To Change Your Clients’ View of Retirement, Stop Using This Phrase
March 12, 2025 by John Manganaro
Financial advisors who use Monte Carlo simulations to develop retirement income plans must be careful with the language they use to present such plans, as the same financial plan can feel very different to clients based on its framing.
This was among the takeaways of a mainstage presentation given by financial planning experts Michael Kitces and Michael Finke during the American College of Financial Services’ inaugural Horizons retirement conference in San Diego.
Wink’s Moore on the Market: Stop using this phrase with your clients?
“I actually have completely stopped using the term ‘probability of failure’ in my client meetings,” Michael Kitces said.”
According to both Michael Kitces and Michael Finke, advisors should not present the simulation results to their clients without providing substantial contextualization about what the commensurate probabilities of success and failure really represent.”
“The essential piece of wisdom to pass along to clients is that Monte Carlo failures aren’t plane crashes. “Failure” in this context merely means running just one dollar short of the stated income goal, and there is a big difference between going broke in retirement and having to skip out on a third or fourth overseas luxury trip during a 30-year retirement. Yet, both situations are dubbed “failures” in Monte Carlo modeling.” – sjm
