Benjamin Felix

Right tail returns don't last forever in real life.

But it is interesting how it changes the mean because that right tail in the Gaussian distribution with random returns is totally uncapped, but the left tail is implicitly capped because financial plans stop, like failure happens when the assets run out and you don't get a big negative number.

People never believe, man.

I haven't been in client meetings like this for a while now, but I know advisors still have this issue.

When we show that long-term projection for someone who's 35 or 40 years old, and it says they're going to have all these tens of millions of dollars in the future, people are always a little bit skeptical.

So I mean, reining that in a little bit by improving our simulation process is great to show a more accurate number.

And I think it's more believable for people.

Yeah, that's such a good example.

People have trouble thinking about how much risk should I take?

Should I invest in this or that?

All that kind of stuff.

One of the ways that we always come back to is let's put it in the financial planning projection and see how it affects things.

People have a much easier time grasping this will change my expected retirement date or how much I have to save or how much I can spend in retirement.

Those are much more tangible data points for people to use to make investment asset allocation decisions.

But you're so right that for some stuff like, should I continue holding this individual stock or should I invest in this private markets fund or whatever?

Those have historically been a lot harder to show people in our planning projection, like using that same type of approach.

because for the reasons you've described, they often make things look good, even though we know that's not the right thing to show and the right expected result.

We didn't previously have the capability to model the components or the characteristics of the return distribution for those asset classes.

We're moving in that direction, which is very exciting.

After going through this and running the simulations, what are your main practical takeaways?