Historical Audit: analyzes a financial strategy or scenario using historical investment returns.

What is Historical Audit?

This calculation method is the industry's only historical backtested calculation method that takes into account all the variables of a financial strategy and uses probability analysis to determine the appropriate confidence level. The Historical Audit method takes into account asset allocations, target spending needs, and account contributions and withdrawals, and then compares these variables to historical markets in a sequential manner, providing the user with an indication of how the tested financial strategy would have fared had it been implemented in all historical market periods, as they occurred, beginning with the year 1926.

This simulation option tests a strategy against each rolling historical period of market return data. Because the historical method is directly linked to the performance of asset classes in sequential historical periods, the number of simulations is limited to the number of sequential historical periods available for the proposed duration of the tested strategy. For example, a 54-year old client with an expected mortality age of 87 has a 34-year time horizon. This simulation option looks at forty-eight different 34-year periods. The first period is 1926-1959. The second is 1927-1960. The last (the forty-eighth simulation) is 1973-2006. (In cases where the duration of your strategy is too long to have an adequate number of historical periods, 49 years or longer, the term of the strategy is split in half and run against the same market period for each half. In this case, the market period is listed twice.)

The Historical Audit method always uses a fixed lifespan.

How do we apply Historical Audit in the context of evaluating a client's strategies?

Once a client's financial strategies - including valued goals, personal and account information, desired level of investment risk - have been input, the Historical Audit tests these strategies against historic markets. The results of the analysis reflect how the client's strategies would have fared under past markets, though this is no indication of how the strategies will be impacted in the future.

This audit approach is easily understood by the summary numeric results described below:

• The Summary states the number of historical periods that achieved an ending value greater than the target value. This number is also stated as the percentage of historical periods tested in which the client's valued goals were achieved or exceeded.
  
  
• In addition, the Summary states the number and percentage of historical periods that ended below the targeted ending value but did not run out of money during the client's lifetime.
  
  
• The Summary also states the number and percentage of historical periods in which the plan ran out of money prior to the end of the planning period.

Register Today

Ready to sign up for a free trial account? Do you want to see if your clients will meet their goals? Register here.

Interactive presentation

This exciting three minute Flash video will give you an overview of how our process works. On a T1 connection the file should download in 1 to 2 minutes.

Wealthcare Conference

Wealthcare Capital offers training conferences periodically throughout the country in various metropolitan areas. For more information please contact your Wealthcare Specialist or email us at: support@wealthcarecapital.com.

Seminars, product enhancements, and other brand new information at the click of your mouse. Take a look.