Income & Asset Modelling
Income is the underpinning of both lifestyle and asset accumulation.
Our Income and Asset Modelling (IAM)TM gives you the opportunity to peer into the future and watch your financial affairs unfold. With a personalized IAM, we can determine the suitability of planning strategies and product solutions, allowing you to properly evaluate their cost, impact, and effectiveness.
Income and Asset Modelling projects your:
- Income from all sources – All of your income is run through personal tax returns each year to illustrate changes in income based on actual tax versus estimated average tax rate. Tax rates are based on today’s schedule rates and are updated annually. We’ll show you exactly where your income is coming from by illustrating individual sources of income (e.g., dividends from your business or holding company, rental income from property, salary, interest, investment dividends, capital gains). Whatever the source is, we account for it accurately.
- Total net worth – The value of each of your assets are projected into the future based on growth rates you choose for the individual assets. Taxation is accounted for based on the nature of the asset. We also consider individual asset dispositions, anticipated turnover, volatility, and acquisitions. Loans and other liabilities (such as income tax) are clearly illustrated on an individual asset and total net worth basis.
- Changing lifestyle needs – If you have a good handle on what your actual spending is, we can use this as our guide to project your expenses into the future. If you don’t track your expenses, there are several ways to estimate your spending to maintain your lifestyle (you can also just tell us what you want to spend). We’ll also consider extraordinary expenses including long-term care costs, education expenses, travel plans, and much more. We can get as detailed as you like.
- Monte Carlo Simulation – No, we aren’t talking about a gambling program. This is our way of testing your plan to see how it stands up to the volatility of markets, as well as probabilities of living beyond normal life expectancy. We’ll run your net worth and income through 25 different combinations of returns, volatility ratings, and varying life expectancies. Our aim is a 100% probability of success, and, for those clients, this simulation is a great tool for estimating net worth range, as well as associated estate tax liabilities.
- Variance Testing – Like the Monte Carlo testing, variance testing demonstrates the impact of variables on projection assets. The difference is that variance testing assumes fixed plus and minus return assumptions that does not include the year by year volatility of individual asset returns.
The IAM is presented as part of your Right Path Plan and includes detailed recommendations on how to improve both your cash flow and net worth.
Call us to get started on your Right Way Path.