Market History Discussions

The Market History tool is designed to help you educate clients about how markets actually perform over time and illustrate how different product features can change the experience of those market returns.

 

Use it to select a market index and historical time period, compare average vs. actual rates of return, and demonstrate concepts such as floors, caps, buffers, spreads, participation rates, and fees.

Start With the Market History

The tool includes a variety of historical indexes, including:

• Dow Jones Industrial Average
• S&P 500 Price
• S&P 500 Total Return, including dividends
• Canadian TSX indexes
• Russell 2000
• NASDAQ
• World Equity
• 10-Year Government Bonds
• 20-Year Municipal Bonds
• 30-Year Corporate Bonds

Select the index you want to discuss and then choose the historical time period you want to illustrate.

This allows you to use actual market history to help educate clients about how different markets have behaved over time.

Average Return vs. Actual Return

One of the most important conversations you can have with this tool is the difference between an average rate of return and an actual rate of return.

Brian describes it simply:

Average is math. Actual is money.

An average return is calculated by adding the annual returns together and dividing by the number of years.

But that's not how an invested dollar actually grows.

The actual return shows what happened to the money as it experienced those gains and losses year after year.

For example, using the S&P 500 Price Index from 2000–2022, the tool shows:

• Average Rate of Return: 5.9%
• Actual Rate of Return: 4.26%
• $1 invested at the beginning: $2.61 at the end

This can help demonstrate why hearing that an investment “averaged” a certain return doesn't necessarily tell a client how their money actually performed.

Illustrate the Impact of Avoiding Losses

Next, you can use the Limited Return settings to demonstrate how changing the way an account participates in market gains and losses can affect the outcome.

Floor

Adding a floor allows you to illustrate what happens when negative market returns are limited.

For example, with a 0% floor, a year in which the index lost money would instead show a 0% return in the limited scenario.

This makes it easy to visually demonstrate the potential long-term impact of avoiding losses.

Cap

A floor is commonly illustrated along with a cap.

For example, setting a 12% cap means that if the selected index returned 26.38% in a particular year, the limited scenario would receive 12%.

You can then compare what happened over the entire historical period, rather than focusing on a single year's return.

In Brian's 2000–2022 example, applying a 0% floor and 12% cap resulted in:

• Actual Limited Return: approximately 6.6%
• Original $1: approximately $4.40
• Original market scenario: approximately $2.61

This provides a visual way to discuss the trade-off between participating in all of the market's upside and limiting exposure to its downside.

Other Settings You Can Demonstrate

Buffer

A buffer protects against the first portion of a loss.

For example, with a 5% buffer, a market loss of approximately 10% would result in a limited loss of approximately 5%.

Spread

Brian describes the spread as essentially the opposite of the buffer.

Instead of affecting losing years, a spread affects positive years.

With a 5% spread, the first 5% of a positive return is removed and the investor receives the remaining return.

Participation Rate

Use the participation setting to demonstrate what happens when an investor participates in only a specified percentage of the index's return.

Fees

You can also add a fee to illustrate how ongoing fees affect actual long-term results.

This is another area where looking only at averages can be misleading because money removed for fees is no longer available to compound in future years.

Multi-Year

The Multi-Year setting allows you to illustrate a two- or three-year look-back.

Brian notes that he doesn't use this setting as frequently, but it can be useful when illustrating an annuity or another strategy with a multi-year structure.

Make the Example Relevant to the Client

Instead of illustrating the results with a single dollar, you can enter an amount that is more meaningful to the client.

For example, enter $100,000 and show what would have happened to that money over the selected historical period under the different scenarios.

This can make the comparison much easier for a client to relate to their own financial situation.

Create a Report

Once you've created a scenario, you can generate a report showing:

• Annual returns
• Annual limited returns
• How the account value changed each year
• The ending value for each scenario

The report can then be downloaded, exported to Excel, or printed to PDF.

The Client Conversation

The real value of Market History isn't simply showing historical numbers. It's using those numbers to help a client understand how money behaves over time.

You can quickly change the:

Market → Time Period → Dollar Amount → Product Features

and use the results to explore questions such as:

• What's the difference between an average return and what your money actually earned?
• What impact did major market losses have on the ending value?
• What would have happened if those losses had been limited?
• What did you give up in positive years in exchange for that protection?
• How did those trade-offs affect the result over the entire period?

Rather than simply telling a client how a strategy works, Market History gives you a visual way to help them see it.