Glide path

What is a Glide Path?

Glide paths are used to transition invested assets from high exposure to lower exposure allocations over time. Specifically, glide paths identify the percentage of a portfolio invested in equity, fixed income, and cash asset classes at a given year on the path. This enables you, as their advisor, to have a guide to transitioning a client's investment portfolio from more aggressive to more conservative, over time.

The two charts here illustrate the "default" glide path in RightCapital. The first graph indicates the risk exposure shift in the glide path allocation over time, from higher risk (more aggressive) to lower risk (more conservative). The "risk exposure" values are illustrative, as the actual risk exposure is determined by the specific holdings in the portfolio. The second graph illustrates the asset class allocation over time.

Transitioning Invested Assets over time

1. Same asset allocation for all years: When using the default setting the client's specified asset allocation, entered in the Profile > Net Worth area, will remain constant throughout the life of the plan.
2. Pre and post-retirement asset allocation models: This setting allows advisors to specify a pre-retirement and post-retirement asset allocation model to project invested assets into the future. If this setting is used, the ‘Asset Allocation’ selection in the Retirement > Analysis > Action Items will be used up until retirement and the ‘Retirement Allocation’ selection will be used post-retirement. New asset allocation models can be created in the Advisor Portal > Models Tab > Portfolios area to be used in all client plans.
3. Enable Glide Path: If a glide path is enabled, the client's investment allocation will slowly migrate to the glide path allocation over the specified number of years. A second dropdown menu will then appear under the allocation method to determine which glide path will be used. Options include the Default glide path, or creating your own custom glide path(s). Details on the Default glide path can be found at the bottom of the page. Once a glide path is selected, determine how quickly the allocation shifts from the current allocation to the glide path allocation by changing the grading schedule. This can be a duration anywhere from 1 to 40 years.
   

   If '1-year grading' is selected, the client's allocation will automatically shift to the glide path allocation in year 2 of the projection. For any other grading schedule, the client's allocation will shift proportionally over the duration of the grading schedule, from the selected allocation (as indicated in the Retirement Analysis action items) to the glide path allocation indicated.

Creating Custom Glide Paths

Quick Fill

When creating a custom glide path, the Quick Fill button allows advisors to populate or clear information much more easily.

1. Interpolate will automatically populate all 0% inputs between beginning and ending values listed. This feature saves time and helps to populate values more quickly.
2. Clear all will reset all glide path inputs to 0%.

Details on the Default Glide Path

The Default glide path is derived based on the average glide path from some of the largest target retirement date funds including Fidelity, Vanguard, T. Rowe Price, Principal, American Funds, and Schwab. Below is the default glide path used.