Stochastic modeling module for providing financial planning and advice

• US 20050004856A1
• Filed: 05/03/2004
• Published: 01/06/2005
• Est. Priority Date: 07/31/2001
• Status: Active Grant

• Current Assignee: Ameriprise Financial, Inc.
• Original Assignee: American Express Travel Related Services Company, Inc. (American Express Company)
• Inventors: Jenson, Jodi, Scarlato, Patricia, Brose, Gabriela, Vanney, Beth M.
• Granted Patent: US 8,306,885 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The present invention provides systems and methods for facilitating financial advising and planning for a user using a stochastic modeling module. In accordance with an exemplary embodiment of the present invention, the system includes a portfolio integration module for facilitating integration of a user'"'"'s goals, assets, savings, and risk tolerance to facilitate analyzing and developing a customized strategy for financial portfolio planning of the user. A portfolio reconciler module in communication with the portfolio integration module facilitates comparison of the customized strategy to other strategies and projected user financial decisions in order to further facilitate the financial portfolio planning of the user. A stochastic modeling module in communication with the portfolio integration module and the portfolio reconciler module for facilitating use of data from the portfolio integration module and the portfolio reconciler module in a stochastic modeling analysis using a synchronous stationary bootstrap sampling method to facilitate creation of a proposed situation portfolio for the user. A simulator module in communication with the portfolio integration module, the portfolio reconciler module, and the stochastic modeling module for facilitating forecasting the effects of the proposed situation portfolio on the user'"'"'s portfolio, and monitoring, simulating, designing, and testing the portfolio integration module, the portfolio reconciler module, and the stochastic modeling module.

Claims

1. A system for facilitating financial advising and planning, comprising:

a stochastic modeling module for facilitating use of data from the financial portfolio planning of a user in a stochastic modeling analysis using at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method to facilitate financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

2. The system of claim 1, further comprising at least one of a portfolio integration module, a portfolio reconciler module, and a simulator module in communication with the stochastic modeling module in order to further facilitate the financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

3. The system of claim 1, wherein estimating the p value in the bootstrap sampling method uses at least one of the following:

autocorrelation depending on lag alone; and

estimating standard errors of bootstrapped samples for an original series and comparing the estimated standard errors for independent bootstraps.

4. The system of claim 3, wherein estimating the p value includes arriving at a 1/p value between 25 and 50.

5. The system of claim 1, wherein creation of the proposed situation portfolio includes analysis of a normal life span, disability, long-term care, early death, life insurance information, disability insurance information, Social Security, social pension, asset structure, savings, goals, retirement information, expenses, tax structure of assets, savings, company pension information, and other factors affecting the user'"'"'s financial or personal situation.

6. The system of claim 5, wherein creation of the proposed situation portfolio further includes at least one of:

customized timelines for at least one of normal life span, disability, long-term care, early death, life insurance information, disability insurance information, Social Security, social pension, asset structure, savings, goals, retirement information, expenses, tax structure of assets, savings, company pension information, and other factors affecting the user'"'"'s financial or personal situation;

customized timelines for each member of a family; and

analysis of life expectancy on factors other than retirement information.

7. The system of claim 1, wherein the stochastic modeling module measures the probability of the user reaching at least one user goal.

8. The system of claim 1, wherein the stochastic modeling module is configured to perform about 6,750 simulation runs for the lifetime of the user in order to facilitate financial portfolio planning of the user and creation of the proposed situation portfolio for the user.

9. The system of claim 1, wherein determining a projection period for a lifetime simulation of the user includes

calculating the user'"'"'s current age by determining if the user'"'"'s month of birth is less than or equal to the month of the analysis start date, then the user'"'"'s current age is equal to the year of analysis start date minus the user'"'"'s year of birth, or

else the current age of the user is equal to the year of analysis start date minus one minus the user'"'"'s year of birth,

wherein the number of years in the projection period is equal to the user'"'"'s age at the end of the projection period minus the user'"'"'s current age.

10. The system of claim 9, wherein the processing order for simulating a lifetime of the user includes at least one of

determining an inflation rate and a growth rate for a current period;

applying the inflation rate to the current period but not a first period;

processing any Required Minimum Distributions (RMDs) and applying the tax on the RMDs;

processing any incomes of the user and applying the tax on any income, wherein the tax is equal to the taxable income multiplied by the average tax rate of the user;

processing any expenses of the user; and

adding any savings to the non-qualified savings and the qualified assets.

11. The system of claim 10, wherein the processing order for simulating the lifetime of the user further includes at least one of

determining if any after-tax income of the user and any RMDs exceed the user'"'"'s expenses and any phantom loan balances and savings to determine any excess, wherein the excess can be added to the non-qualified assets;

determining if the expenses and any phantom loan balances and savings exceed the after-tax income and RMDs to determine any shortage, wherein the shortage can be subtracted from the assets including the non-qualified assets, the non-qualified savings, the qualified assets of the user; and

calculating the end of any period asset balances and applying the growth to those balances.

12. The system of claim 11, wherein calculating any phantom loan balances of the user includes at least one of

creating a phantom revolving loan balance when the shortage has consumed the non-qualified assets and the qualified assets;

calculating the phantom revolving loan balance as the remainder of the shortage, increased by a phantom interest rate, wherein the phantom interest rate is calculated relative to a modeled inflation rate; and

adding the phantom revolving loan balance to any cash flow shortage or subtracting the phantom revolving loan balance from any cash flow surplus before applying the surplus or the shortage to the assets, so that any regular savings can pay down the phantom revolving loan balance.

13. The system of claim 11, wherein calculating any RMDs of the user includes at least one of

withdrawing the RMDs from the qualified assets starting in the period in which the user'"'"'s current age is 71 years old;

and

calculating the RMDs by using the beginning of the period balance for the user'"'"'s qualified assets divided by the number of periods remaining in the projection period for a lifetime simulation of the user, wherein the number of periods remaining in the projection period is equal to the user'"'"'s current age at the end of the projection period minus the user'"'"'s current age in the current period.

14. A method for facilitating financial advising and planning, comprising the steps of:

using data from the financial portfolio planning of a user in a stochastic modeling analysis which includes at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method; and

facilitating financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

15. A system for facilitating financial advising and planning, comprising:

a host system including a processor for processing data associated with a user;

a memory in communication with the processor for storing the data;

an input digitizer in communication with the memory and the processor for inputting the data into the memory; and

an application program stored in the memory and accessible by the processor for directing processing of the data by the processor, wherein the application program is configured to facilitate the steps of;

using data from the financial portfolio planning of a user in a stochastic modeling analysis which includes at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method; and

facilitating financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

16. A computer implemented method for facilitating financial advising and planning, comprising the steps of:

obtaining data in connection with a user via a communication channel in communication with a computer system having a memory and a processor;

storing the data in the memory and configuring, via said processor, the data to facilitate financial portfolio planning of the user; and

analyzing, via said processor, the data in a stochastic modeling analysis using at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method to facilitate financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

17. A system for facilitating financial advising and planning, comprising:

a host server for accepting and processing data in connection with a user;

a database in communication with the host server for collecting data on the user and for financial portfolio planning of the user;

a second database in communication with at least one of the host server and the database for using a stochastic modeling module for facilitating use of data from the financial portfolio planning of a user in a stochastic modeling analysis using at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method to facilitate financial portfolio planning of the user and creation of a proposed situation portfolio for the user.

18. A system for facilitating financial advising and planning, comprising:

a browser for submitting data to a web server, wherein the browser and the web server communicate via a communication channel and the data submitted to the web server includes information in connection with a user;

a stochastic modeling module associated with the web server for facilitating use of data from the web server in a stochastic modeling analysis using at least one of a stationary bootstrap sampling method and a synchronous stationary bootstrap sampling method to facilitate financial portfolio planning of the user and creation of a proposed situation portfolio for the user.