Financial planning tool

Our financial planning tool lets you create a financial plan that gives your clients a full picture of their different sources of income and how their spending needs could change over time.

Our tool uses a sophisticated economic forecast provided by Moody’s Analytics. This stress tests your client’s plan by looking at 1,000 different ways the economy could perform, so you can confidently discuss the sustainability of your client’s income.

At Royal London, we’re committed to helping your clients achieve their long-term savings goals. 

Our financial planning tool lets you create a financial plan that gives your clients a full picture of their different sources of income and how their spending needs could change over time. 

The financial plan will help your clients understand the risks and rewards of investing in the stock market. And it will also tell you how realistic your client’s retirement goals are and how much they need to save to achieve them, based on their needs and circumstances. 

Our tool uses a sophisticated economic forecast provided by Moody’s Analytics.  This stress tests your client’s plan by looking at 1,000 different ways the economy could perform, so you can confidently discuss the sustainability of your client’s income.  

It’s also integrated with our ready-made investment solutions – the Governed Range – which benefits from regular reviews, hands-on supervision and ongoing fine-tuning. 

And all of this comes at no extra cost. 

To find out more about creating a financial plan that’s expertly assembled to meet your client’s needs, speak to your usual Royal London contact. 

You can use our financial planning tool alongside our existing tools and communications to support and enrich your client conversations. Our  tool will:

  • Create a clear and engaging financial plan for your clients.
  • Model all the different sources of income your client has available.
  • Stress test your client’s financial plan.
  • Help your clients understand the risks and rewards of investing in the stock market.
  • Tell you how realistic your client’s retirement goals are and how much they need to save to achieve them.

And it comes at no extra cost.

Q1. What’s the difference between stochastic and deterministic?

It’s useful to look back at where these two words originate from. The word stochastic is derived from the Greek word stokhos, which means guess. If something is stochastic, then there is an element of randomness involved, and the outcome is therefore unknown. Deterministic, on the other hand, comes from a philosophical idea that all outcomes are completely predetermined, ie that there is no element of uncertainty.

Q2. How does this translate into the world of modelling?

The weather man- there’s some things that they know for sure – for example that it will be colder at night than it is during the day. But then there are lots of things that they don’t know for sure.  For example, the wind strength.

The question is how they deal with those things that they don’t know for sure.

1. They could assume the wind will travel, at 20mph. That’s the deterministic approach

2. Alternatively, they could tell their model that the wind might travel at 20mph, but it might be 10, or it might be 30. They might even assign some probabilities, if they think one of these scenarios is more likely than the other. This is the stochastic approach

Q3. OK but why is that relevant to pensions and investments?

Just like the weather system, there are lots of things about investment markets that aren’t certain. So when we are using models to try to predict how investment markets are going to behave in the future, we have to decide whether to use the deterministic approach or the stochastic approach.

It’s actually extremely important that we get this right when it comes to pensions, and it’s one of the biggest focuses in the pensions industry. That’s because the way that investment markets behave can have a huge impact on how well off people will be in retirement.

Q4. Which technique is better – deterministic or stochastic?

At Royal London, we use stochastic modelling in the design of our investment portfolios, and to manage the risk within those portfolios. We look at thousands of different scenarios, so that we can optimise our products for the best possible customer outcomes. We absolutely believe that this stochastic approach is also best when it comes to retirement planning. That’s why we’ve integrated the same Moody’s stochastic model we use ourselves into our planning tool – so that advisers, at no extra cost, can also have access to these modelling techniques, and help their clients achieve their best possible outcomes.

Q. Finally, how does our ‘retirement planning tool’ play into all of this?

The tool does everything that we’ve just discussed. It’s fully integrated with our specially designed investment products, and it is powered by Moody’s stochastic model which we use to stress test retirement plans. Combined with all the other features of the tool, this means you’ll get a very well rounded and very well understood picture of someone’s retirement.

Q1. What is volatility?

We should all know that when you invest money, it goes up and down in value. That’s volatility. It’s a measure of how much your money will fluctuate in value over a given period of time.

Q2. Is this something people need to worry about?

You don’t always need to worry about volatility. For people still in work, it’s all about paying money into a pension, and maximising growth before retirement. When markets are down when you’re paying in, you are getting more bang for your buck. It’s generally accepted that higher volatility means higher growth over the long term, and a strong team of investment professionals can really make sure they capitalise on that opportunity for you.

Q3. So when is volatility a problem?

Volatility is a problem in the run up to, and at the start of, retirement. Ups and downs in the investment markets during this period can really make or break a retirement plan in terms of how well off someone is going to be. During the growth phase, when you’re paying money in, you can ride out the ups and downs. But, as soon as you start taking money out of a pension, this becomes much harder to do because your pension value is constantly getting smaller so you have less and less opportunity as time goes by to recover any losses.

Q4. Gosh, that sounds like a real risk that people approaching retirement really need to think about?

Absolutely, it’s a massive risk. The industry even has a name for it, it’s called sequencing of returns risk. This essentially means that you want your retirement to start at a time when investment markets are making profit, not losses. The difficulty is that not many people can control when they retire, and even fewer people can control or predict what the investment markets will be doing at that time.

Q6. What’s Royal London doing to help manage this risk?

So there are two key things that Royal London are doing:

Firstly - Our retirement portfolios are designed to reduce volatility. We do that by investing in a very diverse range of asset classes. Reduced volatility means that the timing of withdrawals doesn’t make so much of a difference, because there are less profits or losses to be locked in

Secondly - We stress test our investment portfolios. In English, that means that when we are designing our portfolios, we look at thousands of different scenarios for how investment markets might behave in the future, and we optimise our products based on these scenarios. This means that, even if someone does retire when markets are making a loss, we’ve planned for that.

Q. Finally, how does our ‘planning tool’ play into all of this?

The tool does everything that we’ve just discussed. It’s fully integrated with our specially designed investment products, and it harnesses the power of Moody’s analytics, a company who are experts in stress testing investment plans. Combined with all the other features of the tool, this means you’ll get a very well rounded picture of someone’s retirement.

Find out more

If you’d like to know more about our financial planning tool, speak to your usual Royal London Sales contact.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.