How does Advizr's Monte Carlo work?

Where you can find Advizr's Monte Carlo simulations

  • The Monte Carlo success rate and corresponding graph in the Advizr platform can be found under the Retirement goal section of the Recommendations page in the Financial Plan. Hover your mouse over the name of the Retirement Assets graph (with a little down arrow next to the name), and you'll see a drop down menu with a couple of other graphs that can help you understand a client's retirement goal.
  • The Monte Carlo "Probability of Success" rate and its corresponding graph are specifically regarding the Retirement goal only. Our system will look at the value of all accounts earmarked for "Retirement" on the Accounts page unless they have been excluded from the Distribution strategy in the Retirement What Ifs (see the following screenshots) and then simulate or "trial" the values of those accounts year over year from today until the end of the plan, given the cash flow needs of the client. If the trial of the plan ends with those accounts having a total balance of more than $0, that trial is considered a "success". The graph shows one line for these specific accounts balances year over year for each trial.
  • While the current Monte Carlo simulation in Advizr is specific to Retirement, it can often act as a proxy for the likelihood of success for the entire plan. Advizr is a cash flow-based system, which means we look at cash flows year over year for the duration of the plan and each goal's use of assets or cash flow reduces the remaining available assets or cash flow for other goals. For example, if a Home Purchase or Education goal dips into assets that are also earmarked to Retirement, the success rate for the Retirement goal will drop.