There are no graphs or charts. It just shows the values of the amounts used throughout the model. It is extremely easy for a person to follow how all the numbers flow from one page to the other.

 

These books are very cumbersome. Numbers are hard to follow from one schedule to another. When we ask our clients about the content they normally have no clue. Many times we have even asked the broker and even they can’t interpret the data without talking to the programmer.

 

This model takes all the annual recurring expenses and non-recurring expenses, year by year, into consideration. Things like auto purchases, weddings, house improvements and the like are ALL considered. This number is mathematically checked for accuracy to make sure the base assumptions are good going forward.

 

 

They allow a client to summarize the annual expenses without getting into the detail. None of the numbers are questioned. Most clients will indicate the total cash out as a recurring expense and forget that they just put an addition onto a house or some other one-time event. For the non-recurring expenses, they normally only question college, not all the other large one-hit expenses that we all incur in life. As a result of using less detailed information, the results are dramatically less accurate.

 

At the end of every projected year, there is an indication of where your net worth should be. If at any time, you stray off course, it could damage the probability of the model. As indicated above, it is very easy to see these numbers. On an annual basis we post the actuals vs. projected and respread the future to accommodate any permanent changes.

 

 

Although the firms would like to profess to do the monitoring, in most cases we have seen, this is not being done consistently. Without the monitoring it causes many people to not stay on track and ultimately not achieve their goals.

 

Having a model prepared by an independent 3^rd party gives the client a lot of comfort that strictly their interests only are being considered. We are looking at many other factors beside the investments. Things like insurance, estate planning, option planning, etc. are being considered and many recommendations can come from having an outside party prepare the model.

 

There is an illusion (that may not be true) that the model is being prepared solely to get the client to give more assets.

Although there is a cost for the model, it has been proven over and over that this cost creates an emotional attachment for the client to want to complete the model properly and interact with the data in the future. Also, because there is a fee to GCD, we are even more motivated to constantly fix the model and make it more valuable.

 

 

There is no fee because most of these firms are not set up to collect for their services, only on assets and investments. In general we have found that since people don’t pay for these, they don’t spend as much time to gather data to complete them properly nor follow them.

This model mathematically determines the rates of return you will need in order to attempt to achieve all your goals. Although it starts out with a specific rate, we have the ability to lower the rate every 10 years thereafter in order to slowly move toward a rate that would require less equities and could handle more fixed income.

 

 

These models come up with only one rate that you will need and assume that you can handle the risk associated with that rate throughout your life.

All are based on actual formulas in place at the time of preparation. This includes federal, state and payroll taxes. 

 

These models include a flat percentage for federal taxes based on your current tax and can only increase by inflation. They cannot adjust for differing levels of income nor do they include payroll taxes.

 

Because we wrote the model ourselves, we have extreme flexibility to deal with current issues and change affected formulas and output. Recently, this has included the change in capital gains rates; the change in federal rates; the discounting of social security expected to happen in 2042; the reserving of cash requested by a client, etc.

 

 

These programs are all mandated by the mother ship. Since they have to use a team of programmers, or an outside firm, that is not as focused on the value of the software, they don’t update the software that often. Then, when a new version is deployed, it takes a while to get trained and used properly.

There are no assumptions in this model made by us. All of the assumptions come from you, with our guidance. This includes things like inflation rates, college inflation rates, pay raise percentages, etc.

 

They do have the ability to include inflation rates but not a different rate for college. These models also don’t have the ability to alter the percentage increases in salaries throughout time. Again, the results are much less accurate.

 

This is the best part of the GCD model. In the end, because of all of the items above, it has a 100% success rate of getting people to take some kind of action with their investments. We have always felt that if the results of our model were not going to change the future path for our client, then why do it. 

 

We have heard many people refer to these books as “doorstops”. We have met clients that have had several of these prepared over the years but few understand the contents, let alone can take an action from them.