Scenario Analysis: The Key to a Robust Financial Plan

Most of the time, clients come to me unsure of how much to set aside for the various aspects of wealth protection and management. For example, they have no clue how much insurance coverage they need to adequately protect themselves against unforeseen circumstances; they also do not know how much money they need for a comfortable retirement. I often start with a scenario planning strategy.

Step 1: Classify various financial planning needs – from Wealth Protection to Wealth Creation, Retirement and Legacy Planning – according to three scenarios:

Scenario Areas of Financial Planning
Scenario 1: “If You Survive”
  • Retirement Planning
  • Legacy Planning
Scenario 2: “If You Don’t Survive”

Protection planning against:

  • Death
  • Total Permanent Disability
  • Terminal Illness *The table above is for illustration purposes only.
Scenario 3: “If You Survive But are Unwell”

Protection planning against:

  • Early Critical Illness
  • Advanced Critical Illness
  • Other Medical Needs

With this, clients will be guided with a clearer direction on the areas of financial planning they need to prioritise. This makes it easier to discuss how much to set aside for the various scenarios.

Step 2: Look at Possible Solutions
I recommend a series of solutions with varying budgets and commitment levels after understanding their needs and concerns. Generally, I propose insurance policies for wealth protection. For wealth creation and retirement, I recommend investment solutions, insurance solutions or a combination of both. I categorise the solutions according to: Ideal Scenario, Average Scenario and Basic Scenario. Then, I draw up projected plans with a scenario that would meet a client’s desired lifestyle, while giving them an option that would at least cover their basic needs; there is also an option for something in between.

Example 1: Retirement planning
Here’s a breakdown of three scenarios I would present to a client whose ideal monthly income after retirement is $5,000:

Scenario Projected Aims
Ideal Scenario Planning $5,000 monthly living expenses
Average Scenario Planning 75% X $5,000 = $3,750 monthly living expenses
Basic Scenario Planning 50% X $5,000 = $2,500 monthly living expenses

* The table above is for illustration purposes only.

Example 2: Protection against Death, Total Permanent Disability or Terminal Illness coverage, I use this calculation:

(Retirement Age – Current Age) x Gross Annual Income

Let’s assume that a 35-year-old client’s target retirement age is 65, and his gross annual income is $60,000.

Scenario Projected Aims
Ideal Scenario Planning (65 – 35) x $60,000 = $1,800,000
Average Scenario Planning $1,800,000 X 75% = $1,350,000
Basic Scenario Planning $1,800,000 X 50% = $900,000

* The table above is for illustration purposes only.

Example 3: Protection against Early Critical Illness (ECI), Critical Illness (CI) / Income Replacement due to illness)

Now, assume that the same client wants to get ECI / CI coverage – that is, a plan to fill the gaps of his financial health should he be struck with illness and/or be unable to work for a period of time.

Scenario Projected Aims
Ideal Scenario Planning 7 years X $60,000 = $420,000
Average Scenario Planning 5 years X $60,000 = $300,000
Basic Scenario Planning 3 years X $60,000 = $180,000

* The table above is for illustration purposes only.

While planning for these “what ifs” can be daunting, doing it will help you immensely in prioritising your financial planning needs, so that you can worry less and live your best lives.


Raymond Tan

Raymond Tan specialises in wealth advisory – from protection planning to legacy creation. Passionate about guiding individuals and families towards gaining financial confidence, Raymond today supports over 350 clients or over 200 families from the mass to mass affluent markets. His trustworthiness, dedication and sincerity have won over many clients as well as their friends, earning him the moniker of “Referral Guru”; he gets many referrals for new clients from his satisfied customers.

This seasoned adviser, who has been with IPPFA for 14 years, has many awards to his name. Raymond has consistently qualified for IPPFA’s Producers’ Club. Additionally, he has qualified previously for the prestigious Chairman’s Round Table (CRT). He remains down-to-earth and is always happy to nurture and coach new generations of advisers, generously sharing the knowledge and experience he has gained over the years.

In his free time, fuelled by his desire to help others, Raymond stays actively involved in mission and charity work.

Contact Raymond Tan at:

Contact Number:
+65 9772 7134

Corporate E-mail:

IPP Financial Advisers Pte Ltd

78 Shenton Way #30-01 Singapore 079120Tel: +65 6511 8888