Stress Test Your Financial Plans Like a Billionaire

February 21, 2017

It’s not unusual for the Super Rich (those with a net worth of $500 million or more) to have family offices and a legion of professional advisors to help them create and implement financial plans. These advisors often perform “stress tests” on those plans to ensure they’re both state-of-the-art and in line with their clients’ needs and wants.

Here’s why you should be stress testing your plans, too—even if you’re not nearly as wealthy. 

What Is Stress Testing?

Essentially, stress testing is asking “what if …?” It’s looking at a range of possible scenarios and outcomes, pushing those scenarios to their breaking points, weighing viable solutions, and choosing plans that are most likely to deliver as desired.

Let’s look at estate planning, for instance. A wealthy individual might ask questions like:

  • What will actually happen to my assets when I pass on?
  • How will my family be affected?
  • Who will be tracking the hard assets (e.g., artwork and jewelry) so they go to the designated heirs—as opposed to vanishing?
  • Who will make sure my estate plan is being executed as intended? 

Stress testing helps people find the right financial solutions by seeing how their plans hold up when placed under intense theoretical pressure.


Why You Should Perform Stress Tests, Too 

Any financial plan has the potential for success and failure. A plan can look great on paper, but not perform well when executed. Unintended consequences can and do happen—derailing your hard-earned agenda. 

Stress testing will help you navigate uncertainty so that you can be more confident your plan will deliver as promised. When you examine your strategies with a series of smart “what if?” questions, you’re more likely to find the right solutions and achieve your desired results.