U.S. patent application number 14/277299 was filed with the patent office on 2014-11-27 for system and method for income planner.
The applicant listed for this patent is Charles Schwab & Co., Inc.. Invention is credited to Mark De Vincenzi, Olga Milosavljevic, James Peterson.
Application Number | 20140351168 14/277299 |
Document ID | / |
Family ID | 26964058 |
Filed Date | 2014-11-27 |
United States Patent
Application |
20140351168 |
Kind Code |
A1 |
Milosavljevic; Olga ; et
al. |
November 27, 2014 |
SYSTEM AND METHOD FOR INCOME PLANNER
Abstract
The invention forecasts a customer's annual withdrawals, manages
order of withdrawal, forecasts likelihood that assets at retirement
will provide needs for retirement, and provides ability to perform
alternative analysis by changing various retirement goals, such as
preservation of principal, amount of income desired, or expected
length of retirement.
Inventors: |
Milosavljevic; Olga;
(Oakland, CA) ; De Vincenzi; Mark; (Walnut Creek,
CA) ; Peterson; James; (Walnut Creek, CA) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Charles Schwab & Co., Inc. |
San Francisco |
CA |
US |
|
|
Family ID: |
26964058 |
Appl. No.: |
14/277299 |
Filed: |
May 14, 2014 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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09880170 |
Jun 12, 2001 |
8768800 |
|
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14277299 |
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60286770 |
Apr 26, 2001 |
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Current U.S.
Class: |
705/36R |
Current CPC
Class: |
G06Q 40/06 20130101;
G06Q 40/02 20130101; G06Q 40/00 20130101 |
Class at
Publication: |
705/36.R |
International
Class: |
G06Q 40/06 20120101
G06Q040/06 |
Claims
1. A computer-implemented method comprising: receiving a current
asset allocation and in-retirement goals, the in-retirement goals
comprising an income goal, an estate goal, and a years in
retirement goal; receiving input to set a first one of the
in-retirement goals as priority goal; performing, using a computer,
an analysis based on said in-retirement goals, the priority goal
and said current asset allocation, the analysis ensuring that the
priority goal is met; forecasting, using the computer and results
of said analysis, a first likelihood that assets at retirement meet
the in-retirement goals when the priority goal is met; setting a
second one of the in-retirement goals as an updated priority goal;
performing, using the computer, an alternative analysis based on
the updated priority goal, the alternative analysis ensuring that
the updated priority goal is met, wherein the likelihood of meeting
the in-retirement goals is determined while all other goals are
held constant; forecasting, using the computer and results of the
alternative analysis, a second likelihood that assets at retirement
meet the in-retirement goals when the updated priority goal is met;
and recommending a course of action based on the first likelihood
and the second likelihood.
2. The method of claim 1, wherein said forecasting is based on:
financial holdings from outside and inside financial institutions,
which financial institutions currently house the financial
holdings, whether each financial holding is a tax-deferred account,
input from other income planning tools, and for equities, bonds or
mutual funds, the CUSIP or symbol, number of shares held and
whether the dividends are being reinvested.
3. The method of claim 1, further comprising: projecting annual
snapshot cash flows from said current asset allocation and
determining if a gap exists between projected cash flows and said
income goal.
4. The method of claim 3, wherein said cash flows comprise dividend
and interest sources, and non-fluctuating sources, and wherein said
dividend and interest sources comprise equity dividend, fixed
income, and cash payments, and wherein said non-fluctuating sources
comprise income property, social security, and pension
payments.
5. (canceled)
6. The method of claim 3, further comprising: providing a current
performance planning table, wherein said current performance
planning table includes: current yield and total return information
representing which holdings of said assets provide cash flow versus
growth required to meet said in-retirement goals, and information
on each asset's annual income, 1-year and 5-year total returns, and
current value.
7. The method of claim 3, further comprising a current summary
showing a breakdown of said cash flow into said dividend and
interest sources, said non-fluctuating sources, total cash flow,
and said income goal.
8. The method of claim 3, further comprising: providing an
in-retirement income stream withdrawal strategy, wherein said
withdrawal strategy: avoids withdrawal of assets from tax-deferred
accounts during a first time period, and provides for withdrawal
from one or more tax-deferred accounts during a second time
period.
9. The method of claim 8, wherein said withdrawal strategy further
comprises designating when and how much to withdraw from taxable,
401 K, traditional IRA, and Roth IRA accounts.
10. The method of claim 8, further comprising an asset draw down
schedule over each retirement year.
11. The method of claim 3, further comprising determining required
minimum distribution (RMD) income streams based on total value of
tax-deferred assets.
12. The method of claim 11, further comprising a report showing
annual tax-deferred account withdrawals, and year-end tax-deferred
account balances.
13. The method of claim 3, further comprising providing financial
and nonfinancial alternatives in order to attempt to increase said
first likelihood of meeting said in-retirement goals.
14. The method of claim 13, wherein said non-financial alternatives
increase said first likelihood by requiring a relaxing of at least
one of said in-retirement goals.
15. The method of claim 13, wherein said financial alternatives
attempt to increase said first likelihood by altering said asset
allocation and thereby assuming a better diversified portfolio.
16. The method of claim 14, further comprising: generating a report
showing said in-retirement goals and said first likelihood versus
said modified in-retirement goals, said modified in-retirement
goals comprising said at least one of said relaxed in-retirement
goals, and showing said subsequent possible increased likelihood,
the increased likelihood being equivalent to the second
likelihood.
17. The method of claim 15, further comprising: generating a report
showing said in-retirement goals and said first likelihood versus
said altered asset allocation, and showing said subsequent possible
increased likelihood, the increased likelihood being equivalent to
the second likelihood.
18. The method of claim 15, wherein asset allocation preferences
are incorporated.
19. The method of claim 15, further comprising: generating action
plans for attempting to increase said first likelihood, said action
plans comprising means for conveying whether to buy or sell said
assets.
20. The method of claim 19, wherein each asset class holding are
separated from each other small company holdings are separated from
large, international, and fixed income company holdings.
21.-35. (canceled)
36. A computer-implemented method comprising: receiving a current
asset allocation and in-retirement goals, the in-retirement goals
comprising an income goal, an estate goal, a years in retirement
goal; receiving input to set a first one of the in-retirement goals
as priority goal; performing, using a computer, an analysis based
on the in-retirement goals, the priority goal and the current asset
allocation, the analysis ensuring that the priority goal is met;
providing, using the computer and based on the analysis, an
in-retirement income stream withdrawal strategy, wherein said
withdrawal strategy: avoids withdrawal of assets from tax-deferred
accounts during a first time period, and provides for withdrawal
from one or more tax-deferred accounts during a second time period;
generating, using the computer and the results of the analysis, a
findings overview report and an asset drawn down schedule, wherein:
the findings overview report includes the in-retirement goals, the
first likelihood that the priority goal will be met if the
in-retirement income stream withdrawal strategy is followed, and
the asset drawn down schedule shows a predicted end of year account
balance for each of different types of customer accounts if the
in-retirement income stream withdrawal strategy is followed;
determining, based on the findings overview report and asset draw
down schedule, to perform an alternative analysis based on
reprioritized in-retirement goals to improve likelihood of meeting
the in-retirement goals, wherein the alternative analysis at least
includes an analysis based on altering the current asset allocation
or relaxing at least one of the in-retirement goals; setting a
second one of the in-retirement goals as an updated priority goal;
performing, using the computer, the alternative analysis based on
the updated priority goal, the alternative analysis ensuring that
the updated priority goal is met, wherein the likelihood of meeting
the in-retirement goals is determined while all other goals are
held constant; generating, using the computer and the results of
the alternative analysis, a modified findings overview report and a
modified asset draw down schedule based on the alternative
analysis; and recommending a course of action based on the modified
findings overview report and the modified asset draw down schedule.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation application of U.S. Ser.
No. 09/880,170 filed Jun. 12, 2001, issued as U.S. Pat. No.
8,768,800 on Jul. 1, 2014, which claims priority to U.S. Ser. No.
60/286,770 filed Apr. 26, 2001, which applications are hereby
incorporated by reference in their entirety.
BACKGROUND OF THE INVENTION
[0002] 1. Technical Field
[0003] The invention relates to retirement income planners. More
particularly, the invention relates to forecasting a customer's
income, managing order of withdrawal, forecasting a likelihood that
assets at retirement will provide needs for retirement, and
providing ability to perform alternative analysis by changing
various retirement goals in retirement.
[0004] 2. Description of the Prior Art
[0005] In the past, retirement was defined as the period following
an individual's withdrawal from the labor force. Today, however,
most people vary their attachment to the labor force throughout
their lives, so retirement may be thought of differently, for
example, in terms of an Accumulation Phase and a Drawing-Down
Phase. The Accumulation Phase is the period during which
individuals accumulate financial assets. The Drawing-Down Phase is
the period during which individuals start using their financial
assets to meet their income needs. Most Web and traditional
financial advisory products and services are aimed at people in the
Accumulation Phase. Despite the fact that people in the
Drawing-Down Phase are currently among the most wealthy in America,
most financial institutions fail to provide a broad range of
services dedicated to these individuals and their on-going income
(cash flow) management needs.
[0006] As individuals approach or enter retirement their investment
objectives shift away from accumulation/growth and move toward
income generation. Individuals seek to replace the paycheck they
used to receive from their employer. During this phase an
individual will generally draw income from multiple sources:
part-time employment; company pensions; social security benefits;
annuities; investments, and the like.
[0007] In order to begin to manage their income needs during the
Drawing-Down Phase, individuals need to identify and evaluate their
existing and potential sources of income. A very important
potential source of funds for this group will be investment income.
Therefore, identifying the timing and amount of income being
currently generated by their investments and evaluating individual
investments based on income in addition to traditional risk and
return measures is needed in order for this group to manage
effectively their overall income needs.
[0008] There is very little in the way of education and advice-type
products in the market today that help individuals evaluate their
investments based on their overall income needs.
[0009] Except for the assistance of a personal financial planner,
very little advice and information addressing this shift to income
and retirement risk management exists in the market place.
[0010] Prior art is geared toward providing customers with tools
for planning for retirement, as opposed to in-retirement. Much of
the prior art focuses on how to get growth in a portfolio.
[0011] One prior art reference is T. Rowe Price Associates,
Retirement Income Manager.sup.SM Analysis and Recommendation,
prepared Jan. 10, 2000, provides specific advice regarding
improving the user's probability of success in meeting their
in-retirement goals. T. Rowe price uses simulation techniques to
identify a retirement income strategy that they believe is best for
the client based on the amount of retirement assets the client has
and the client's personal goals. The output includes four different
retirement income strategies: a recommended strategy, two
alternative strategies, and the strategy that is most likely to
meet the client's monthly income goal. Each strategy includes a
recommended pre-tax monthly income, an estimate of the probability
that the withdrawal amount can be sustained throughout retirement,
a product allocation (% in variable annuities and % in mutual
funds), an asset allocation for mutual funds, and an asset
allocation for variable annuities. They also provide an
implementation plan that includes recommendations of specific T.
Rowe Price investment products and specific guidance on the amounts
to withdraw over time from each account type.
[0012] Following are key assumptions made by T. Rowe's model.
[0013] The client's current portfolio is converted to cash. All
taxes and transactions costs are completely ignored in this
conversion process; [0014] Cash is invested in one of 13 model
asset allocation portfolios; [0015] Asset classes included in these
model portfolios are: [0016] U.S. large-cap; [0017] U.S. small-cap;
[0018] Investment-grade bonds; [0019] High-yield bonds; [0020]
Money market securities; [0021] Foreign stocks; and [0022] Foreign
bonds.
[0023] It should be appreciated that that there is no allocation to
municipal bonds because, it appears that tax efficiency is not a
goal of the product. [0024] Asset allocation becomes more
conservative over time; [0025] Assets are drawn down first from
taxable accounts, then tax deferred assets. Roth IRAs are left for
last in all analyses; [0026] Beginning at age 70 and one half,
minimum required distributions are included in the client's income
strategy. When the minimum required distribution exceeds the
draw-down amount, the excess is placed in the client's taxable
account; [0027] The projected withdrawal amounts are pre-tax, i.e.
there is no attempt to adjust for the taxes a client will owe due
to the withdrawal; [0028] Each year, an estimated tax on the
appreciation or depreciation of the assets in the client's taxable
account is calculated. T. Rowe determines the tax rates (capital
gains and ordinary income) used in this calculation and it is not
the rate inputted by the client. The return on money market and
bond funds is completely taxed at ordinary income rate. The return
on stock mutual fund assets is taxed at 60% of the ordinary income
tax rate; and [0029] Returns on key asset classes are normally
distributed; T. Rowe determines the future average return on each
asset class (according to T. Rowe, they use rates lower than
historical rates to be conservative); the historical standard
deviations of returns on each asset class and the correlations
among asset classes are set at their historical levels. T. Rowe
cautions clients that their estimates of probability are probably
too high because actual stock return distributions have a higher
concentration of returns in the tails of the distribution than is
implied by normality.
Methodology
[0029] [0030] 1. Simulate 500 future paths for asset class returns.
[0031] 2. Create investment mixes: a mix consists of a product
allocation (mutual funds and variable annuities) and an asset
allocation. There are 7 different product allocations and 13
different asset allocations. [0032] 3. For each investment mix,
define many different levels of monthly withdrawals. A combination
of an investment mix and a withdrawal amount is labeled a
"retirement income strategy". [0033] 4. Subject each retirement
income strategy to the 500 investment-return scenarios and
calculate the probability that a given level of income can be
sustained throughout retirement. [0034] 5. The recommended strategy
is the retirement income strategy that offers the highest utility,
where utility is based on a model of the client's preferences. This
model is essentially a scoring system applied to a series of
questions regarding the client's financial goals. Alternative
strategies include the next highest utility strategy and the
strategy that is compatible with the client's risk tolerance that
provides the highest level of monthly income. Only strategies
resulting in a 70% probability or higher of being able to sustain
the withdrawal amount throughout retirement are recommended. The
strategy that is most likely to hit the client's monthly income
target is also included. [0035] 6. Both a retirement counselor and
a financial planner review the clients recommended income strategy
to make sure the recommendation is consistent with the client's
personal profile.
Key Methodological Weaknesses
[0035] [0036] Simulations do not include assets from the client's
current portfolio but assumes client liquidates all their
securities to bring to T. Rowe. [0037] Tax treatment: with the
exception of an adjustment to taxable account balances, taxes are
ignored throughout the product. The client's own tax rate plays no
role in the simulations. [0038] Simulations are at the asset class
level using indices returns, (i.e. S&P 500 index) to simulate
asset class returns. Simulations on T. Rowe Price recommend funds
are not performed. However, all recommendations come in the form of
T. Rowe Price propreitary funds. [0039] Normality assumption:
probability estimates will be too high because stock return
distributions have more observations in the tails of the
distributions than is implied by normality. [0040] One `Optimal"
withdrawal sequence is forced on all T. Rowe Price solutions--the
withdrawal sequence recommendation is not customized. [0041] No
"what-if" type analysis for years in retirement. [0042] Does not
consider contributions between today and retirement date if
retirement date is in the future. The best way for some users to
achieve their goals will be to delay retirement or increase their
investment amount between now and retirement.
[0043] It would be advantageous to provide a system and method that
examine actual holdings and actual positions.
[0044] It would be advantageous to provide a system and method that
provides a customized optimal withdrawal sequencing
recommendation.
[0045] It would be advantageous to provide a system and method that
provides a depletion to a goal service to a high value of
customers.
[0046] It would be advantageous to provide a system and method that
focuses on balancing growth and yield, and identifies assets which
are providing low yields and low growth rates, as well as providing
customers with information which will allow them to make decisions
that fit their cash flow needs.
[0047] It would be advantageous to provide a system and method for
financial institutions to deliver effectively investment help and
advice across its multiple channels to meet customers' full-service
investing needs for the near and in-retirement group of
customers.
SUMMARY OF THE INVENTION
[0048] This invention provides the customer with information that
allows the customer to make decisions that fit their cash flow
needs. The invention forecasts the customer's likelihood of meeting
their in-retirement goal based on the actual assets and securities
a customer holds at the financial institution and any assets and
securities they holds at other institutions. The invention also
manages the order of withdrawal from taxable, tax-deferred and tax
free accounts so that the customer defined in-retirement goal is
met in an efficient way. For example, if the customer identifies
maximizing their estate, as their priority goal, the invention may
recommend that those assets in tax-free accounts are withdrawn last
while assets in taxable accounts are withdrawn first. The
recommended sequence will vary depending on a variety of
client-specific factors as well as how the customer prioritizes
their in-retirement goals. The invention also forecasts a
likelihood that assets at retirement will provide for needs
throughout retirement. The invention also provides the ability to
perform alternative analysis by reprioritizing various retirement
goals, such as preservation of principal, portfolio allocation,
amount of income desired or expected length of retirement. The
invention also allows for company representatives to output
information in a manner that is uniform and consistent across the
company. That is, the invention is designed to integrate with other
existing or future financial applications of the financial
institution, as well as developed on a common system architecture
for both World Wide Web (Web) and applications that reside on the
desktop of the financial institution's retail branch
representatives located nationwide (retail desktops) and phone
service representatives.
BRIEF DESCRIPTION OF THE DRAWINGS
[0049] FIG. 1 is a schematic diagram showing common architecture
according to the invention;
[0050] FIG. 2 shows an in-retirement income planner integrating
with other tools according to the invention;
[0051] FIG. 3 shows a high level schematic diagram for providing an
in-retirement customer with information according to the
invention;
[0052] FIG. 4 is an example of a customer's findings overview
report corresponding to the results of the findings overview
according to the invention;
[0053] FIG. 5 is an example of a customer's summary of findings
report corresponding to the summary of findings according to the
invention;
[0054] FIG. 6A is an example of a 12-month rolling view of a
customer's current portfolio cash flow report corresponding to the
current portfolio cash flow according to the invention;
[0055] FIG. 6B is an example of a 12-month historic view of a
customer's current portfolio cash flow report corresponding to the
current portfolio cash flow according to the invention;
[0056] FIG. 7 is an example of a customer's current performance
planning report according to the invention;
[0057] FIG. 8 is an example of a customer's current summary
corresponding according to the invention;
[0058] FIG. 9 is an example of a customer's in-retirement income
projection report according to the invention;
[0059] FIG. 10 is an example of a customer's asset draw down report
according to the invention;
[0060] FIG. 11 corresponds to the RMD income streams according to
the invention;
[0061] FIG. 12 corresponds to the RMD income streams according to
the invention;
[0062] FIG. 13 is an example of summary of alternatives report
according to the invention;
[0063] FIG. 14 is an example of the non-financial alternative
according to the invention;
[0064] FIG. 15 is an example of the financial alternative according
to the invention;
[0065] FIG. 16 is an example of the financial alternative according
to the invention;
[0066] FIG. 17 is an example of the action plan corresponding to
the Alternative II according to the invention;
[0067] FIG. 18 is an example of the action plan corresponding to
the Alternative II according to the invention;
[0068] FIG. 19 is an example of the action plan corresponding to
the Alternative II according to the invention;
[0069] FIG. 20 is an example of the action plan corresponding to
the Alternative II according to the invention; and
[0070] FIG. 21 is a flow diagram determining a customer's cash
flows and portfolio performance according to the invention.
DETAILED DESCRIPTION OF THE INVENTION
[0071] The invention analyzes a customer's assets, focuses on
balancing growth and yield, and identifies assets that are
providing low yields and low growth rates. The invention provides
the customer with information that allows the customer to make
decisions that fit their cash flow needs. The invention also
forecasts the customer's likelihood of meeting their in-retirement
goal based on the actual assets and securities a customer holds at
the financial institution and any assets and securities they hold
at other institutions. The invention also manages the order of
withdrawal from taxable, tax-deferred and tax-free accounts so that
the customer defined in-retirement goal is met in an efficient way.
For example, if the customer identifies maximizing their estate, as
their priority goal, the invention may recommend that those assets
in tax-free accounts are withdrawn last while assets in taxable
accounts are withdrawn first. The recommended sequence will vary
depending on a variety of client-specific factors as well as how
the customer prioritizes their in-retirement goals. The invention
also forecasts a likelihood that assets at retirement will provide
for needs throughout retirement. The invention also provides the
ability to perform alternative analysis by reprioritizing various
retirement goals, such as preservation of principal, portfolio
allocation, amount of income desired or expected length of
retirement. The invention also allows for company representatives
to output information in a manner that is uniform and consistent
across the company. That is, the invention is designed to integrate
with other existing or future financial applications of the
financial institution, as well as developed on a common system
architecture for World Wide Web (Web), retail desktops, and phone
service center desktops.
[0072] An objective of the preferred embodiment of the invention is
to help customers create a personalized cash flow withdrawal plan
by analyzing their existing assets and using a variety of
investment products, and to provide more in depth and specific
investment advice, taking into account a host of complicating
factors, such as, for example, tax implications, preserving wealth
as drawn down on principal, cash flow timing, and the like. The
invention discussed herein can be used by a financial institution's
branch and phone representatives for advising customers in the
institution's branch offices and over the phone and can be used
directly by customers through the institution's online customer
center. The target market of the preferred embodiment of the
invention is customers with more than $100,000 in invested assets
held at the financial institution or high potential prospected
investors.
One Architecture
[0073] The preferred embodiment of the invention provides for
customer interaction by three different channels and is discussed
with reference to FIG. 1. FIG. 1 is a schematic diagram showing the
common architecture according to the invention. By the first
channel, customers access the information online through a customer
center 10 and are able to use it independently. By the second
channel, the customer and a branch representative from the
financial institution use the invention together in a branch office
11. Likewise by the third channel, the customer and a phone
representative from the financial institution discuss the invention
output together over the phone 15. While the underlying income
planning functionality and business logic is identical, user
interfaces and some features of the invention may differ to
accommodate different delivery mechanisms, such as, for example
self-service versus assisted service.
[0074] The preferred embodiment of the invention is built on a
common system architecture 12 for both the Web and retail desktops.
The system architecture provides a common customer database 13 for
all channels as well as all future tools 14 for linking and sharing
information.
[0075] In the preferred embodiment of the invention, a customer can
use any or all three channels for income planning. For example, a
customer is able to follow up on a branch office or phone
conversation by using an online version for updating and reviewing
the customer's income generating portfolio. Likewise, a customer is
able to follow up on a customer center session with branch office
or phone conversations.
Integrate into Suite
[0076] The preferred embodiment of the invention integrates
robustly into a suite of planning tools that provide financial
guidance and advice to the near and in-retirement groups making key
life-event decisions. The in-retirement income planner discussed
herein fills a large void in the current marketplace as well as
enhances a financial institution's advice offering at the retail
branch and phone center level as well as the customer center
level.
[0077] FIG. 2 shows the in-retirement income planner 20 integrating
with other tools according to the invention. It builds on and draws
from other tools and applications, such as, for example, asset
allocation 21, retirement planner 22, and investment verification
applications 23 by downloading a customer's position level
data.
[0078] The preferred embodiment of the invention is flexible and
modular so that additional functionality can be added, and to allow
for increases in significant volume of customers.
[0079] The preferred embodiment of the invention should be
consistent in "look and feel" to other applications in the suite of
applications discussed above.
Business Objectives
[0080] The preferred embodiment of the invention can be used by a
financial institution to accomplish the following business
objectives. The invention: [0081] Enhances a suite of advisory
tools available to branch representatives and helps them in
building relationships with customers and addressing their needs;
[0082] Enhances advice, such as planning and guidance, offering in
a customer center; [0083] Promotes customer good-will by providing
needed education and advice in the area of income planning to
customers; [0084] Encourages customers to re-evaluate their
holdings and to examine additional investment products; [0085]
Increases the visibility and highlights the benefits of fixed
income products as well as annuities; and [0086] Highlights
importance of considering growth and income investment strategies
for retirees.
High Level Flow
[0087] A preferred embodiment of the invention is described with
reference to FIG. 3. FIG. 3 shows a high level schematic diagram
for providing an in-retirement customer with information,
comprising an action plan, given the customer's current financial
information and in-retirement goals. The invention gives the
customer a snapshot of how much income the customer's current
portfolio is generating, compares that income to the customer's
income goal, and directs the customer in narrowing any gap that may
exist between the goal and the customer's current income status.
Further detail of each of the components in the high level flow is
provided in a separate section herein below.
[0088] Referring to FIG. 3, the invention provides a findings
overview 101 based on the customer's stated income, estate value,
and number of years in retirement goals, as well as the customer's
portfolio allocation. A summary of findings 102 is then
provided.
[0089] Next a detailed current analysis of the customer's current
portfolio is performed 103. Performing current analysis 103
comprises: providing the customer's current portfolio cash flow
104, where the customer's estimated annual cash flow and estimated
cash flow gap, if one exists, are shown; current performance
planning report, where the approximate current yield and total
return information are shown; and current summary, where the
difference between the customer's income goal and non-fluctuating
sources of income is shown.
[0090] Next, an analysis of the customer's years in retirement is
shown 107. The analysis comprises performing and showing a
customer's in-retirement income withdrawal projection 108, where
the in-retirement income withdrawal projected incorporates a
withdrawal sequencing strategy that best meets the customer's
goals; where assets are listed by taxable and non-taxable
categories, investment asset draw down 109; and required minimum
distribution (RMD) streams 110 are shown. Note: Income projection
may include income from capital gains and/or principal.
[0091] Next, strategy alternatives are analyzed and shown 111
comprising performing and showing a summary of alternatives 112,
where customer information, and pros and cons of two alternatives
are shown. Note that FIG. 3 shows one example of many possible
alternative recommendations that may result. The alternatives may
include but are not limited to the first alternative 113, where the
customer's estate goal is relaxed; and the second alternative 114,
where the customer's asset allocation is altered. Action plans for
the second alternative is then provided 116.
[0092] It should be appreciated that the components, current
analysis 103, years in retirement 107, and alternatives, could be
used separately and individually if given the appropriate
input.
Detailed Flow
[0093] Further details of each of the components in the high level
flow of the preferred embodiment of the invention are described
herein below using figures.
[0094] The preferred embodiment of the invention provides a
findings overview report, as depicted in FIG. 4. FIG. 4 is an
example of a customer's findings overview report corresponding to
the results of the findings overview of FIG. 3 101. The findings
overview report comprises a heading 201, a table 202, and a chart
203, according to the invention. The heading comprises the title of
the report, the name of the customer, and the date.
[0095] The table in FIG. 4 shows the customer's in-retirement
income goal 204, the customer's in-retirement estate goal 205, how
many years the customer expects to be in retirement 206, the status
of the customer's asset allocation 207. The likelihood of success
208 that the customer would meet their defined priority
in-retirement goal while all the other goals are held constant is
also shown. The priority goal default is set at "meeting the
client's estate goal" unless otherwise indicated by the client.
[0096] The chart in FIG. 4 shows an example of the customer's asset
draw down schedule according to the invention. That is, the bar
chart shows the amounts each of taxable (bottom) 209, tax deferred
(middle) 210, and tax free (top) 211 withdrawals for the customer's
end of year account balance 212 versus the customer's in-retirement
age 213.
[0097] The preferred embodiment of the invention provides a
customer's summary of findings report, as depicted in FIG. 5. FIG.
5 is an example of a customer's summary of findings report
corresponding to the summary of findings of FIG. 3 102. The summary
of findings report comprises a heading 301, a summary 302, a chart
303, according to the invention. The summary of findings report
shows the customer the likelihood that the customer will meet the
desired estate goal, given the customer's in-retirement income
needs, years in retirement goal and current portfolio allocation.
The summary 302 restates the input into the analysis and the
outcome which is the likelihood of the customer meeting a lifestyle
goal in retirement. The chart 303 shows the likelihood for meeting
the estate goal, as well as the best case 304, the worst case 305,
and the expected case 306 results.
[0098] The preferred embodiment of the invention provides a current
portfolio estimated annual cash flow report, as depicted in FIG.
6a, which shows a 12-month rolling cash flow estimate. An
alternative method to depict current portfolio estimated annual
cash flow report, FIG. 6b shows a 12-month historic rolling
estimate. FIGS. 6a and 6b is an example of a customer's current
portfolio cash flow report corresponding to the current portfolio
cash flow of FIG. 3 104. The current portfolio cash flow report
comprises a heading 401, a summary spotlighting the customer's
estimated annual cash flow gap (surplus) 402, a bar chart 403, and
a table 404 corresponding to the bar chart 403. The estimated
annual cash flow bar chart shows the cash flows for a full year,
wherein the cash flows are broken down to sources of income. The
full year cash flows may be displayed either as a 12 month rolling
(FIG. 6a) or a 12 month historic (FIG. 6b) view. In this example,
the dividend and interest sources of cash flow are: equity dividend
405, fixed income 406, and cash 407; the non-fluctuating sources of
income are: income property 408, social security 409, and pension
plans 410. Also shown running across the bar chart is a line at the
level of the customer's desired average monthly in-retirement
income goal 411 to help the customer in understanding the cash flow
estimate. The cash flow table 404 shows the dollar amount for each
month for each source.
[0099] The preferred embodiment of the invention provides a current
performance planning report, as depicted in FIG. 7. FIG. 7 is an
example of a customer's current performance planning report
corresponding to the current performance planning report of FIG. 3
105. The current performance planning report comprises a heading
501, a table 502 showing approximate current yield and total return
information to help the customer assess their holdings on an income
versus growth continuum. Industry indices, such as the Lehman
Municipal Bond Index 503 and the S&P 500 Index 504 are
benchmarks. Indexes are unmanaged, do not incur management fees,
costs and expenses and cannot be invested in directly. The report
provides an explanation of the purpose of the table at the bottom
of the page 505.
[0100] Based on this report, the customer can assess, at a high
level, growth versus cash flow balance of the portfolio by
examining current yield and total return information for each of
the holdings. The report lists individual holdings by current yield
to give the customer a perspective on various assets are projected
to contribute to the cash flow goal. The report also provides
1-year, 5-year, and 10-year total return information for the
financial investments.
[0101] The preferred embodiment of the invention provides a current
summary report, as depicted in FIG. 8. FIG. 8 is an example of a
customer's current summary corresponding to the current summary of
FIG. 3 106. The current summary report comprises a heading 601, a
section providing an evaluation of the customer's investments,
whereby a specialist can assist the customer, and a table 603
showing the customer's estimated annual cash flow breakdown of
dividend and interest sources and non-fluctuating sources, compared
with the customer's annual goal, and thereby the customer's
estimated annual shortfall (surplus) to be met by capital
gains.
[0102] The preferred embodiment of the invention provides a
customer in-retirement income withdrawal projection report, as
depicted in FIG. 9. FIG. 9 is an example of a customer's
in-retirement income withdrawal projection report corresponding to
the in-retirement income withdrawal projection of FIG. 3 108. The
in-retirement income withdrawal projection report comprises a
heading 701, a bar chart 702 and a corresponding table 703 showing
a recommended income stream withdrawal strategy for best meeting
the customer's goals. It should be noted that any applicable
distribution or income planning forecasting model may be used. The
preferred embodiment uses a tax-savvy or tax-smart withdrawal
strategy which maximizes the estate.
[0103] The preferred embodiment of the invention provides a
customer asset draw down report, as depicted in FIG. 10. FIG. 10 is
an example of a customer's asset draw down report corresponding to
the asset draw down of FIG. 3 109. The asset draw down report
comprises a heading 801, the same asset draw down bar chart of FIG.
4 203 and a corresponding table 802 listing the customer's age, and
the dollar amount of withdrawals for each category, and the final
projected estate value.
[0104] The preferred embodiment of the invention provides a
customer required minimum distribution (RMD) chart and explanation
report, as depicted in FIG. 11. FIG. 11 corresponds to the RMD
income streams of FIG. 3 110. The RMD chart and explanation of FIG.
11 comprises a heading 901 and the chart and explanation 902.
Currently, the IRS requires individuals who reach the age of 70 and
one-half years to begin taking distributions from his or her IRA or
401K account(s). In the example shown in FIG. 11, based on the
value of the customer's tax deferred assets, such as, for example
IRAs and 401K, and the minimum distribution calculation method, the
actual distributions and the IRS mandated minimum distributions
from the customer's tax deferred account did not vary. Sometimes in
order to plan for a better estate with better tax advantages, the
customer is advised to exceed the RMD from the tax deferred
accounts resulting in actual withdrawals that vary from the
RMD.
[0105] The preferred embodiment of the invention provides a second
RMD withdrawal streams report showing a bar chart of the customer's
annual 401K/IRA withdrawals and a bar chart showing the customer's
corresponding account balance, as depicted in FIG. 12. FIG. 12
corresponds to the RMD withdrawal streams of FIG. 3 110. FIG. 12
comprises a heading 1001, a bar chart of the annual 401K/IRA
withdrawals 1002, and a year end 401K/IRA account balance.
[0106] The preferred embodiment of the invention provides a summary
of alternatives report, as depicted in FIG. 13. FIG. 13 is an
example of summary of alternatives report corresponding to the
summary of alternatives of FIG. 3 112. FIG. 13 comprises a heading
1101 and a table 1102, having a current analysis column 1103, a
first alternative column 1104, and a second alternative column
1105.
[0107] The first alternative column 1104 shows the result of
relaxing one of the goals. Relaxing one of the goals is viewed by
one skilled in the art as being a non-financial alternative. In
this example, the goal relaxed is the estate goal. The second
alternative column 1105 shows the result of moderately altering the
customer's asset allocation. Altering asset allocation is viewed by
one skilled in the art as being a financial alternative. In this
example, the asset allocation was changed moderately.
[0108] The table shows a Pros row 1106 and a Cons row 1107, which
help educate the customer on the impact of the alternatives to the
customer's portfolio position and likelihood and method of meeting
their goals, so that the customer can make an informed
decision.
[0109] The preferred embodiment of the invention provides a report
on the non-financial alternative, as depicted in FIG. 14. FIG. 14
is an example of the non-financial alternative corresponding to the
Alternative I of FIG. 3 113. FIG. 14 comprises a heading 1201, a
table 1202, and a bar chart 1203. The table displays the results of
applying the first alternative in a format which compares the
modified results with the customer's current analysis. The bar
chart displays a modified asset draw down showing an alternative
estate 1204 next to the current estate 1205. This bar chart 1203
helps the customer to visualize the two different draw downs.
[0110] The preferred embodiment of the invention provides a report
on the financial alternative, as depicted in FIG. 15. FIG. 15 is an
example of the financial alternative corresponding to the
Alternative II of FIG. 3 114. FIG. 15 comprises a heading 1301, a
table 1302, and a bar chart 1303. The table displays the results of
applying the second alternative in a format which compares the
modified results with the customer's current analysis. The bar
chart displays a modified asset draw down showing an asset
allocation modified draw down 1304 next to the current draw down
1305. This bar chart 1303 helps the customer to visualize the two
different draw downs.
[0111] The preferred embodiment of the invention provides a report
on the financial alternative, as depicted in FIG. 16. FIG. 16 is an
example of more information than displayed in FIG. 15 corresponding
to the Alternative II of FIG. 3 114. FIG. 16 comprises a heading
1401, a section containing pie charts 1402, a section containing
explanations 1403, and a section containing the legend for the bar
charts 1404. The reports shows the customer the results of analysis
discussed, including likelihood of customer achieving in-retirement
goal, of the customer reallocating the portfolio taking into
account customer preferences, such as, altering the diversification
of the customer's portfolio.
[0112] The preferred embodiment of the invention provides an action
plan report with respect to the customer's financial alternatives,
as depicted in FIG. 17. FIG. 17 is an example of the action plan
corresponding to the Alternative II Action Plan of FIG. 3 116. FIG.
17 comprises a heading 1401, a section 1502 containing a summary of
financial standings and the analysis on the customer's portfolio's
assets to aid the customer in deciding an action plan, the action
plan comprising activities such as, for example, buying or selling
small company holdings.
[0113] The preferred embodiment of the invention provides an action
plan report with respect to the customer's financial alternative,
as depicted in FIG. 18. FIG. 18 is an example of the action plan
corresponding to the Alternative II Action Plan of FIG. 3 116. FIG.
18 comprises a heading 1401, a section 1602 containing a summary of
financial standings and the analysis on the customer's portfolio's
assets to aid the customer in deciding an action plan, the action
plan comprising activities such as, for example, buying or selling
large company holdings.
[0114] The preferred embodiment of the invention provides an action
plan report with respect to the customer's financial alternative,
as depicted in FIG. 19. FIG. 19 is an example of the action plan
corresponding to the Alternative II Action Plan of FIG. 3 116. FIG.
19 comprises a heading 1701, a section 1702 containing a summary of
financial standings and the analysis on the customer's portfolio's
assets to aid the customer in deciding an action plan, the action
plan comprising activities such as, for example, buying or selling
international holdings.
[0115] The preferred embodiment of the invention provides an action
plan report with respect to the customer's financial alternative,
as depicted in FIG. 20. FIG. 20 is an example of the action plan
corresponding to the Alternative II Action Plan of FIG. 3 116. FIG.
20 comprises a heading 1901 and a section 1902 containing the
action plan comprising activities such as, for example, buying or
selling fixed income holdings.
An Exemplary Method for Determining Cash Flows and Performance
Planning
[0116] The preferred embodiment of the invention provides an
exemplary method for calculating cash flows and performance
planning as discussed with reference to FIG. 21. FIG. 21 is a flow
diagram of an end user, such as a customer, or a branch office
representative, determining a customer's cash flows and portfolio
performance according to the invention. End users can: [0117]
Download/enter/update a customer profile and obtain income goal
(2201); [0118] Import/display/enter/edit a customer's in house
accounts (2202); [0119] Import/display/enter/edit a customer's
outside accounts' assets (2203); [0120] Import/display/enter/edit a
customer's other non-security sources of income (2204); [0121]
Graphically display 12-month rolling or historic rolling year cash
flow generated from all sources of income by cash flow category and
compare to customer's income goal (2205), in bar chart format and
table, for example, and choose provided option to view same data on
an annual (2206) and monthly basis (2207); [0122] Graphically
display 12 month rolling or historic rolling year dividend and
interest cash flow generated from in-house-only accounts by cash
flow category and compare to annual cash flow goal (2208), in bar
chart format and table, and choose provided option to view the
information in greater detail and on an annual basis (2209) and
monthly basis (2210); [0123] Display cash flow including: each
security's estimated annual cash flows, current yield, current
value, dividend reinvestment status all by cash flow category,
relevant cash flow category benchmarks, and a calculation of the
total dollar sum of dividends re-invested, i.e. foregone cash flow,
for the calendar year under analysis (2211); [0124] Display cash
flow versus growth performance including: a listing of all assets
by approximate current yield, annual income by asset, current
yield, one, five, and ten year total return data, current value,
and relevant cash flow category benchmarks allowing the customer to
compare asset's performance to relevant cash flow category
benchmarks and historical performance where appropriate (2212);
[0125] View a provided general advice page highlighting
under-performing assets consider both growth and income components
of each asset's return, and make general recommendations for
narrowing/closing cash flow shortfalls (2213); and [0126] View a
provided full printed report (2214).
Exemplary Method in Detail
[0127] The exemplary method, also referred to below as the income
planner, for determining cash flows and performance planning is
described in further detail below, organized into logical blocks or
modules, as follows.
Module 1: Complete/Update Customer Profile
[0128] Where possible, the end user downloads a customer's profile
of demographic and account information, for example, from previous
planning tool sessions. The end user is able to confirm the
information and update it manually as necessary. See Table I below
for a list of data requirements.
[0129] Additionally, in this module, the customer's annual cash
flow goal can be ascertained. The attainment of the customer's cash
flow goal may differ between retail branch and phone versus
customer center tools. The customer seeking the assistance of a
branch or phone representative would likely come to his appointment
with a number in mind, while the customer center client is more
likely to need assistance to calculate this number accurately. It
should be appreciated that for the customer center tool it may be
appropriate to include additional functionality, such as, for
example, income goal worksheets.
Module 2: Choose Customer in House Account Holdings for Use in
Income Planning Analysis
[0130] The first step in analyzing cash flow generated by a
customer's current portfolio is to evaluate current assets. The
invention allows the customer to analyze cash flow from all of the
assets in the customer's in house accounts, or a
customer-identified subset, as well as any outside
accounts/holdings that the customer enters either via other tools
or manually.
[0131] Wherever possible, the exemplary method determines if the
customer has data captured by other tools and imports that data for
both in house and outside account data. The method allows the end
user, sometimes the customer, to import all relevant information
and edit/update the data for each session/interaction. See Table I
below for a list of data requirements.
[0132] Because a customer may have several accounts in house that
the customer would like to include in the cash flow analysis, the
end user is able to specify which accounts to include.
[0133] Once the user selects accounts to be included in the cash
flow analysis, the method provides for generating reports and
tables summarizing all customer's in house positions. The positions
are also classified into all relevant asset categories. See below
for listing of all six categories.
Module 3: Choose/Enter Customer Outside Account Holdings for Use in
the Income Planning Analysis
[0134] The end user is able to incorporate positions held in
outside accounts. The method in-retirement income planner draws on
the database for outside holdings when created by in house tools.
Hence an end user only has to enter outside holdings once.
[0135] If the customer has not used in house tools or products, or
would like to update holdings information, the method allows the
end user to enter any holdings held outside manually.
[0136] It should be appreciated that the method requires the
following information be captured for all holdings: [0137] 1. Which
financial institution currently houses the holdings, such as, for
example, brokerage Account, Bank Account, and Mutual Fund Company,
that is, a name/title must be ascribed; and [0138] 2. Is the
holding a tax-deferred account, such as, for example, 401(k), IRA,
SEP, and the like.
[0139] Additionally, for mutual funds, equities and bonds, the
customer must provide: [0140] The CUSIP or symbol; [0141] The
number of shares held; and [0142] Dividends Re-invested
(yes/no).
[0143] The method identifies the ticker symbol or name entered and
returns the company/fund name or ticker, respectively. If the user
does not enter the CUSIP, the system identifies and stores the
CUSIP associated with the entered Ticker symbol on the back end.
The CUSIP serves as the income planner's holdings identifier on the
back end.
[0144] The method provides for calculating the total value of the
position entered by multiplying the number of shares held by the
current price. The method captures the asset's current price
through an existing, internal data feed. Current prices are of
previous business day's market close. The pricing data feed is be
updated nightly.
[0145] It should be appreciated that the method captures the tax
status of the account in which the investment is held, such as, for
example, taxable, tax deferred, and tax-free.
[0146] It should also be appreciated that the method verifies if a
listed outside security is in the database, and if not, the method
prompts the user to enter an investment description, dollar amount,
and other required information.
Module 4: Edit/Enter Customer Other Non-Security Income Sources for
Use in the Income Planning Analysis
[0147] As non-financial assets form a critical part of many
investor's portfolio, the cash flows generated must also be
captured. These sources of cash flow will include items such as
social security, income property, and part-time/full-time
employment payments. Such investments need to be entered and
updated manually.
[0148] For Cash and Other Investments, the customer must provide:
[0149] The security type: name/description of asset: Money Market
Mutual Fund, Checking Account, annuity, pension payment, UITs,
REITs, options, and the like; [0150] The current value of the asset
where applicable; [0151] Current cash flow Stream; and [0152]
Frequency of Current cash flow Stream.
[0153] A unique data entry screen is preferred for these
investments.
[0154] For this module, the user must be able to indicate which
specific months the end user expects to receive each cash flow, or
indicate if the receipt of cash flow is recurring and thereby set a
start/end date. For example, a situation might be if the end user
has summer employment the months of June through August only.
Analyze Customer Cash Flow from Customer Defined Portfolio: Modules
2-4
[0155] Once a customer has selected the holdings to be analyzed,
the assets are classified into one of six asset categories: [0156]
1. Social Security Cash Flow--customer provided or calculated in
house; [0157] 2. Income Property Cash Flow--customer provided;
[0158] 3. Fixed Income Cash Flow--calculated in house from customer
data or customer provided data; [0159] 4. Equity Cash
Flow--calculated in house from customer data or customer provided
data; [0160] 5. Cash--calculated in house from customer data or
customer provided data; and [0161] 6. Other (annuities, pension,
post-retirement employment . . . ) in house from customer data.
[0162] See Table II below for a mapping of in house positions as
defined by issue class ID.
[0163] The method provides a summary of all the selected investment
accounts and holdings under consideration by account and dollar
value. In order to ensure that the data captured is, at a minimum,
consistent with the data captured by the other tools, it also can
capture the tax status of the holdings under consideration. By
selecting a specific holding, the user is able to display all
positions held within the account and include: symbol/CUSIP, name,
quantity, current price, and dollar amount.
[0164] Positions held in house as well as outside holdings and
other sources of income are classified into one of the six asset
categories listed above. The method maps positions to asset
categories. The following schema is used to map in house and
outside holdings: [0165] Create a map to aggregate asset class
information and map this information into the six asset categories
cited above; [0166] Use any in house classification database to map
to asset class; [0167] For mutual funds, use the ticker symbol to
look up the Morningstar fund category and use an existing mapping
of Morningstar category to asset class, such as, in Table III
below, to determine the asset class. Match mutual fund data to the
Morningstar category; [0168] For individual stocks, use the ticker
symbol to look up classification information from the S&P data
feed: [0169] Stocks with an International designation (ADR) should
be mapped to the International Equity class; [0170] Domestic stocks
with market capitalization >$1 billion map to Large Company
Equity; and [0171] Stocks with market capitalization <$1 billion
map to Small Company Equity.
[0172] Each time a customer uses the method and enters new data or
updates information, the method recalculates all information and
generates new tables and charts. If the information changes the
results, an mechanism, such as a pop-up window, indicates that the
changes due to updated information should appear.
Module 5: Display Calendar Year Cash Flow from all Sources of
Income and Compare to Stated Cash Flow Goal
[0173] Modules 5 through 7 allow the end user to evaluate the
current dividend and interest cash flow situation from several
views: [0174] cash flow from all sources of income; [0175] cash
flow from in house holdings; and, [0176] cash flow from outside
holdings.
[0177] The tables and analyses in modules 5 through 9, are based on
the data entered and calculations performed in modules 2 through
4.
[0178] In Module 5, the end user is able to generate a chart
displaying a snapshot of the 12 month rolling or historic rolling
year dividend and interest cash flow generated by a customer's
current portfolio from all sources. The bar chart illustrates the
customer's current rolling or historic rolling year cash flow by
cash flow category and compares it to the customer's income goal.
The chart accompanies a summary of data entered and income goals.
The method calculates shortfall or surplus and notifies the user.
Disclaimers referencing that the analysis is based on the data
provided by the customer and changing market data is provided. The
method provides for indicators to inform the customer whether the
customer's current assets generate sufficient cash flows or not,
for example: [0179] Goal Met: [0180] Goal Surpassed: [0181] Cash
Flow Shortfall:
[0182] For information on generating additional income/cash flows,
the end user is be directed to a Variety of links. The method
provides for several avenues for the customer to pursue in
narrowing his cash flow gap such as: [0183] examining the
performance of his current portfolio (proceed to the data analysis
portion of the planner); [0184] re-assess his current asset
allocation (provide general guidance on asset allocation,
importance of having a growth component to portfolio); [0185]
consider drawing down on his assets (and/or not reinvesting his
dividends); and/or [0186] reassessing income needs/goal.
[0187] In each of the listed scenarios, the customer has the option
to see cash flows in greater detail and viewing these cash flows
from a quarterly versus annual view and/or monthly versus annual
view. Such detailed views draws customer attention to uneven income
flows and, possibly highlight investment vehicles that may help
diminish problematic fluctuations.
[0188] The method provides the user with information/education on
hitting an annual cash flow goal versus the need to smooth monthly
cash flows. If the customer's cash flow analysis indicates
problematic fluctuations (periods in which the actual monthly cash
flow generated falls below the average monthly cash flow goal by 5
percent or more) the customer is alerted. In this case, the
customer is provided with information on the pros/cons of various
fixed income products, equity categories and the mutual funds.
Additionally, email hyperlinks and/or telephone numbers for the
other channels of information, such as, fixed income, stocks, and
utilities are provided for the customer center user allowing the
customer to obtain more information.
[0189] An "income goal" line would run through the detail charts to
illustrate the difference between the customer's cash flow goal and
current cash flow status.
[0190] The method provides the user with information/education on
asset/portfolio allocation and appropriate diversification. It
provides links to an asset allocation.
Module 6: Display Calendar Year Cash Flow from in House Holdings
Only and Compare to Stated Cash Flow Goal (Optional)
[0191] Module 6 allows the user to evaluate the customer's current
cash flow status from an in house only perspective for business
purposes.
[0192] As in Module 5, in Module 6 the user should be able to
generate a chart displaying a snapshot of the cash flow generated
by a customer's current in house holdings. The chart illustrates
the customer's current 12 month rolling or historic rolling year
cash flow by cash flow category and compares it to customer's
income goal. The end user has the option to see their cash flows in
greater detail by viewing these cash flows from a quarterly versus
annual view and/or monthly versus annual view.
[0193] As in Module 5, an "income goal" line would run through the
detail charts to illustrate the difference between the customer's
in house holdings generated cash flow and cash flow goal. A table
with supporting detail is provided.
Module 7: Display Cash Flow Report
[0194] Module 7 serves as a precursor to module 8 in which the user
is able to analyze the income and growth performance of the
customer's individual assets, engage in a conversation or
interactive advice session and, in the future, make recommendations
about growth and income investments.
[0195] In this Module, the income planner constructs a table that
lists all the customer's individual assets by cash flow category,
summarizes the individual annual cash flows, current yield and
total value of each asset. It also displays relevant benchmark data
for each cash flow category as a point of reference for the user to
assess the status of his cash flow situation.
[0196] The income planner provides additional education/information
on the meaning of the benchmarks and how they might guide a
customer's investment decisions.
[0197] Approximate current yields are calculated based on numbers
already made available for module 3, by dividing the total annual
dividend income for each asset by the total current value of each
respective asset.
[0198] Additionally, this table notes in which instances dividends
are being reinvested and in which instances the customer is
accessing the dividends. It calculates the sum of total forgone
income represented by reinvested dividends and calculates what
percentage of dividends a customer is currently reinvesting versus
accessing. This information highlights potentially overlooked
sources of income.
[0199] The method provides additional education/information on
dividend re-investment. While the income planner alerts the
customer to the amount cash flow currently being foregone by
reinvesting dividends, an indicator highlights the impact on future
growth/income of accessing those dividend streams (instead of
re-investing them) now. From this information, the user is able to
enter different withdrawal (dividend accessing) scenarios and see
the impact on the future growth and/or income of his assets.
Module 8: Listing Assets by Current Yield (Cash Flow Versus Growth
Performance Table)
[0200] Module 8 takes information provided in Module 7 and lists
customer's holdings by yield as well as provides information on
each asset's annual income, 1-year and 5-year total returns, and
current value. With this information the financial institution
eventually is able to make cash flow and growth recommendations to
the customer to help the customer generate more income from the
portfolio.
[0201] The method provides an explanation of income versus growth
investing. It also provides information from current research on
income/growth allocation of a near and in-retirement investor. It
also provides a discussion of optimal investment strategies for
investors seeking a steady stream of income over a series of years
versus increasing likelihood a customer will not run out of money.
Users are able to access an asset allocation tool to
reassess/reallocate the portfolio.
[0202] This presentation of data allows a branch representative to
engage in a conversation about the customer's portfolio and compare
individual asset performance to relevant benchmarks. It also allows
the user to evaluate the income-generating portfolio. For example,
if one of the asset's yields were low, the user would examine the
asset's 1, 5, and 10-year total return. For assets with approximate
current yield and total return both low (failing to capture either
income or growth), the in house institution may recommend that the
customer divest of that asset and shift resources to better
performing investment vehicles or securities.
[0203] The method provides information to the user on how the user
might improve the performance of the portfolio. Such applies to
users who have a cash flow shortfall as well as those who are
meeting/exceeding their goal. The user is assisted in selecting
alternative investment vehicles or securities within the given cash
flow category/class to replace under-performing ones with links to
in house tools and services.
[0204] By juxtaposing which of the customer's assets' against their
relevant benchmark and recommending a course of action, the branch
representative or the customer center client advice giving features
are able to help the customer enhance portfolio performance.
Additionally, the method provides the financial institution with an
opportunity to guide customers toward a variety of investment
vehicles that may allow the customer to better meet their
in-retirement goals.
Module 9: Display General Advice Page
[0205] A general advice page is provided that provides the user
with information and general recommendations in an easy to read and
understandable summary format. The advice is based on analysis
displayed in Modules 8 and 9. The purpose of this module is to
identify next steps on how the customer can meet income goals, i.e.
reduce a shortfall or evaluate current investments.
[0206] This module: [0207] Provides a set of next steps on how to
reduce any shortfall, i.e. evaluate current holdings, conduct a
general rebalance, examine under-performing assets, reassess
objectives and goal; [0208] Outlines how the financial institution
can help in each of the above areas, i.e. visit branch
representative, use portfolio allocation or rebalancing tools; and
[0209] Provide alternate strategies for fixed income, i.e. laddered
or dedicated bond portfolio.
Module 10: Provide a Printed Full Report
[0210] Module 10 represents the customer take-away or personalized
action plan. The customer is provided with a printed copy of
recommendations and guidance and a copy of all the supporting
graphs, tables and charts.
TABLE-US-00001 TABLE I Income Planner Data Requirements In House
Outside Account Account Variables Money Market Instruments Yes Yes
Symbol or identifier or CUSIP T-Bills (see below) Name Fed Funds
Current dollar amount Commercial Paper Current yield/interest rate
Payment period (mo, qtr, etc) - as appropriate Maturity Date Term
Par value Checking Account, Cash or No Yes Symbol or identifier
Cash Equivalents Access? Name Current dollar amount Current
yield/interest rate Payment period (mo, qtr, etc) Money Market
Mutual Funds Yes Yes Symbol or identifier or CUSIP Name Current
shares held Current price per share Current yield/interest rate
Payment period (mo, qtr, etc) Certificate of Deposit (CD) Yes Yes
Symbol or identifier or CUSIP Name Current dollar amount Current
yield/interest rate Date of maturity Term Treasury Bills Yes Yes
CUSIP number (3, 6, and 12 month maturities) Name Issued at a
discount Current dollar amount Issue Date Frequency Current
yield/interest rate Maturity Date Term Par value Purchase price
Treasury Notes and Bonds Yes Yes CUSIP number Name Notes: term 1 to
10 yrs Number of units owned Bonds: term 10 to 30 yrs Current price
per unit Both issued in $1,000 Coupon rate multiples Issue Date
Frequency Par value Maturity date Call date Dividend Re-invested
(yes/no) 1 year total returns 5 year total returns Credit rating
Yield to Maturity In Default flag Gov't Agency Bonds Yes Yes CUSIP
number Fed Home Loan Banks Name Fed National Mortgage Asso Number
of units owned Gov't National Mortgage Asso Current price per unit
Fed Home Loan Mortgage Coupon rate Other Gov't Agency CMO's Issue
Date Frequency Par Value Maturity Date Call date Dividend
Re-invested (yes/no) 1 year total returns 5 year total returns
Credit rating Yield to Maturity In Default flag Muni Bonds Yes Yes
CUSIP number Name Number of units owned Current price per unit
Coupon rate Issue Date Frequency Par Value Maturity date Call date
Dividend Re-invested (yes/no) 1 year total returns 5 year total
returns Credit rating Yield to Maturity In Default flag Corporate
Bonds Yes Yes CUSIP number Name Number of units owned Current price
per unit Coupon rate Issue Date Frequency Par value Maturity date
Call date Dividend Re-invested (yes/no) 1 year total returns 5 year
total returns Credit rating Yield to Maturity In Default flag
Preferred Stock Yes Yes Symbol or identifier or CUSIP Name Number
of shares owned Current Price per share Last Dividend Payment per
share Dividend payment dates Last Dividend Payment Date Par value 1
year total returns 5 year total returns Equities Yes Yes Symbol or
identifier or CUSIP U.S. Name ADRs Number of shares owned Int'l
Current price per share All Current Calendar Year Dividend Payments
per share Dividend payment dates (associated with above payments)
Frequency 1 year total returns 5 year total returns Dividend
Re-invested (yes/no) Mutual Funds Yes Yes Symbol or identifier or
CUSIP Name Number of shares owned Current price per share Last
dividend payment per share Dividend payment dates 1 year total
returns 5 year total returns Dividend Re-invested (yes/no) UIT's,
REITs Yes Yes Symbol or identifier or CUSIP Closed-end funds Name
Number of shares owned Current price per share Last dividend
payment per share Dividend Payment Dates 1 year total returns 5
year total returns Dividend Re-invested (yes/no) Variable Annuities
Yes Yes Symbol or identifier or CUSIP Name Number of units owned
Current price Payment Payment frequency 1 year total returns 5 year
total returns Non Financial Assets with Income Real Estate (non
REITs) No Yes Name Current value Current income stream Current
income stream frequency
TABLE-US-00002 TABLE II Investment Income Planner Checkup Asset
Cash Flow Issue Class ISSUE CLASS DS Class Category OPTNEQT: Other
Other OPTN: OPTION Other Other OPTNFC: FOREIGN CURRENCY OPTION
Other Other OPTNIND: INDEX OPTION Other Other OPTNINDB: BROAD BASED
INDEX OPTION Other Other OPTNINDN: NARROW BASED INDEX OPTION Other
Other CORPB: CORPORATE BOND Fixed Income Fixed Income CORPBCPN:
CORPORATE BOND COUPON Fixed Income Fixed Income CORPBCNV: CORPORATE
BOND CONVERTIBLE Fixed Income Fixed Income CORPBOID: CORPORATE BOND
ORIGINAL ISSUE DISCOUNT Fixed Income Fixed Income INSRNC: INSURANCE
Other Other MORTBS: MORTGAGE BACKED SECURITY Fixed Income Fixed
Income MONYMI: MONEY MARKET INSTRUMENTS (MATURITY DATE Cash Cash
REALES: REAL ESTATE Other Income Property USERSEC: USER DEFINED
Other Other INDEX: INDEX MASTER Other Other CMRCLP: COMMERCIAL
PAPER Cash Cash GOVAGCPN: GOVERNMENT AGENCY COUPON Fixed Income
Fixed Income PRVTD: PRIVATE DEBT (NO SECONDARY MARKET) Fixed Income
Fixed Income PRVTDCNV: PRIVATE DEBT CONVERTIBLE Fixed Income Fixed
Income REORGE: REORGANIZED EQUITY SECURITY Equity Equity GOVAG:
GOVERNMENT AGENCY Fixed Income Fixed Income GOVAGOID: GOVERNMENT
AGENCY ORIGINAL ISSUE DISCOU Fixed Income Fixed Income GOVAGDIS:
GOVERNMENT AGENCY DISCOUNT Fixed Income Fixed Income BANKACP:
BANKERS ACCEPTANCE Cash Cash CD: CERTIFICATE OF DEPOSIT Cash Cash
MONYM: MONEY MARKET Cash Cash PRFMM: PREFERRED MONEY MARKET/MUNI
PREFERRED Cash Cash CMO: COLLATERALIZED MORTGAGE OBLIGATION Fixed
Income Fixed Income MORTBPT: MORTGAGE BACKED PASS-THROUGH Fixed
Income Fixed Income UIT: UNIT INVESTMENT TRUST (TRUST FIXED GROU
Other Other REORGD: REORGANIZED DEBT SECURITY Fixed Income Fixed
Income WID: WHEN ISSUED DEBT SECURITY Fixed Income Fixed Income
WIS: WHEN ISSUED EQUITY SECURITY Equity Equity PLEDGE: OCC PLEDGED
SECURITY Other Other BASKT: BASKET Other Other FUTR: FUTURE Other
Other MIXUNIT: LIMITED PARTNERSHIP Other Other DUSERSEC: USER
DEFINED DEBT Fixed Income Fixed Income EUSERSEC: USER DEFINED
EQUITY Equity Equity DERV: DERIVATIVE - FIN INSTR WHOSE VALUE IS
Other Other COMDTY: COMMODITY - BULK GOODS TRADED ON A COMM Other
Other DEBT: DEBT Fixed Income Fixed Income ABS: ASSET BACKED
SECURITY Fixed Income Fixed Income MUNIB: MUNICIPAL BOND
(MUNICIPALITY DEBT) Fixed Income Fixed Income MUNIBCPN: MUNICIPAL
BOND COUPON Fixed Income Fixed Income MUNIBOID: MUNICIPAL BOND
ORIGINAL ISSUE DISCOUNT Fixed Income Fixed Income O: OPEN ENDED
MUTUAL FUND Equity Equity BND: BOND FUND Fixed Income Fixed Income
TREAS: TREASURY (GOVERNMENT DEPT) Fixed Income Fixed Income
TREASBIL: TREASURY BILL Fixed Income Fixed Income TREASSTR:
TREASURY STRIP Fixed Income Fixed Income TREASCPN: TREASURY COUPON
Fixed Income Fixed Income EQTY: EQUITY Equity Equity RIGHT: RIGHT
Other Other WARNT: WARRANT Other Other ADR: AMERICAN DEPOSITORY
RECEIPT International Equity CEMF: CLOSED END MUTUAL FUND Other
Other LIMITP: LIMITED PARTNERSHIP Other Other REIT: REAL ESTATE
INVESTMENT TRUST Equity Income Property STOCK: STOCK Equity Equity
STOCKCOM: COMMON STOCK Equity Equity STOCKPRE: PREFERRED STOCK
Equity Equity STOCKCPR: CONVERTIBLE PREFERRED STOCK Equity Equity
CUMCPR: CUMULATIVE CONVERTIBLE PREFERRED STOCK Equity Equity MMF
MONEY MARKET FUND Cash Cash Else USER DEFINED DEBT Other Other
Synthpre Synthetic Preferred Other Other WI Other Other Reorg Other
Other Treasrmk Fixed Income Fixed Income
TABLE-US-00003 TABLE III Morningstar to In House Mapping Table
Moringstar Category In House Asset IP Cash Categories Class Flow 1.
Convertibles Other Other 2. Diversified Emerging Markets
International Equity 3. Diversified Pacific/Asia Stk International
Equity 4. Domestic Hybrid Other Other 5. Europe Stock International
Equity 6. Foreign Stock International Equity 7. High Yield Bond
Fixed Income FI 8. Intermediate Government Fixed Income FI 9.
Intermediate-Term Bond Fixed Income FI 10. International Bond Fixed
Income FI 11. International Hybrid International Equity 12. Japan
Stock International Equity 13. Large Blend Large Company Equity 14.
Large Value Large Company Equity 15. Large Growth Large Company
Equity 16. Latin America Stock International Equity 17. Long
Government Fixed Income FI 18. Long-Term Bond Fixed Income FI 19.
Mid Cap Blend Large Company Equity 20. Mid-Cap Growth Large Company
Equity 21. Mid-Cap Value Large Company Equity 22. Multisector Bond
Fixed Income FI 23. Muni National Intermediate Fixed Income FI 24.
Muni National Long Fixed Income FI 25. Muni Short Fixed Income FI
26. Muni Single State Intermediate Fixed Income FI 27. Muni Single
State Long Fixed Income FI 28. Pacific/Asia ex-Japan Stock
International Equity 29. Short Government Fixed Income FI 30. Short
Term Bond Fixed Income FI 31. Small Blend Small Company Equity 32.
Small Growth Small Company Equity 33. Small Value Small Value
Equity 34. Specialty-Communications Other Equity 35.
Specialty-Financial Other Equity 36. Specialty-Health Other Equity
37. Specialty-Natural Resources Other Classifica- tion Equity 38.
Specialty-Precious Metals Other Changed to Equity 39.
Specialty-Real Estate Other Sm/Med/Lrg Equity 40.
Specialty-Technology Other Company Equity 41. Specialty-Unaligned
Other Equity 42. Specialty-Utilities Other Equity 43. Ultrashort
Bond Fixed Income FI 44. World Stock International Equity 45.
Emerging Markets Bond Fixed Income FI 46. Municipal New York
Intermediate Fixed Income FI 47. Municipal New York Long Term Fixed
Income FI 48. Municipal California Intermediate Fixed Income FI 49.
Municipal California Long Term Fixed Income FI
[0211] Although the invention has been described in detail with
reference to particular preferred embodiments, persons possessing
ordinary skill in the art to which this invention pertains will
appreciate that various modifications and enhancements may be made
without departing from the spirit and scope of the claims that
follow.
* * * * *