METHOD AND SYSTEM FOR COMPUTING PATH DEPENDENT PROBABILITIES OF ATTAINING FINANCIAL GOALS

• US 20060190372A1
• Filed: 04/17/2006
• Published: 08/24/2006
• Est. Priority Date: 07/31/2000
• Status: Active Grant

• Current Assignee: J.P.Morgan Advisory Services, Inc.
• Original Assignee: J.P.Morgan Advisory Services, Inc.
• Inventors: CHHABRA, Ashvin Bonafede, Zaharoff, Alexander G.
• Granted Patent: US 7,509,279 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 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

A method and system for computing the probability of attaining one or multiple financial goals is disclosed. Each goal is analyzed and reduced to a series of cash flows. A threshold criterion of success is established. A plurality of paths are generated. Each path is checked on the basis of the success criterion established earlier and those that do not meet the success criterion are considered failures. The probability of success is a function of the paths that are not failures

Claims

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17. A method of using a computer to provide financial advice to a user, the method comprising:

receiving personal financial data from the user;

receiving financial goal data relating to at least one financial goal of the user;

storing at least one criterion for success;

processing, using a financial advice engine, the personal financial data and the financial goal data according to the at least one criterion for success, so as to determine a probability of meeting the at least one financial goal; and

alerting the user as to the probability of meeting the at least one financial goal.

18. The method of claim 17 further comprising electronically providing financial advice to the user, the financial advice based on the personal financial data and the financial goal data.

19. The method of claim 17 wherein the at least one financial goal comprises a plurality of financial goals, each selected from the list consisting of:

retirement goal, savings goal, educational payment goal, and home ownership goal.

20. A method of using a computer to provide financial advice to a user, the method comprising:

receiving personal financial data associated with the user, the personal financial data comprising user portfolio information relating to a user portfolio and financial goal information relating to at least one financial goal;

storing the personal financial data;

processing, for each of a plurality of paths and using a Monte Carlo simulation, the personal financial data and at least one datum selected from the group consisting of;

current regular income data, savings data, asset class data, expense data, and cash flow data;

analyzing the user portfolio based on results of the step of processing; and

forecasting, based on the step of analyzing, the probability of meeting the at least one financial goal.

21. The method of claim 20 wherein the at least one financial goal comprises a plurality of financial goals, each selected from the list consisting of:

retirement goal, savings goal, educational payment goal, and home ownership goal.

22. A method of using a computer to provide financial advice to a user, the method comprising:

receiving user portfolio information comprising data selected from the group consisting of;

current income data, savings data, asset class data, expense data and cash flow data;

receiving user financial goal data relating to at least one user financial goal;

electronically simulating a plurality of portfolio paths using a probabilistic modeling technique and based upon the user portfolio information;

determining, for each of the plurality of portfolio paths, a probability of achieving at least one related financial goal; and

conveying portfolio analytics information to the user, the portfolio analytics information relating to results of the step of determining.

23. The method of claim 22 wherein the probabilistic modeling technique comprises a Monte Carlo simulation.

24. The method of claim 22 wherein the at least one user financial goal comprises a plurality of user financial goals, each selected from the list consisting of:

retirement goal, savings goal, educational payment goal, and home ownership goal.

25. A method of using a computer to provide financial advice to a user, the method comprising:

receiving data identifying a user portfolio;

receiving data identifying a plurality of income streams;

generating, in the computer, a probabilistic distribution of outcomes for the user portfolio; and

determining, based on the step of generating, a probability that the user portfolio will generate the plurality of income streams, wherein the probability that the user portfolio will generate the plurality of income streams is at least partially based on a sum of probabilities resulting from the step of generating.

26. The method of claim 25 wherein the step of generating comprises conducting a plurality of Monte Carlo simulations.

27. The method of claim 25 wherein the plurality of income streams are each selected from the list consisting of:

retirement goal, savings goal, educational payment goal, and home ownership goal.