The Compass Report is a comprehensive financial tool designed to provide individuals with a detailed analysis of their current financial situation and potential future scenarios. This report aims to assist clients in making informed financial decisions by illustrating various concepts and strategies tailored to their specific needs. Here’s a summary of how the Compass Report functions and what it entails:
Conceptual Nature and Limitations
The Compass Report is inherently conceptual, meaning it is designed to illustrate financial concepts rather than predict precise future outcomes. It is important to note that past performance does not guarantee future results, and diversification or asset allocation strategies do not eliminate the risk of loss. This report should not be used as a substitute for official account statements or tax documents, and clients are advised to review all product features, risks, charges, and penalties with their Financial Services Professional (FSP) before making any financial decisions.
Role of the Financial Services Professional
The FSP plays a crucial role in the creation and interpretation of the Compass Report. They are responsible for ensuring the report reflects accurate and complete information based on the client’s financial data. The FSP also helps tailor the report to address the client’s specific objectives, risk tolerance, and financial needs. It is imperative for clients to maintain open communication with their FSP, updating them on any changes in their financial circumstances to keep the report relevant and accurate.
Current Accounts and Custodial Statements
Information about current accounts included in the report is based on data provided by the client. However, it is crucial to cross-reference this information with actual custodial statements for accuracy. The report is intended for illustrative purposes and should not be used for tax, legal, or lending documentation.
Withdrawal Order and Tax Considerations
The Compass Report outlines the order of withdrawals from various accounts and the tax implications of these withdrawals. Withdrawals typically occur at the beginning of the year, with growth applied to the account afterward. For interest-only withdrawals, growth is applied during the year, and interest is withdrawn at year-end. The report provides estimated tax considerations, but clients should not rely solely on these estimates for tax filings. Actual tax liabilities, including potential capital gains from the sale of appreciated assets, may differ significantly from those illustrated in the report.
Income Riders and Withdrawal Calculations
When dealing with annuities that include income riders, the report illustrates the impact of withdrawals on both the Accumulated Value and the Income Rider Value. The withdrawals are either taken proportionally from both values or equally, depending on the method used. This ensures that clients understand the financial implications of withdrawing from annuities.
Probability of Success Feature
For scenarios utilizing the Probability of Success feature, income riders are considered guaranteed income, regardless of the account value. This feature helps clients gauge the likelihood of achieving their financial goals under different scenarios, enhancing their understanding of potential outcomes.
Static Rate Assumptions and Actual Variability
The report typically uses static rates of return to project future values, which means it does not account for the variability of market returns or advisory fees and commissions. The actual performance of a portfolio may differ due to these factors, and clients should consider this when interpreting the report’s projections.
Important Disclosures and Legal Advice
The Compass Report includes proprietary information from Nextek, LLC, a software company that provides the data and analysis used in the report. However, neither the Federal Benefits Advisory Group, nor Nextek, LLC offers legal, tax, investment, or accounting advice. Clients must consult their personal attorney, FSP, accountant, or tax advisor for specific advice tailored to their circumstances. The report is meant to supplement official documents like prospectuses and disclosure brochures, not replace them.
Comprehensive Financial Planning
Overall, the Compass Report is a valuable educational tool that helps clients visualize their financial landscape and explore various strategies to achieve their goals. By working closely with an FSP and continually updating the report with accurate information, clients can make informed decisions that align with their long-term financial objectives. The report’s detailed analysis of asset allocation, withdrawal strategies, and tax implications ensures that clients have a thorough understanding of their financial situation and the potential impact of different decisions on their future wealth.
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