In the article attached that comes from our book “Breaking Through the Walls” we talk about the importance of Adaptive Distribution Theory (ADT) to differentiate your practice from others.  This article is about the importance of putting that to work in a bear market like we are experiencing from the CV 19 virus.

One of the core teachings about differentiating your practice is to be able to demonstrate the “Value You Bring” by adjusting the plan you create for the client as bad events happen like what we are experiencing now.  ADS provides the methodology to do just that, and most advisers are not talking to their clients about the ideas (which is what differentiates you from others).  

ADS suggests that most all financial planning software is flawed.  That it assumes that your spending rises each year and therefore requires higher returns and more cashflow to be paid out each year.  In reality this is often wrong since many retirees spending flattens.  However, the critical point is that ADS teaches us that minor adjustments along the way can make huge differences.  What’s a minor adjustment?  How about not increasing your distributions in a down year for investment returns?  Your FP most likely calls for an increase.  We as advisors can have that simple conversation with clients and demonstrate how it can change the projected outcome.  

James Sandberg, (ADP, Journal of Investment Consulting, Vol 17, 2016) speaks to this very idea.

In Fig 9 Sandberg shows the effect on a plan with a 5% withdrawal by relaxing the assumption that the 5% increases every year for the period 1957-1981 in a 50/50 allocation.  By changing how often you increase distributions you affect the outcome dramatically.  If you increase every year, you come close to running out of money, an outcome no client is likely to be comfortable with.  By increasing every other year, you move the principal retention to 56%.

The point of this is not there is only one way you should run a financial plan but the “value you can add’ RIGHT NOW in your client relationships by introducing ADT to the conversation.  Clients want you to have solutions during times of economic stress to help them not make poor decisions as we all know.  Hopefully ADT can help you do just that.  This was written several years ago but is even more true today