WO2002011029A1 - Procede, systeme et logiciel de verification de plans financiers - Google Patents

Procede, systeme et logiciel de verification de plans financiers Download PDF

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Publication number
WO2002011029A1
WO2002011029A1 PCT/US2001/023647 US0123647W WO0211029A1 WO 2002011029 A1 WO2002011029 A1 WO 2002011029A1 US 0123647 W US0123647 W US 0123647W WO 0211029 A1 WO0211029 A1 WO 0211029A1
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WO
WIPO (PCT)
Prior art keywords
time interval
historical
investment value
value
randomly
Prior art date
Application number
PCT/US2001/023647
Other languages
English (en)
Inventor
David B. Loeper
Original Assignee
Loeper David B
Priority date (The priority date is an assumption and is not a legal conclusion. Google has not performed a legal analysis and makes no representation as to the accuracy of the date listed.)
Filing date
Publication date
Application filed by Loeper David B filed Critical Loeper David B
Priority to AU2001284671A priority Critical patent/AU2001284671A1/en
Publication of WO2002011029A1 publication Critical patent/WO2002011029A1/fr

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Classifications

    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/02—Banking, e.g. interest calculation or account maintenance

Definitions

  • This invention relates to computer programs and related methods and systems for
  • a financial plan may direct an individual to save more money then she needs to, or retire later than he or she needs to.
  • a financial plan may advise an
  • An object of the invention is to provide a method for evaluating financial plans to determine the likelihood that an investor will meet the investor's financial goals.
  • a method for evaluating a financial plan including predetermined initial values of investments and one or more contribution or withdrawal amounts corresponding to selected times after the commencement of the financial plan, includes the steps of calculating the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value, updating the changed investment value based on the selected contribution or withdrawal amount corresponding to the length of the time interval in accordance with the financial plan to obtain a further changed investment value, calculating the change in the further changed investment value over a second time interval based on changes over a PATENT DOCKET NO.
  • the method may include presenting the result of the calculations as a report to an individual.
  • the method is preferably implemented by suitable computer software.
  • Investments may be categorized in more than one asset category, and distinct historical data employed in calculations for each asset category. The results of the calculation may be compared to a selected wealth goal. After each calculation relative to historical data, an adjustment of the investment value to simulate tax effects may be made. The use of randomly-selected historical time intervals provides a very large number of simulated historical periods against which to evaluate a financial plan.
  • a system for evaluating financial plans includes a computer programmed to calculate the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value; to update the changed investment value based on a contribution or withdrawal amount set in the financial plan for a time corresponding to the time interval to obtain a further changed investment value; to calculate the change in the further changed investment value over a second time interval based on changes over a randomly-selected second historical time interval to obtain a further investment value, to further calculate, update and again calculate with respect to a randomly-selected third historical time interval and a randomly-selected fourth historical time interval.
  • a storage medium has stored therein instructions, wherein the instructions, when
  • a processor executed by a processor, cause the processor to perform the steps of: calculating the change in a predetermined initial value of an investment over a
  • time interval based on changes in value over a randomly-selected first historical time interval
  • Figures 1A, IB and 1C are a flow chart illustrating the steps in a method according to
  • Figure 2 is a sample graphic representation of the result of a method of the invention.
  • Figure 3A and 3B are a sample chart of a result of a method of the invention.
  • Figure 4 is a sample chart showing another result of a method of the invention.
  • Figure 5 is a block diagram showing features of a system according to the invention.
  • Figures 6A and 6B are a flow diagram showing a method according to the invention. Description of the Invention. PATENT DOCKET NO. D5009-00029
  • the initial step is to provide to a program sufficient information about the individual, the individual's current investments, planned future contributions, and planned withdrawals, to permit the method to ran.
  • the user is prompted to define personal information.
  • the personal information preferably includes information important to financial planning.
  • the basic information includes the individual's birth date, the individual's intended retirement age, and the end age for the plan.
  • the information may also include, if the individual has a spouse, the spouse's birth date, the spouse's intended retirement age, and the end age of the spouse for the plan.
  • the user may then be prompted to define one or more accounts, as shown at block
  • these accounts are named by the user.
  • the user is prompted to define the properties of each account as shown at block 106.
  • the most important property of the account is the tax treatment of the account.
  • the gains on the account may be subject to current taxation.
  • the gains on the account may be deferred until withdrawal.
  • Pull-down menus may be provided to provide a selection from a variety of different types of investments, such as 401(k), 403(b), Individual Retirement Account, savings account, Education IRA, Roth IRA, investment real estate, and other investment types.
  • the user is prompted to provide opening balances of each account at block 108.
  • the opening balances preferably represent the actual present values of the accounts.
  • the user is prompted to furnish the planned annual contribution to each account, as shown at block 110.
  • the program may provide for changes in planned annual contributions PATENT DOCKET NO. D5009-00029 to accounts at different time periods in the future, or selection of the start and end age of contributions for various accounts. A default may be a level contribution starting immediately and continuing until retirement.
  • the user is prompted to provide planned retirement distributions, as shown at block 112. This may be a desired retirement income level.
  • the user may further refine by providing specific distributions from specific sources. For example, such sources might include a defined benefit retirement plan.
  • the user is then prompted to provide information on Social Security and other sources of retirement income, as shown in block 114.
  • the user may select a desired retirement age.
  • the program may then display annual social security benefits based on formulas or tables accessed by the program. Such formulas or tables have been constructed from publicly-available Social Security benefit information.
  • the user is prompted to enter additional withdrawal information at block 116.
  • additional withdrawal information For example, a form may be provided to input the age of each child, what levels of education for the child will be paid by the individual, and the expected cost per year. The amount and time of the expected withdrawals from investments may then readily be calculated. Other anticipated large expenses may optionally be included.
  • the user is then prompted to enter allocations of assets by asset categories, as shown at block 120.
  • the asset categories are preferably large categories, such as large capitalization stocks, small capitalization stocks and foreign investments, bonds, and
  • the user may also be prompted to enter a number for investment expenses. If investment expenses are given a positive percentage, this would indicate investments that underperform the market historically. If investment expenses are given a positive percentage, this would indicate investments that outperform the market historically.
  • the user is then prompted to enter tax information, as shown at block 122.
  • This information preferably includes Federal income tax filing status, state of residence, and any local tax rates.
  • the program may access tables to look up applicable Federal ordinary and capital gains income tax rates and state tax rates. Local tax rates may also optionally be entered. Tax rates may be entered from a look-up table separately for pre-retirement and retirement rates.
  • the information preferably includes as much information as possible relevant to the individual's projected cash flow into and out of investments and other retirement income.
  • the option of selecting an assumed inflation rate may be provided. Different inflation rates may be used with respect to different investment categories.
  • the option may be provided of furnishing results in inflation-adjusted dollars or actual dollars.
  • the time periods may be, for example, years,
  • the program selects a time period, as
  • the gain is added to the value in each category, as shown by block 130.
  • the method returns to block 125, a new time period is selected, and the calculations are repeated, using historical data from the next year in the applicable table, and the contribution,
  • a possible minimum number is 32 different starting points. The calculation need not be performed for consecutive years. For example,
  • the number of years of the plan may exceed the number of years of historical data.
  • each test is run from the start point consecutively until one-half of the time
  • Social Security and other sources may be deducted from the desired annual retirement income amount.
  • the method can also calculate the returns based on a flat annual rate of return, without reference to historical data.
  • the method then provides the results in a display for the user.
  • a display for the user Preferably, only certain
  • results are selected for display.
  • the tests may be ranked by ending value.
  • middle ending value ranked at 50% probability, may be selected.
  • results representing a result better than all but one percent of the results may be selected and labeled as having a 99% probability of success.
  • the results may be displayed in tables or graphically
  • results may be displayed in a variety of formats.
  • the results may be displayed in a graph showing age
  • Line 202 represents a standard result based on a steady annual increase in value.
  • Line 204 represents values based on a result worse than 99% of the starting points.
  • Line 206 represents values based on a result worse than 99% of the starting points.
  • the results may also be displayed as a table.
  • Column 402 displays the probability of obtaining
  • Column 404 displays the ending value of each test.
  • Column 406 displays the years of the historical periods.
  • Other displays may include a display of cash flows into and out of investments
  • the program and system may also provide the user, together with the results of the plan, the opportunity to adjust various variables to ascertain the change in historical results.
  • an input may be provided to permit the user to change asset allocations
  • the program may be made accessible to users at client computers connected on the World Wide Web to a server running the program.
  • Web-based forms may prompt the user to PATENT DOCKET NO. D5009-00029 provide required and optional information.
  • the results of the analysis may be displayed on the page.
  • the results may also be presented as a report in a convenient format, such as
  • client can share a report on a web server with suitable security.
  • FIG. 5 illustrates a system according to the invention.
  • Processor 505 is running in a
  • Processor 505 is connected to client computer system 510 via Internet 515.
  • Processor 505 accesses program files 520 for instructions.
  • Program files 520 are stored on a suitable storage
  • Processor 505 accesses
  • Processor 505 may also access client files 535, which contain, as shown by
  • block 540 non-exclusively, investment values, asset allocations, contributions, withdrawals,
  • Processor 505 causes the data in block 540 to be updated and
  • program files 520 contain program files 520.
  • the result may be expressed as the percentage of outcomes for which the desired
  • That financial goal is actually achieved. That financial goal can be, for example, a certain amount
  • the method of the invention gives the investor the distribution the results of any
  • the results of the method of the invention are is unique to the asset allocation, planned contributions and withdrawals, beginning wealth, and risk tolerances of each user. For example, for one investor, lowering the small capital
  • stock/foreign allocation may increase the likelihood of running out of money.
  • the software may be enhanced to include a mechanism for the investor to prioritize
  • an investor may have a goal of having a certain
  • Another extension of this method is, instead of splitting the length of the plan to repeat historical periods, taking actual historical returns and randomly selecting from those
  • a database of historical data may contain data covering 70 years.
  • the method of the invention may be used to ran 30 back tests for a 40 year
  • FIG. 6A - 6B there is shown a process flow diagram for a computer
  • step 605 the plan assumptions are set. These assumptions indicate the selection of the initial asset amount, allocation of assets
  • the change in the initial asset amount is then calculated for a randomly-selected first historical period, as indicated by block 610.
  • the length of the historical period may be a
  • changed asset amount is then adjusted by the historical performance of a second randomly
  • This second randomly selected historical period is preferably selected independently of the selection of the first historical
  • the process may be repeated for a very large number of iterations, as a very large number of
  • results may be presented as a report
  • These financial goals may include having a certain amount of money at the end of the financial plan, being able to make withdrawals at certain amounts in the future, and other financial goals.
  • processing or may be accomplished before analysis, stored in a suitable file, and accessed at the time of calculation.
  • All of these methods could also be combined with the probability of the investor living the length of the plan or out living the length of the plan, thereby further increasing the sampling by running the length of plan instead of a PATENT DOCKET NO. D5009-00029 target age, but instead setting the plan length based on the sampling distribution on numerous
  • the method of the invention may be used dynamically by investors for guidance in
  • an investor may find that, by
  • the planning software of the invention including the historical data on which the
  • the processor may be an Intel Pentium or similar microprocessor.
  • the method can be an Intel Pentium or similar microprocessor.
  • the computer program may also be transmitted as a digital
  • the signal may be transmitted in packets over a packet-switched network, such as the Internet.
  • the computer program in accordance with the invention may be stored and distributed in any suitable storage medium, such as fixed disk, portable diskettes, and CD-ROM or other PATENT DOCKET NO. D5009-00029 read-only memories. Also, methods described as being carried out in software ranning on general-purpose computer hardware may be implemented in hardware.

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  • Business, Economics & Management (AREA)
  • Accounting & Taxation (AREA)
  • Finance (AREA)
  • Engineering & Computer Science (AREA)
  • Development Economics (AREA)
  • Economics (AREA)
  • Marketing (AREA)
  • Strategic Management (AREA)
  • Technology Law (AREA)
  • Physics & Mathematics (AREA)
  • General Business, Economics & Management (AREA)
  • General Physics & Mathematics (AREA)
  • Theoretical Computer Science (AREA)
  • Financial Or Insurance-Related Operations Such As Payment And Settlement (AREA)

Abstract

L'invention concerne un procédé d'évaluation de plan financier, comprenant des valeurs initiales prédéterminées d'investissements (540) et une ou plusieurs apports ou retraits correspondant à des moments sélectionnés après le démarrage du plan financier, consistant à calculer le changement d'une valeur initiale prédéterminée d'un investissement sur une période basée sur des changements de valeur sur une première période historique choisie aléatoirement (530) afin d'obtenir une valeur d'investissement changée, à mettre à jour cette valeur d'investissement changée sur la base de l'apport ou du retrait correspondant à la longueur de la période selon le plan financier afin d'obtenir une autre valeur d'investissement changée, à calculer le changement de cette autre valeur d'investissement changée sur une seconde période basée sur des changements sur une seconde période historique sélectionnée aléatoirement afin d'obtenir une autre valeur d'investissement, et à répéter respectivement les étapes de calcul, de mise à jour et à nouveau de calcul pour des troisième et quatrième périodes historiques choisies aléatoirement.
PCT/US2001/023647 2000-07-27 2001-07-27 Procede, systeme et logiciel de verification de plans financiers WO2002011029A1 (fr)

Priority Applications (1)

Application Number Priority Date Filing Date Title
AU2001284671A AU2001284671A1 (en) 2000-07-27 2001-07-27 Method, system and computer program for auditing financial plans

Applications Claiming Priority (2)

Application Number Priority Date Filing Date Title
US22101000P 2000-07-27 2000-07-27
US60/221,010 2000-07-27

Publications (1)

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WO2002011029A1 true WO2002011029A1 (fr) 2002-02-07

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Citations (4)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US5812988A (en) * 1993-12-06 1998-09-22 Investments Analytic, Inc. Method and system for jointly estimating cash flows, simulated returns, risk measures and present values for a plurality of assets
US6021397A (en) * 1997-12-02 2000-02-01 Financial Engines, Inc. Financial advisory system
US6085175A (en) * 1998-07-02 2000-07-04 Axiom Software Laboratories, Inc. System and method for determining value at risk of a financial portfolio
US6253192B1 (en) * 1996-08-30 2001-06-26 The Quantam Consultancy Group (Proprietary) Limited Method of personal financial planning

Patent Citations (4)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US5812988A (en) * 1993-12-06 1998-09-22 Investments Analytic, Inc. Method and system for jointly estimating cash flows, simulated returns, risk measures and present values for a plurality of assets
US6253192B1 (en) * 1996-08-30 2001-06-26 The Quantam Consultancy Group (Proprietary) Limited Method of personal financial planning
US6021397A (en) * 1997-12-02 2000-02-01 Financial Engines, Inc. Financial advisory system
US6085175A (en) * 1998-07-02 2000-07-04 Axiom Software Laboratories, Inc. System and method for determining value at risk of a financial portfolio

Also Published As

Publication number Publication date
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