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Scenario analysis tools in financial planning


Fidelity - Fidelity

Scenario planning takes into consideration different parameters and provides useful insights, to allow you to help your clients prepare for various future circumstances. By analysing a spectrum of potential situations and outcomes, it enables you to create powerful and easy-to-understand plans to futureproof your clients against risks and take advantage of opportunities.

Advantages and disadvantages of scenario analysis

In the past, scenario analysis was done using spreadsheets, which is time consuming, demands the use of multiple documents and can lead to costly mistakes. It also prevents you from stress testing different scenarios and their outcomes, making planning much harder. Plus, static models are used, meaning they can’t be updated automatically in real time.

All the above can complicate the analysis process, making it harder for you to clearly communicate and present information to your clients. However, modern software tools and automation have changed things for advisory firms who can now enjoy the benefits of scenario analysis tools. Next-generation tools, like Conquest, simplify the advice process, while keeping costs down. Here are just few of Conquest’s benefits:

  • Offers the ability to plan quickly and more accurately, leaving no room for mistakes.
  • Enables you to test unlimited strategies in real-time to help your clients make informed, data-led decisions about their future and confidently deal with change.
  • Familiarises clients with scenario analysis risk management, helping them understand potential dangers that could lead to negative outcomes.
  • Promotes proactivity, business growth and opportunities, encouraging clients to prepare for potential gains and losses from investments and spot opportunities they might have missed otherwise.
  • Delivers data-driven strategies, creates conversations with clients around potential strategies and empowers them to actively participate in the advice process through a customer-centric design.

Performing financial scenario analysis with Conquest

With Conquest you can easily demonstrate how different strategies can affect client goals, examining multiple inputs that could impact cash flow, revenue growth and net income. 

Conquest’s scenario analysis technique presents current and recommended strategies, as well as scores the success rate to help your clients make informed and data-led decisions. 

How do you do a scenario analysis in Conquest? 

After you’ve added client information and set up the plans in the Conquest software, you can apply hypothetical ‘what-if’ scenarios, following the steps below. 

  • Step 1: Add a ‘what if’ scenario

    Choose a scenario to test from our list, including market crashes, disappointing return rates, inflation, and life expectancy.
  • Step 2: Check how client goals are impacted 

    Use the dropdown menu to select and see in detail how a specific goal is affected by each ‘what-if’ scenario. The system will then suggest strategies to combat and/or manage them.
  • Step 3: Review the suggested strategies for each scenario

    The suggested strategies are broken down into proactive and reactive ones, showing what actions your clients need to take immediately or later on. 

As you select a strategy, the what-if panel will automatically be populated, while you can adjust or remove suggested strategies if you need to.

Once you’re happy, you can review and confirm your plan and suggested actions for your client. 

See a Conquest planning demonstration here.

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