The Allocation Method setting determines how a client's investment allocation will be projected out into the future. You can find this setting within the Gear Icon > Settings > Methodology tab of each client plan:
The default setting for the allocation method is Same asset allocation for all years. With this option selected, RightCapital will use the client's Current allocation as the long-term rate of return within the plan. The Current Allocation is the blended result of all of the client's invested assets (entered in Profile > Net Worth), and can be viewed within the Investment > Asset Allocation tab:
Note on Bank Accounts in Asset Allocation
Please be aware that if you've chosen to 'Include bank account in Asset Allocation card' in the Gear Icon > Settings > Methodology tab, the Annual return percentage listed will be impacted. This may cause the return percentage to not align with the annual portfolio return occurring in the Cash Flow projections.
As a reminder, bank accounts in RightCapital will grow each year using your return assumption for cash.
When using this option, you will have the ability to propose a different long term rate of return for your Proposed plans in the Retirement Analysis module. You can do so by choosing a different model portfolio within the Action Items > Asset Allocation strategy dropdown:
The second option is Pre- and post- retirement allocation. With this option selected, RightCapital will use the client's Current allocation in pre-retirement, and will allow you to specify a different model portfolio to be used in post-retirement. You can specify the post- retirement model within the 'Post-retirement allocation for current plan' field that appears:
When using this option, you will have the ability to propose different pre- and post- retirement allocations for your Proposed plans in the Retirement Analysis module. You can do so by choosing a different model portfolio within the Action Items > Pre- retirement allocation and Retirement allocation strategy dropdowns:
The third option is Enable glide path. With this option selected, RightCapital will model a gradual transition in a client's investment allocation over time. New glide paths can be created within the Models > Glide tab of the advisor portal. The Grading schedule determines how quickly the client's current allocation will transition to match the allocation of your chosen glide path:
When using this option, you will have the ability to propose different glide paths trajectories for your Proposed plans in the Retirement Analysis module. You can do so by choosing a different starting allocation and glide path within the Action Items > Asset allocation and Glide path strategy dropdowns:
The last option is No blending across account types. With this option selected, RightCapital will use the individual rate of return associated with each investment type (e.g. taxable account, IRA, etc.) rather than the Current Allocation when calculating portfolio return. In other words, all investment types will grow based on their own separate rates of return.
Please note that when using No blending across account types, you will be unable to:
Apply a glide path or use pre- and post-retirement allocations
You can switch between allocation methods freely in the Gear Icon > Settings > Methodology tab for a client, without losing any data entered into the client plan. This can be useful for visualizing the differences that allocation methods will have on a client's projections.
The best place to visualize a client's allocation method is within the Investment > Allocation Path tab. The Allocation Path moduleallows you to easily illustrate to a client how their investment strategy will change over time:
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