By modeling goals and expense funding for each year of a Jones Lang LaSalle client’s projected lifetime, cash flow planning reveals the true impact of chronological and priority goal funding on multiple client goals.  One of the biggest decisions clients make during their Jones Lang LaSalle retirement is if they should retire from Jones Lang LaSalle this year or next year.

By showing how asset allocation adjusts due to withdrawals—and the tax implications of those withdrawals— our advisors can more accurately assess client outcomes for each year and over time assist with choosing the best date to retire from Jones Lang LaSalle. With cash flow planning, clients can better determine where their money went and where it will go to help fund their life goals. This type of planning can be used at any life stage: early accumulators, mid-career accumulators, pre-retirees, and Jones Lang LaSalle retirees.

Early Adopters

Early Adopters can use cash flow planning to understand spending, saving, and the funding of emergency and Jones Lang LaSalle retirement accounts. Cash flow planning can start with a proper savings plan for early accumulators. As Financial planner Michael Kitces points out, “Good planning starts with putting the client’s financial house in order and making sure that a good savings plan is in place with the proceeds invested into a solid, diversified portfolio.”

Mid-Career Investors

Cash flow planning for mid-career investors can help them manage their spending so they can save for goals like paying for college and covering future healthcare expenses.

Pre-and post-retirement

Pre-retirees from Jones Lang LaSalle can use cash flow planning to show how current spending could translate into retirement spending, and the impact current spending has on funding all of their goals. Jones Lang LaSalle retirees can use cash flow planning to understand spending and the impact it has on the distribution of income to fund goals and outlive their retirement savings.  Finally one of the best uses of our cash flow tool is to determine if Jones Lang LaSalle employees should retire from Jones Lang LaSalle this year versus next year. 

Cash flow planning can help our clients from Jones Lang LaSalle stay on the right financial path by incorporating their entire financial situation, including income and expenses, investment performance, education funding, insurance, and estate planning. Cash flow planning can also help our clients from Jones Lang LaSalle understand where they’re losing money unnecessarily. Many families are unaware of the impact that fees, miscalculations, incorrect insurance, penalties, and all sorts of other charges have on their finances. On average, they’re bleeding a minimum of $200 a month. With the holistic view that cash flow planning provides, advisors have important points they can discuss with their clients during the planning process. Advisors are ultimately able to analyze data more fully and provide recommendations that serve the best interests of their clients. Gamma, a metric created by Morningstar Research, pinpoints the value of sound financial decisions.4 As seen in Morningstar’s Gamma study, “Gamma research demonstrates that making sound financial planning decisions in five areas—asset allocation, withdrawal strategy, guaranteed income products, tax-efficient allocation, and portfolio optimization—can generate 29% more income on average for a retiree.”

Additionally, by including a year-by-year trail of income and withdrawals, clients gain more robust Monte Carlo insights, as it will incorporate market volatility and the impact on the client’s portfolio assuming their particular planned flows and withdrawals. Morningstar Research also points to this value, “Using Monte Carlo simulation, we estimate a retiree can expect to generate 22.6% more in certainty equivalent income using a Gamma-efficient retirement income strategy when compared to our base scenario.”

To help our Jones Lang LaSalle clients understand the financial impact of their lifestyle decisions, our advisors focus their client meetings and plans around detailed cash flow projections. Our advisors use software to offer several output options and tools to facilitate this. These tools range from a detailed cash flow report showing annual simulations for inflows, outflows, and total portfolio assets, to an interactive tool called Decision Center, which allows the advisor to model recommendations in real time during a review meeting.

The cash flow simulation applies several key data points to project a client’s cash flow simulation.

• The simulation will utilize the client’s inflows which include income, investment distributions, planned distributions, and other inflows.

   

• Projections include total expenses for such things as living expenses, liability payments, insurance premiums, gifting, taxes, etc.

• Planned savings (also considered an outflow) include employee contributions to a qualified account, HSA, or taxable investment.

• The subtraction of total outflows from total inflows produces a net cash flow number, either positive or negative.

• Total portfolio assets will show the end-of year balance of all liquid investments such as taxable accounts, tax-deferred, cash, etc. Some factors that affect the ending total portfolio assets year over year include the growth rates associated with each account, as well as the ending net cash flow.

• If the client has a negative net cash flow, that deficit will need to be met from available portfolio assets via liquidation. If the client has a positive net cash flow, that surplus will be added to the client’s core cash account. The core cash account can be viewed as a hypothetical wallet that measures the client’s inflows and outflows. Advisors can opt not to save surplus cash at the end of the year if a client prefers.

An expense number can help advisors initiate cash flow planning conversations with Jones Lang LaSalle clients. Conversations about spending can be difficult especially if there are areas of concern that should be addressed. A budgeting solution can be an excellent tool for facilitating discussions on client spending and for assessing the impact of spending on a cash flow plan. We use budgeting tools to provide daily updates on a client’s spending transactions through connections to their financial institutions. The budgeting tool provides the advisor with an accurate picture of a client’s spending that can be utilized in cash flow simulation and can highlight areas where changes could be made.

It is also important for Jones Lang LaSalle employees to note that entering data, especially expenses, does not have to be time-intensive or too finely detailed in cash flow planning.  Your advisor and software provide a great deal of flexibility for entering expenses; from an annualized rollup of all expenses to the ability to create major expense buckets (like discretionary, etc), and the ability to complete a digital expense worksheet or categorize transactions on the Jones Lang LaSalle client site to assess a client’s true expenses in any given year. The time required for data entry depends on the amount of detail you need.

Account aggregation has shaped the financial planning landscape because it truly helps advisors plan with their clients. In cash flow planning, aggregation provides an up-to-date account balance with real-time information that improves a client’s cash flow projection.  Account aggregation connects with thousands of institutions to gather client account information, including balances, holdings, asset allocations, and more. By including accounts held away, aggregation ensures that the cash flow plan is comprehensive. Additionally, with this information, the advisor understands how an account accumulates for projection purposes. This helps the advisor make recommendations that better align with the client’s needs. These features fully integrated account consolidation (assets under management) and account aggregation (assets held away) functionality across both the advisor and client experiences. In total, more than $2 trillion in assets are linked through the platform. All linked accounts refresh automatically each day, updating values across the system, including financial plans. We use a  commercial aggregator, whereby more than 90 percent of this aggregation work is performed in-house by the team with a small portion of assets gathered through third parties.

1. United States Census Bureau, “2017 National Population Projections Table.” Available at: https://census.gov/data/ tables/2017/demo/popproj/2017-summary-tables.html. Accessed September 2018.

2. Michael Kitces, “A Hierarchy Of The Value A Financial Advisor Provides.” Available at: https://www.kitces.com/blog/hierarachyof- financial- advisor-value/. Accessed at March 2018.

3. Advisor News, “Here’s Why Advisors Need to Focus on Cash-Flow Analysis.” Available at: https://insurancenewsnet. com/in article/1491434#.XPl9iG5KhaS. Accessed April 2017.

4. Morningstar, “Alpha, Beta, and Now...Gamma.” Available at:https://www.morningstar.com/content/dam/marketing/ shared/research/foundational/677796- AlphaBetaGamma.pdf.Accessed August 2013.

5. Morningstar, “The Value of Advice: What Investors Think,

   What Advisor Think, and How Everyone Can Get on the Same Page.” Available at: https://bit.ly/2XwYNpE

   Accessed April 2019.

6. eMoney ROI Survey, Tech Validate, March-April 2019, n=

   341,*n=180, 95% confidence level with a +/- 8% margin of error

The Retirement Group is a nation-wide group of financial advisors who work together as a team.

We focus entirely on retirement planning and the design of retirement portfolios for transitioning corporate employees. Each representative of the group has been hand selected by The Retirement Group in select cities of the United States. Each advisor was selected based on their pension expertise, experience in financial planning, and portfolio construction knowledge.

TRG takes a teamwork approach in providing the best possible solutions for our clients’ concerns. The Team has a conservative investment philosophy and diversifies client portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks and other investments to help achieve their goals. The team addresses Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care issues. This document utilizes various research tools and techniques. A variety of assumptions and judgmental elements are inevitably inherent in any attempt to estimate future results and, consequently, such results should be viewed as tentative estimations. Changes in the law, investment climate, interest rates, and personal circumstances will have profound effects on both the accuracy of our estimations and the suitability of our recommendations. The need for ongoing sensitivity to change and for constant re-examination and alteration of the plan is thus apparent.

Therefore, we encourage you to have your plan updated a few months before your potential retirement date as well as an annual review. It should be emphasized that neither The Retirement Group, LLC nor any of its employees can engage in the practice of law or accounting and that nothing in this document should be taken as an effort to do so. We look forward to working with tax and/or legal professionals you may select to discuss the relevant ramifications of our recommendations.

Throughout your retirement years we will continue to update you on issues affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates. You may always reach us at (800) 900-5867.

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