Fidelity has launched an online calculator called the Target Funds Illustrator, which is designed to...
Fidelity has launched an online calculator called the Target Funds Illustrator, which is designed to help clients understand how much money they should invest to meet a financial target and what the average returns might look like.
Make-up of the funds used in the calculator are based on the Fidelity Wealthbuilder Target Funds, so marketing bias tilts specifically at the content and maturity date of these funds.
That said, the make-up of such funds might be one of the asset allocation strategies which might be suitable for a client, because they use assumed returns of 8.5% pa from equities, 5.8% from investing in bonds and 3.7% in cash.
Using the tool is very simple as it simply asks you to select:
Once all information is entered, click the 'run projection' button the Illustrator will advise, with a graph showing projected returns, how much needs to be saved over time - if selecting regular payments, and how much potential capital there could be on top.
One of the additional features of the programme is information which even suggests investors do not need to save as much as they originally indicated, which should help you, the IFA, to persuade the client because less money is likely to being invested that the client than they might expect to pay.
A test run of the tool run - selecting regular investments of £70 per month inside an Isa, to achieve target amount of £5000 by 2010, our results indicated that paying £70 per month would produce our target and might present a surplus of £1,062 too, even with fluctuations in the growth rate of different asset allocations.
The Illustrator then pointed out in our example that reducing the payment to £58 per month should still achieve the same target by 2010, even with a fund designed to look like a distribution fund.
Partner Insight: Continuing the Architas education series for clients.
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