What do you (and clients) really need from cashflow modelling?
Cashflow modelling technology is the most popular tool for helping clients meet their long-term financial objectives. In fact, according to a poll by Intelliflo earlier this year, 70% of advisers and paraplanners believe it to be the most important tool they have.
Continuing with the data, 88% agreed that cashflow modelling was useful when demonstrating the value of advice to clients.
Using cashflow modelling also resulted in clients feeling more engaged in the financial planning process. And 67% of respondents agreed that cashflow modelling had helped to reduce the burden of worry for clients during the pandemic.
Almost all participants (92%) also agreed that such tools helped clients to understand the effects of significant market movements on their future plans, and that it may be necessary to make compromises over time to reach their objectives.
Demonstrate different scenarios and bring the impact of different decisions to life
Advisers find cashflow modelling tools helpful in demonstrating different scenarios and can bring to life the impact of different decisions, such as retiring early or making a significant purchase.
Top benefits of cashflow modelling tools for advisers
- Exploring different scenarios live with clients
- Graphs and reports
- In-built tax calculation.
Many cashflow modelling tools allow you to play out various “what if” scenarios, which help clients understand why they are making a particular choice now and see the impact of this on their future.
This shifts their focus away from the immediate benefit and allows them to see how actions they choose to take today will affect their long-term financial goals.
Top benefits of cashflow modelling for clients
- Visual representation of financial goals
- Insight into retirement savings and planning
- Effects of varying inflation and investment returns
- See how life events could have an impact.
During the early months of the Covid crisis, when markets were low, cashflow modelling was important for demonstrating the impact of sequencing risk for clients who were drawing an income from their investments.
Later, the pandemic forced many people to focus on their future and what they really wanted from life. This led some to make a lifestyle change, such as partial retirement or stopping work earlier than they had originally expected.
Cashflow modelling helps clients visualise how these big life decisions change their financial picture and helps them plan for the future.
90% of advisers use cashflow modelling tools
The number of advisers using cashflow modelling and planning tools has increased significantly in recent years. A survey by the Lang Cat late last year found that only 10% of advisers weren’t using cashflow modelling.
Mike Barrett, director of the Lang Cat believes advisers tend to focus on at-retirement clients, where people are transitioning from work to retirement. And cashflow modelling plays an essential role in delivering that kind of advice.
These clients want to know when they can afford to retire and how long they can afford to live, and cashflow modelling provides a visual and holistic view of all your assets, property, cash, and living expenses.
Many advisers are failing to use cashflow tools to full effect
However, the study from Intelliflo revealed that advisers and planners weren’t using cashflow tools to full effect. Only 34% offered cashflow modelling to all their clients and 8% didn’t offer it at all. 25% of the group that didn’t use cashflow planning at all cited the reason as not having the time to input the data.
- 34% of advisers and paraplanners use cashflow planning tools less than once a year
- 39% use it at significant milestones, such as retirement
- 36% use it when a client’s lifestyle changes
- 24% use it when their client receives a lump sum.
And almost a quarter (23%) of advisers don’t use their cashflow tools live with clients. This means many advisers are missing out on the valuable opportunity to engage clients in the financial planning process.
What do clients want from cashflow modelling?
Seeing a visual representation of their financial situation helps clients engage with the financial planning process.
Most clients want to know:
- What age will I be able to retire?
- How much net income will I have during my retirement?
- How will I achieve my goal of financial freedom?
- How will I fund my children’s education?
- How much can I gift to my children without affecting my own retirement plans?
- When will I be mortgage-free?
- How long will my current income stream last in retirement?
- What happens if I am no longer around to provide for my family?
Advisers shouldn’t be using cashflow modelling to perform complex sums, but to help clients visualise what their future lifestyle could look like. Used correctly, it can help bring a sense of reality of their financial situation, especially when they first see the apparently “huge” retirement pots at their disposal.
The trend of cashflow modelling tools is towards systems with user-friendly interfaces that allow considerable amounts of “what-if” scenario planning by advisers. And it’s these user-friendly, intuitive interfaces that are growing in appeal among consumers.
How AdviceBridge delivers cashflow modelling to support you and your clients
AdviceBridge incorporates cashflow planning and scenario exploration in a simple and quick manner that can be used by adviser or client. No training or understanding is required, as the system undertakes multiple computations to assess the best outcome.
In addition, the AdviceBridge platform replaces manual processes, digitises many time-consuming processes, and can increase client engagement through its simple and meaningful interface.
AdviceBridge automates the processes, research, and analysis to generate a retirement plan that you can quickly and easily review before presenting it to your client. This leaves you more time to focus on client relationships instead of admin, research, or reports.
Clients can update their information 24/7 and you’ll get an instant alert telling you about the changes in their finances.
Get in touch
If you want to find out how AdviceBridge can benefit your business and your clients, please get in touch. Email email@example.com or call us on 020 3925 3850.