How Our Clients Use Financial Modeling
The purpose of the Personal Financial Model is to help our client determine what he or she needs financially to meet his or her personal financial objectives. Too often, plans are developed without this component, which illustrates the impact of various strategies.
Detailed information on cash flow, assets, expenses and net-worth reflect the owner’s current situation. We then project those values and the relationships between them on a year-by-year basis over a defined time horizon, taking into account predictable milestones such as retirement of debt or a planned sale of property. By changing variables in the model that correspond to various strategic alternatives, we can help clients examine and compare the outcome of different courses of action in similar detail
The context created by the models is a starting point used to create the overall investment strategy. By exploring alternative strategies, the client is in a position to answer key questions with confidence and comfort.
Clients use financial modeling to answer such questions as:
Do I have enough?
You’re wondering if a certain change of course will allow you to maintain your desired financial lifestyle. Can you afford to sell your business now or do you need the income it generates? Am I better off retaining that rental real estate or selling it during an up market?
How much risk can I accept?
Using proprietary probability analysis software, the emotional comfort of the client, and the volatility characteristics of the various types of investments we are able to define the appropriate and acceptable amount of risk.
To view full disclosure on probability analysis, click here.
What is the appropriate structure of my financial assets?
The Financial Model enables us to explore and compare different asset allocation strategies and the impact of each one on the client's financial picture. The appropriate allocation, based on historical norms, can be determined by examining the impact of each on cash flow, taxation and the growth in value.
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