How does Timeline differ from other cashflow tools?
If only I have a penny for every time we’ve been asked that question! I would have retired by now, enjoying a decent, sustainable withdrawal from the fund built up entirely from answering the question.
The standard response, of course, is… ’Well, Timeline is NOT a cashflow tool. It’s the next-generation retirement income software.’
Which is true! But it probably doesn’t quite roll off the tongue. We understand the natural human instinct is to lump things into categories. It’s a useful shortcut that reveals our innate biases, but it doesn’t do a good job when it comes to understanding the true purpose of a thing.
So, we came up with a straightforward and visual way to illustrate how Timeline differs from traditional cashflow tools. After all, a picture, they say, is more than a thousand words!
Cashflow tools have their place in financial planning, but they are not built for decumulation. Timeline is specifically built to illustrate and manage sustainable withdrawal from retirement portfolios.
Cashflow tools don’t do this. Nor should they.
- Cashflow tools can’t illustrate sequence risk as well as longevity that is inherent in income drawdowns. They certainly don’t use extensive empirical data to do so. Timeline does.
- Cashflow tools don’t apply 25 years of academic and practitioners to the decumulation challenge. Timeline does.
- Cashflow tools don’t demonstrate the impact of asset allocation glide-paths, rebalancing option and asset class withdrawal order on client outcome in retirement. Timeline does.
- Cashflow tools don’t craft a personalised Withdrawal Policy Statement for clients. Timeline does.
When it comes to decumulation, cashflow tools fall under what eminent financial adviser and author Dr. William Bernstein calls ‘retirement calculations from hell’. Why? Because they ‘all make the same erroneous assumption – that your expected rate of return is the same each and every year.’ Timeline DOESN’T! And this is why we don’t like to be put in the same category.
Nobel Prize Winner Prof Bill Sharpe Ratio frame calls decumulation ‘the nastiest hardest problem in finance’. Timeline approaches this with extensive empirical evidence and rigour and delivers the output in a simple, and elegantly that is meaningful to clients. And that’s what separates Timeline from cashflow tools.