AdvicePlus Frequently Asked Questions

[Top] What is AdvicePlus?

MasteryPOINT’s AdvicePlus is an optional service that includes investment and retirement preparation education and support, such as retirement calculators and interactive education modules.

The “First Look” option can quickly generate investment recommendations using assumptions and information from the recordkeeping system.

The Action Plan provides income replacement analysis by comparing your current annual retirement income goal, the suggested goal and the probability of reaching each goal. For more specific and personalized recommendations, you can enter additional information to create a more detailed Action Plan.

[Top]What is the charge to use AdvicePlus?

You are eligible to receive investment advice through the AdvicePlus service at no charge to you.

[Top]How does AdvicePlus calculate future retirement income and wealth values?

Using the available investment options in your plan, AdvicePlus identifies each option as belonging to an asset class, or set of asset classes. For each asset class, AdvicePlus maintains statistics and assumptions data. Using that asset class data and your balance in each asset class, AdvicePlus suggests a portfolio mix of asset classes representing a combination of your plan investment choices that produces the probability of obtaining the highest return for your selected risk level.

Once a suggested portfolio is determined, AdvicePlus then estimates the amount of wealth this portfolio and your current portfolio could accumulate from now until your retirement date by running Monte Carlo simulations.

The simulation step produces 1000 wealth scenarios that consider your account balance and savings levels, the randomness of the economy, the markets, and the inter-related behavior of the various different types of investments. The simulation step is performed separately for both portfolios.

The 1000 wealth scenarios are sorted and summarized. Your “most likely” income value is the annual amount of income that your “most likely” wealth can generate. This value is computed by determining the annuity payment (keeping pace with inflation) that your “most likely” wealth value could generate from your retirement date through your remaining life expectancy using a 5% discount rate. If you have included Social Security or defined benefit estimates in your analysis, those amounts are added to your “most likely” income. AdvicePlus provides a side-by-side comparison of the “most likely” wealth and income values for your current portfolio and the suggested portfolio.

[Top]How does AdvicePlus calculate my probability of reaching a retirement goal?

The results of the Monte Carlo simulation step are summarized (see above). The percentage of the 1000 wealth scenarios that generate enough income to meet or exceed your retirement income goal is the probability of reaching your retirement goal. Note that the computed probabilities greater than 95% are set to 95% and those less than 5% are set to 5%.

[Top]How does AdvicePlus calculate my retirement income goal?

AdvicePlus computes your retirement income goal by growing your current salary at the indicated annual rate until your specified retirement date. The resulting amount is multiplied by your specified retirement income goal percentage to determine an income goal in the first year of retirement. That income goal continues to grow by the inflation rate during each year of retirement. If you enter spouse or partner salary information, that salary amount is also included in the goal computation with allowances made for the possible timing differences brought about by different ages and retirement ages for the spouse/partners.

[Top]How is my risk tolerance measured?

You can measure your tolerance for risk using the optional AdvicePlus Risk Advisor tool.

Based on your answers to the Risk Advisor questions, you will be assigned a risk score. AdvicePlus then uses your risk score, your time horizon, and the makeup of your other portfolios (if any) to suggest a mix of investments with the highest return potential that may be appropriate for you. You can then choose whether or not to accept the AdvicePlus portfolio suggestions.

[Top]How does AdvicePlus measure the risk level of my portfolios?

Using the available investment options in your plan, AdvicePlus identifies each option as belonging to an asset class, or set of asset classes. For each asset class, AdvicePlus maintains a number of statistics and assumptions. Using that asset class data and your asset allocation, AdvicePlus computes the portfolio standard deviation, a statistic used to measure the volatility (risk) of your investments.

[Top]How are outside assets (spousal or household) included in the analysis?

You may choose to include outside assets in your analysis by manually entering information about them. If you include outside assets, your future retirement wealth and income will be affected.

Analysis of outside assets uses the current balances and annual savings of those assets in the wealth simulation process. Allocations of future investments are based on the current allocation of the assets. The analysis for the suggested strategy assumes that the rates and investment selections for the spousal and outside assets remain unchanged and continue until retirement.

AdvicePlus will generate a suggested portfolio allocation for your plan assets that will align your total portfolio as closely as possible to your target risk and time horizon.

[Top]How does AdvicePlus determine if I am on track?

Based on the information and assumptions you provide, and the information from the recordkeeping system, AdvicePlus determines how much wealth you are likely to accumulate by your future retirement date. It then determines how much annual income your accumulated wealth can be expected to generate in your retirement, and compares it to your retirement income goal. If your income exceeds your goal, you're on track. If you have a retirement income shortfall, you're not on track.

[Top]How does AdvicePlus come up with a suggested strategy?

AdvicePlus considers several factors when determining a suggested strategy: contribution rate, risk tolerance, retirement age, and income goal. Your suggested strategy may include one or more of the following changes:

• Increased contribution rate
• Increased retirement age
• Decreased income goal

While determining a suggested strategy, AdvicePlus includes limits on each of the items above. For example, AdvicePlus will only suggest that you retire up to 2 years later than your indicated retirement age. As a result of these limits, the system cannot always find a successful strategy in which the probability of meeting your goal is above 90 percent. In those cases, you should seek the assistance of a financial advisor. You may also use the Design Custom Strategy option to explore other strategies without the limits imposed by the suggestion algorithm.

[Top]What can I do if my suggested strategy does not reach my retirement goal?

Although the suggested strategy may improve your retirement strategy, it may still result in a probability that is less than the suggested 90 percent. If your suggested strategy does not reach your income goal, you may need the assistance of a financial advisor. You may also use the Design Custom Strategy option to explore other retirement strategies. This option allows you to adjust your contribution rate, risk level, retirement age and income goal. The suggestion algorithm imposes limits on each of these factors when determining a new strategy. The Design Custom Strategy option allows you to make adjustments without these limits.

[Top]How do I make the changes AdvicePlus suggests in my Action Plan?

When you accept the Action Plan in AdvicePlus, the changes are automatically fed back into the recordkeeping system and updated in your retirement account.

[Top]What should I know about the AdvicePlus tool?

MasteryPOINT Guidance Plus is a sophisticated retirement planning tool designed to provide you with valuable help in reaching your retirement goals. However, MasteryPOINT Guidance Plus' forecasts and projections are derived from mathematical modeling techniques of the economic and financial markets that may or may not reflect actual conditions and events.

IMPORTANT: The projections or other information generated by this Strategy Builder regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investments results and are not guaranteed. Strategy Builder does not evaluate every possible investment or strategy you could use, particularly when considering investments outside of your employer sponsored pension plan. As a result the recommendations of Strategy Builder may not have considered investments or strategies that would produce similar or superior results. Additionally, the results provided by Strategy Builder may vary with each use and over time.

The suggestions of asset allocation strategies furnished through the Strategy Builder and the projections and advice furnished through the Advice section are based on information you provide about your current financial, personal, and family status, as well as on general market and financial conditions existing at the time that you utilize the MasteryPOINT Guidance Plus service. While MasteryPOINT Guidance Plus can provide you with insights on which investment alternatives offered by your Plan appear to best fit your retirement needs, you are solely responsible for using your own best judgment to choose the investments that are most suitable for you.

METHODOLGY

AdvicePlus creates its suggested portfolio using a sophisticated mathematical process called “portfolio optimization” to generate a set of asset mixes for the participant at various risk levels. To estimate each participant’s tolerance for risk, AdvicePlus incorporates a risk measurement tool. Investment Technologies/ Risk Advisor Tool presents a series of ten questions to the user in order to map his/ her personal investment risk level onto a 100 point scale with 1 being the most risk averse and 100 being the most risk tolerant. The set of efficient portfolios produced is also mapped to the risk scale with each portfolio associated with a specific level of risk.

Once an efficient portfolio is determined, the user will receive (upon acceptance of an advice agreement) fund-specific advice recommendations based on their plan investment options. Each fund is scored using a fund scoring methodology provided by Schlindwein Associates, LLC. Each fund is assigned a Total Rank Score based on four fund measures: measures for fund expenses, fund consistency, fund manager experience, and fund risk/ return.

Each suggested portfolio is evaluated using another mathematical process called Monte Carlo simulation to generate potential retirement date wealth values that may be produced by that portfolio. AdvicePlus computes 1000 such simulated wealth valuations for the suggested portfolio and ranks them in order of increasing wealth. The “most likely wealth value” is the 10th percentile value, which means 900 of the 1000 simulated valuations exceeded this value. The “likely wealth value” is the 50th percentile value, or the point at which 500 of the 100 simulated wealth values exceeded this value. The “least likely wealth value” is the 90th percentile value, or the point at which 100 of the 1000 simulated wealth values exceeded this value.

LIMITATIONS AND KEY ASSUMPTIONS

1. The AdvicePlus model’s optimization and Monte Carlo simulation steps require assumptions for rate of return, standard deviations, and correlations to produce the projections. Published historical return, standard deviations, and correlations information (computed 1926 – present) for all asset classes available in the participant’s plan and for the inflation rate are used for these assumptions. Since AdvicePlus results are computed using these historically based assumptions, the suggested portfolios produced may vary over time and with each use. There is no guarantee that the future performance of various asset classes over time is related to past performance.
2. Monte Carlo Simulations are used to estimate retirement wealth. There is no assurance that simulated results can be used to predict actual results of any investment portfolio.
3. AdvicePlus uses portfolio standard deviation as a measure of risk. There can be no assurance that historical standard deviation predicts the actual risk of any historical or future investment portfolio, or that it captures all of the risk factors associated with investing in any security or group of securities.
4. The Risk Advisor uses a series of questions to estimate the participant’s tolerance for investment risk. There is no guarantee that the questionnaire captures the participant’s actual tolerance for risk.
5. The Schlindwein fund score is based on four measures applied to each of the participant’s plan funds. Fund expenses, fund consistency, fund manager experience and fund risk/ return characteristics are used to evaluate and rank funds. There is no guarantee that funds with higher rank scores will perform better in the future than those with lower scores.
6. There can be no assurance that any of the suggestions for modification of participant savings level, participant retirement age, participant retirement goal, or participant risk level will generate any specific level of retirement date wealth or income in retirement.
7. The AdvicePlus tool will only use available plan investments in its suggestions. The available plan investments may not be appropriate for all participants.
8. AdvicePlus does not make a determination about the overall quality of the plan investments. The Suggested portfolio will be made up of those investments deemed to be the best of those available.

OTHER RISKS AND LIMITATIONS

MasteryPOINT Guidance Plus cannot independently monitor, review, or update the recommendations or projections you receive from us, nor does it have the capability to monitor or review the investment decisions you make based on our recommendations or projections. Because MasteryPOINT Guidance Plus' utility depends on the completeness, accuracy and timeliness of the information you provide, you are solely responsible for reviewing and updating information within MasteryPOINT Guidance Plus. You understand that you must provide complete and accurate information when requested by MasteryPOINT Guidance Plus in order to get meaningful from it.

Consult with your financial professional to discuss how other investment options can be combined with your MasteryPOINT Guidance Plus allocations to best meet your overall retirement or other financial goals.

Mastery Point is an independent Registered Investment Advisor and is not an affiliate of any of the Companies of OneAmerica.