This post is a follow-up to our shameless Ginzu-Knife themed commercial for the Actuarial Financial Planner (AFP) in our post of July 21, 2022. Since that post, the AFP has received admittedly-indirect endorsements from two frequent financial writers. We describe these “endorsements” below.
In our post of August 10, 2022, we referred our readers to two podcasts from Dr. Wade Pfau and his Retirement Researcher team which described some of the planning benefits of using a household (or Actuarial) balance sheet approach like we use in the AFP over using Monte Carlo modeling used by many financial advisors today.
In his ThinkAdvisor article, “Liability-Driven Investing, Explained”, Roger Wohlner outlines the basic principles of LDI, which is a foundational component of AFP. Mr. Wohlner says,
“LDI is also gaining popularity with financial advisors to individual clients as a method to help match their retirement assets with their liabilities as part of their retirement income planning for these clients.”
and
“Liability-driven investing is about formulating an investment approach that matches the assets and the liabilities of the portfolio, along with considerations as to an appropriate level of investment risk. While there may be some differences in the execution, these principles apply whether we are talking about a pension portfolio or your individual client’s retirement portfolio.”
As former pension actuaries, we couldn’t have described the benefits of LDI better. In the AFP, we “do” LDI by advocating using non-risky assets to fund essential spending liabilities and riskier assets to fund discretionary spending liabilities.
We encourage financial advisors to check out our AFP to better serve their clients. And, of course, we encourage DIYers to try it as well.
