financial advisors can log onto the site to input asset allocation information, as well as an expected rate of return and stated volatility, and then run the Monte Carlo simulation with historical data.
"We can construct millions of scenarios of numbers that will give us, say, a 9% rate of return and have a standard deviation of 7%. Then we run them through a thousand lifetimes or more and get a confidence level," explains McVay. "That confidence level is what your risk is, or your chance of success or failure. Monte Carlo changes the whole nature of risk, from one of volatility to one of risk of failure." While the WealthSimulator tool is aimed mainly at Financeware.com's more than 6,000 registered financial advisor users, it is also used by other investors who want to perform the same types of calculations for their own purposes, adds McVay.
Other enhancements made to the Financeware.com site include an asset allocation section that indicates the percent of assets in large cap stocks, small cap stocks and bonds, with various pie charts. Users can also input various types of holdings, including taxable, tax deferred-such as 401k plans-and tax exempt and non-investment assets and contributions. Withdrawals can be factored into the plan, along with tax calculations and retirement income. The site also features a secure document management area for users to print, store and share documents online with clients. In the future, Financeware.com plans to release an XML version of its document management tool, adds McVay.