Braden Warwick

And where we ran into trouble in doing that was because we have so many asset classes.

We have our market cap weighted asset classes, our factor tilted asset classes.

And then internally, we also have a bunch of other asset classes like alternative investments and

individual stocks and things that we don't make public.

And we also don't recommend to our clients necessarily.

But it's really important for us to have in the planning software so that we can quantify those outcomes.

And if clients have questions about investing in a certain other type of asset class that we don't typically recommend, we can actually show how that impacts their financial plan directly rather than just having our story versus the story of another advisor that is trying to sell them something.

So when we do that today, all together, it ends up being, I think, 4 million data points that we end up sending over to conquest planning.

But it was going to be really difficult to add in those higher order moments and the way that we're doing it now.

So that's why it was really an exciting opportunity to engage John and a dedicated research team led by Professor Robbins to look at the better ways of doing this.

Coming back to geometric versus arithmetic means, I really want to set the stage here too, because this is an important one that I think most people are aware of, but I'm not sure that everybody fully understands when to use what and the implications.

Before I get into the details, I think it's important just to backtrack and define what a geometric mean is and what an arithmetic mean is.

I'll use a simple example just so that people can follow along.

If we have two years of returns, year one is a negative 10% return and year two is a positive 10% return,

we can see that the simple average of those two numbers is 0%.

So that is the arithmetic return.

But if we walk through what happens to your investment account subject to those returns over time, if you have $100 and it has a negative 10% return in year one, it comes down to $90.

And then if it's subject to a plus 10% return, that $90 becomes $99.

So at the end of that two-year period, you started with $100, you're left with $99.

Even though the arithmetic mean is 0%, you're still down $1 and you have a negative realized return over that two-year period.