It is the standard caveat of the investment business: Past performance is no guarantee of future results. But are CPAs actually advising their clients accordingly?

Specifically, can history dating back to 1925 provide a reliable guide to the sort of returns that clients can bank their retirements on in the years and decades ahead? Or are ongoing shifts in the global economy and the United States' role in that economy fundamental enough to alter an 85-year pattern?

Some say yes. Some say no. Others remain agnostic. But at least the questions are being asked, and investment strategies are becoming more sophisticated - as are efforts to help clients understand the range of potential outcomes.

Thirty-year veteran Peggy Ruhlin, a CPA/PFS at Budros, Ruhlin & Roe, in Columbus, Ohio, has not been too rattled by recent events, including the 2008 crash. "We believe that any assumptions you make for long-term planning have to be rooted in fact - in other words, history," she said. Specifically, the widely used Ibbotson historic standard stock market returns dating back to 1925. Any effort to modify those numbers for long-term assumptions about the future, she said, amounts to speculation. "You have to decide, what's your track record" on other predictions, Ruhlin added.

Her firm currently is assuming average long-term returns on U.S. stock portfolios of 8.5 percent - a number that, interestingly, is higher than the 7.1 percent Ibbotson geometric capital market assumption (as of October). However, Ruhlin said that any advisor who simply plugged such assumptions into planning models and client conversations without the additional dimension of probability factors using Monte Carlo analyses would be making a grave mistake.

In addition, Ruhlin emphasized the importance of using a sufficiently long historical period as the basis for long-term investment assumptions. "People have told me to start measuring returns in 1970, because that's when [analysts] started tracking returns of foreign equities. But people who did not use returns between 1925 and 1940 probably got killed by what happened in 2008."

REDUCING EXPECTATIONS

But many advisors whose clients were indeed injured, even if not fatally, in the 2008 market crash have responded very differently from Ruhlin. One response has been to drop expectations of future long-run returns from those suggested by the pattern dating back to 1925 (both on the stock and bond side).

"We have dialed back our expectations," said Jeff Call, a CPA/PFS and shareholder-in-charge of Bennett Thrasher's wealth management unit in Atlanta. For example, the firm's "guidance" on long-term stock market expectations today is in the 6-7 percent range, "even though that might be optimistic," and sharply lower than what he considers the "historic" average in the 8-10 percent range.

He is also operating on the assumption of a long period of lower bond yields, in the range of today's levels. "If you have a diversified portfolio, the bond portion is definitely going to pull the return down," he said.

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