It’s never going to be easy for advisors to assuage retirees’ fears during turbulent economic moments, but one powerful tool, according to Derek Tharp, is the power of storytelling.
Tharp, a retirement researcher and financial planning expert, is a big fan of an emerging planning technique called “historical market visualization,” or “HiMaV” (pronounced “High-Mav”).
Unlike Monte Carlo projections, HiMaV's framework can show clients exactly how their current portfolio and guardrails-based income strategies would have performed during earlier periods of significant market losses.
The underlying math is similar to using risk-based guardrails to project possible future spending changes for retirees, but grounding the information in a historical context seems to provide even greater peace of mind for clients. HiMaV’s simplified-but-not-simple visual aids help show the real causes of spending adjustments required during prior market crashes.
Tharp explores these concepts in an in-depth new analysis published on Kitces.com. The key practical takeaway for advisors is the need to move away from statistical communications steeped in abstract probabilities of success and failure.
Instead, Tharp says, techniques like HiMaV can show clients much more clearly how sticking to a curated plan that adjusts to evolving market conditions can prevent the worst outcomes — even during the worst periods.
Advisors, then, could use HiMaV and related planning approaches to give clients a better appreciation of what adjustments they might have to make if the Trump administration’s trade war sparks a serious recession.
Making the Abstract Tangible
As Tharp explains, with HiMaV "we are transforming theoretical concerns into visible patterns of portfolio depletion and spending cuts that clients can literally see unfolding. When an advisor says, ‘Your strategy would have maintained 95% of your initial spending power through the Great Recession,’ clients immediately grasp the implications.”
This is far less true when advisors present traditional Monte Carlo projections with phrases like, “Your strategy has a 92% probability of success.” Unless clients are statistically inclined, these metrics carry little meaning, and in fact they often mislead.
“Clients may forget specific Monte Carlo success probabilities within days, but they’ll remember for years that their strategy would have weathered the Great Recession with only minor spending adjustments,” Tharp suggests. “Historical narratives also naturally bring cause-and-effect relationships to life.”
So instead of simply showing that spending would have needed to decrease by X amount for Y years during the stagflation of the 1970s, HiMaV helps illustrate why it decreased: Inflation eroded purchasing power at the same time that equity markets performed poorly.
“This level of understanding is something that probability of success results alone cannot provide,” Tharp says. “Monte Carlo simulations, by contrast, generally reduce all planning insights — including how a strategy unfolds over time — into a single probability of success. This obscures the sequence of adjustments that would otherwise be visible in a real-world scenario.”
Making It Feel Real
For clients who lived through specific market periods, Tharp adds, HiMaV connects to autobiographical memory, transforming abstract concepts into extensions of personal experience.
“Major market events like the Great Depression, stagflation or the tech bubble function as shared cultural reference points that create a common understanding between advisors and clients of different ages, backgrounds and financial sophistication,” Tharp says.
Younger clients also benefit from narrative frameworks about historical periods they didn't personally experience, drawing on the emotional and intellectual lessons of previous market cycles through visualization.
A Developing Discipline
HiMaV techniques are still relatively new in retirement income planning, Tharp observes, but they will likely evolve to incorporate applications tailored for specific retirement income methodologies.
One approach with great potential, he noted, is combining HiMaV techniques with risk-based guardrails.
“Risk-based guardrails are arguably particularly well-suited for adaptation among advisors thanks to their ability to customize risk settings,” he writes.
Because risk-based guardrails can account for Social Security and other income sources to assess total risk, a set of parameters that looks conservative to one retiree — such as a low risk of downward spending adjustment — may not look as conservative to another.
While a challenge in its own right, this feature opens the door for deeper discussions between advisors and clients about their risk appetite and income planning preferences.
“For instance, one retiree may feel that a potential 10% spending cut is trivial, whereas another retiree may feel that 10% is way more than they could possibly cut back,” Tharp says. “For this reason, HiMaV helps further provide clarity when selecting a particular set of guardrails for a client.”
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