When clients want to understand the risks and rewards of investing, what do you tell them?

• Can you show them graphs and charts that explain what happens to their portfolio in a bear market?
  
  
• Can you give them a probability based on historical data that they will not lose their hard earned nest egg?
  
  
• Can you tell a retiring couple how much they can withdraw each year while still maintaining their original investment?
  
  
• Can you optimize their portfolio based on their risk tolerance?

With the recent volatility in the stock market, are you confident of the risks you face in your financial planning? If not, then you need to turn to Crystal Ball®.

Crystal Ball is a Microsoft® Excel®-based suite of analytical tools that includes Monte Carlo simulation, optimization, and forecasting. With little effort, you can apply these advanced analytical techniques to your new or existing financial planning spreadsheets to create more accurate financial forecasts and help your clients with better informed financial decisions.

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In traditional financial analysis - not using Monte Carlo simulation - you rely on linear analysis where uncertain and uncontrollable variables such as life expectancy and investment returns are treated as known, static values. Future deviations from those assumptions means a revision of the plan, and if the client has already taken significant actions based on the original plan, such as retiring early or making large gifts to family members or charity, the client's financial security could be put at risk.

By adding stochastic analysis with Crystal Ball, you can see how the plan will succeed or fail in thousands of possible financial futures, create a confidence level for the client, and allow your clients to decide, based on their own risk tolerance, whether the confidence level is acceptable. You can then tailor and optimize the plan to the client’s desired confidence level.

Key features of interest to your industry include sensitivity analysis, correlation, historical data fitting, and trend charts. The sensitivity analysis helps you to understand which of the uncertain inputs are most critical and drive the uncertainty of your planning model. Correlation lets you link uncertain inputs and account for their positive or negative dependencies. If historical information does exist, the data fitting feature will calculate the probabilities around data such as investment returns. Trend charts allow you to visually analyze how the uncertainty around a portfolio grows and varies over time. The Professional Edition includes time-series forecasting and optimization, which can help to maximize portfolio return and protect the long and short term value of a client's portfolio.

LEARN MORE ABOUT CRYSTAL BALL FOR FINANCIAL PLANNING

This page offers links to a growing number of resources, including recorded Web seminars, articles, white papers, case studies, and example models. Additionally, you can view a list of common uses and examples reported directly from customers using Crystal Ball. You can also download a free trial version of Crystal Ball to see how it can help improve your business forecasts and decisions!

RECORDED WEB SEMINARS

The Next Generation of Financial Planning Demonstrates the use of Crystal Ball software in a series of financial planning applications, including how to project probabilities of future wealth, incorporating all tangible assets as well as financial assets that include stock options, restricted stock, qualified and non qualified accounts, etc. Presented by Mike Patton, Principal of Integrity Wealth Management, LLC Recorded September 19, 2007	View recording Download files
Advising with Confidence - Using Stochastic Analysis in Financial Planning Learn how Bank of America applies stochastic analysis that allows the planner to test and visualize thousands of possible outcomes to better tailor the client's plan. Presented by Terence Condren, Director of Planning Solutions at the Bank of America Private Bank Recorded August 18, 2005	View recording Download files

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WHITE PAPERS & ARTICLES

A Better Way to Size Up Your Nest Egg,'' Monte Carlo'' models simulate all kinds of scenarios By Christopher Farrell (On the BusinessWeek Web site)	Download
Advising with Confidence: Using Stochastic Analysis in Financial Planning By Terence D. Condren, Bank of America Private Bank	Download
Commerce, Enterprise Use Simulated Planning Programs By Anne Lindner (On the St. Louis Business Journal Web site)	Download
Financial Planning for Worst Case Scenarios By Huybert Groenendaal and F. J. Zagmutt (Written for Risk Management Magazine)	Download
Live Well—Die Broke By John M. Charnes, Professor, University of Kansas; Howard Marmorstein, Professor, University of Miami; Tom Robinson, Professor, University of Miami	Download
Monte Carlo simulation: Model calculates probability of estate plan's worth By Susan Deutschle (For Business First Web site)	Download
The Next Generation of Financial Planning Michael J. Patton, Personal CFO, Integrity Wealth Management, LLC	Download
Will Your Clients Accept a 50/50 Chance of Meeting Their Financial Objectives?	Download

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CASE STUDIES

Ryan Beck & Co. Crystal Ball Services Helps This Regional Investment Bank and Brokerage Firm Forecast Future Stock Performance	Download
ProVise Management Group For ProVise Management Group, Crystal Ball is the Key to Optimizing Portfolio Profit	Download

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EXAMPLE MODELS

Portfolio Allocation (Part 1) Detail: This portfolio allocation model, used in our basic optimization tutorial, requires you to define decision variables and run OptQuest to determine an optimal investment strategy. The model uses standard deviation to limit risk. Includes optimizations setting file. Portfolio Allocation - Revisited (Part 2) (D) Detail: This model is the same as above, but now the decision variables are already defined. Combines several objective functions into one multiobjective using special Crystal Ball functions and uses the Arbitrage Pricing Theory for incorporating risk. Includes optimizations setting file. Portfolio Allocation - Revisited EF (Part 3) (D) Detail: Same as Portfolio Allocation, but with decision variables already defined. This example is used to show the use of the Efficient Frontier feature in OptQuest. Includes optimizations setting file.	For: Crystal Ball & OptQuest Level: Simple Download   Download   Download
Portfolio Without Market Correlation Detail: This model was developed for a client who is retiring and requires yearly cash income from her investment. The amount of the investment, income required per year, and anticipated inflation rate are entered by the user. In addition, the desired asset allocation is entered. The model will simulate the return of the portfolio using normal distributions based on the historical mean and standard deviation of each asset class. The balance at the end of Year 2000 and Year 2009 along with the simple average return are forecasted. These forecast will allow the user to analyze the risk and return of the portfolio.	Download For: Crystal Ball & OptQuest Level: Simple

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COMMON USES & EXAMPLES

The following examples were provided by our customers and represent only some of the potential financial planning applications for Crystal Ball.

• Analysis of new business financial plan
• Assess investment opportunities in various business sectors
• Assessing retirement plan returns based on variable levels of risk tolerance
• Determining the best set of investments
• Evaluate equity option prices and refine financial market models
• Evaluate investment opportunity for private equity funds
• Evaluating the current and future positions of employer granted options
• Forecasting and Predicting impact of product sales growth and decline
• Headcount planning and break-even analysis
• Maximizing client's portfolio returns
• Monte Carlo simulation for newly formed hedge funds
• Planning an estate
  

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TEXTBOOKS

Analyzing and Managing Risky Investments

Stochastic Modeling: The New Way to Predict Your Financial Future

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