Asset Return Assumptions
Where to input asset return assumptions
Navigate to Advisor Portal > Assumptions to review and update asset return assumptions. Aligning assumptions with your desired outcomes is an important step that ensures tailored-made advising for each financial plan.
For a brief overview of Assumptions watch this short video.
Looking to adjust return assumptions for a specific client?
To make changes that only affect a specific client, read the article on individual return assumptions.
Option to use historical asset return data to set return assumptions in RightCapital
Below are assumptions based on historical index return data that you can choose to reference as you are setting your return assumptions. These assumptions reflect a geometric return calculated from the return data indicated.
For equity asset classes, RightCapital provides assumptions based on the last 50 years of return data. For indices that do not have 50 years of data, RightCapital provides data back to the earliest date that the index is available.
For fixed income data RightCapital provides assumptions based on the last 20 years of data (as many of these indices do not have 50 years of data).
Please review the data below or use your own historical data to set your return assumptions.
Option to use forward looking return assumptions in RightCapital
Many financial institutions provide forward looking return assumptions. Below is summary information from JP Morgan's Long Term Capital Market Assumptions. You can review the detailed JP Morgan report here ↗️. There are also other financial institutions that provide long term capital market assumptions.
To utilize a forward looking assumption, simply click into the fields to modify and enter the preferred data:
Custom asset allocations
Creating your own asset return assumptions is easy! Just click on the field to modify and enter a new number that reflects your advising philosophy.
As a bonus, RightCapital provides complete control over Inflation assumptions, real estate transaction costs, and assumptions around the costs associated with the death of a loved one.
Considerations to set up your return assumptions
It is very important to set your return assumptions for your clients and review these assumptions on a periodic basis. Using historical data to set return assumptions provides a systematic approach to factor in the historical experience data into your financial projection. Using a forward looking approach allows you to incorporate more subjectivity into the projection.
How do I know what rate of return is assumed in my client's plan?
The rate of return is driven by the Proposed asset allocation in the Retirement Analysis action items. That can be set to the current allocation or any of the asset allocation models. You can see the rate of return for the current allocation as well as any of the models on the Investment > Asset Allocation screen:
Adjust the growth rate by choosing a different model. Alternately, reach out to our support team or your sales associate to learn how you can build your own custom asset classes — control the standard deviation and rate of return!
How do I transition allocation percentages over time?
Rather than break out different allocations pre and post-retirement, RightCapital has the option of using a glide path as an approach to adjusting the client's investments over time. See more details on the glide path here.