--- title: "Hidden Value: Probability of Success vs. Consequence of Failure" description: In ThinkAdvisor, Joe Elsasser, CFP®, discusses the shortcomings of Monte Carlo simulations and the importance of identifying the consequences of failure. image: https://www.covisum.com/hubfs/think-advisor-logo-blog.jpg --- [Login](https://www.covisum.com/login-experience) | [Call: 402-235-4500](tel:1-402-235-4500) | [Contact Us](https://www.covisum.com/contact) ** [![covisum-logo](https://www.covisum.com/hs-fs/hubfs/covisum-logo.png?width=264&height=41&name=covisum-logo.png "covisum-logo")](https://www.covisum.com/) [![Start Your Free Trial](https://no-cache.hubspot.com/cta/default/2755909/b23743cd-d0df-4907-a66d-293b58ab1164.png)](https://cta-redirect.hubspot.com/cta/redirect/2755909/b23743cd-d0df-4907-a66d-293b58ab1164) [![Contact Us](https://no-cache.hubspot.com/cta/default/2755909/6c6d7fe7-e094-4fc0-9c82-d93d4ccbb532.png)](https://cta-redirect.hubspot.com/cta/redirect/2755909/6c6d7fe7-e094-4fc0-9c82-d93d4ccbb532) # Hidden Value: Probability of Success vs. Consequence of Failure [IN THE NEWS  |  ](https://www.covisum.com/blog/topic/in-the-news)4/22/19 8:37 AM  |  by [Lauren Laferla, Director of Communications](https://www.covisum.com/blog/author/lauren-laferla-pr-content-marketing-manager) ![thinkadvisor-footer-logo](https://www.covisum.com/hs-fs/hubfs/Graphics%20-%20Social%20Media/thinkadvisor-footer-logo.png?width=370&name=thinkadvisor-footer-logo.png) Hidden Value is a column in [ThinkAdvisor](https://www.thinkadvisor.com/2019/04/16/the-probability-of-success-vs-the-consequence-of-failure/) where Joe Elsasser, CFP®, answers common questions with insights advisors and their clients may not have considered. This week he takes a closer look at Monte Carlo simulations. Many advisors use Monte Carlo simulations to demonstrate to clients the range possible outcomes. However, Monte Carlo simulations neglect to consider the consequences of failure, which can be dangerous for clients and their [retirement income planning](https://www.covisum.com/blog/multidimensional-holistic-financial-planning-techniques). Here's an excerpt: > "If the focus of financial planning is to move people to the best possible decisions, the industry needs to recognize that “a probability of success” is really a poor mechanism to do so. People experience events, not probabilities. More importantly, people can’t visualize probabilities, but they can visualize events." It is crucial for advisors to consider the consequences of failure a well as the probability of success. Instead of Monte Carlo simulations, Joe suggests a lifetime financial planning processes that systematically revisits a reasonably conservative expected path, and in addition, considers multiple possible personal and economic futures that could create dramatically different results. > "I would argue that the central dashboard for financial planning decision-making should include a base case with a reasonable, but realistic, estimate of long-term returns. Couple this with a variety of stress tests that demonstrate the impact or consequences of a risk event with clear explanations of the base case and the risk events tested. If there is a realistic possibility of failure, then we should discuss the consequences of that failure and adjust the plan to bring those consequences into an acceptable range." Read the *ThinkAdvisor* article in its [entirety](https://www.thinkadvisor.com/2019/04/16/the-probability-of-success-vs-the-consequence-of-failure/). --- You can help clients navigate portfolio risk and other challenges with our retirement income planning platform. [Income InSight®](https://www.covisum.com/income-insight)  can help you answer client questions like: 1. Should I keep that old annuity? 2. Do I need this old life insurance policy? 3. What about long-term care insurance, if I have it, does it meet my need? 4. What about reallocating my portfolio? - Can I take more risk? - And if I do, am I more likely to increase my estate? - Or do I run the risk of creating a down market situation that I can't recover from? 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