The opportunities awaiting financial planners

By Mark Harman
10-Oct-2018 15:23:32

Like it or not, the financial planning industry is experiencing a period of increased regulation, whether it’s through the Retail Distribution Review (RDR), MIFID II or the new changes to DB pension transfers.

i4C_Mark Harman

These changes have ultimately led to a greater need for transparency, forcing financial planners to look at new ways to thrive and prove their worth to clients.

Evolving regulation, combined with the increasing prevalence of robo advice means that more and more clients are beginning to question the work of financial planners and the value that they bring above that of what can be achieved via an automated solution.

Change always offers opportunity. The opportunity here for financial planners is to focus on enhancing their value-add activities which will create longer lasting, more prosperous relationships that, in return, will raise profitability while also supporting resilient compliance and advice processes.

The main value a financial planner can offer to a client is robust, transparent planning which can be easily understood by the client, provides clarity about their future life, removes worry and empowers them to make often life-changing decisions with confidence. The best way to do all of this is via interactive cashflow modelling and with the right system at your disposal you can demonstrate in monetary value the benefit your advice brings. Often a simple piece of planning can result in financial benefits to the client which completely dwarf the cost of your advice. These financial benefits not only demonstrate your value, but also lead to positive client engagement, ensuring they have the confidence to take decisive action.

Cashflow modelling as a term is a misnomer and one of the reasons it is only just beginning to get the recognition as a discipline that it deserves. There is much more to cashflow modelling than just ‘cashflow’ as it combines risk management, tax planning, asset planning and other key benefits all under one roof.  

Often the benefits of a financial planner’s advice are tax related, so it is important for planners providing tax related advice to use a system which contains detailed tax computations. This enables the user to ensure that they are both giving robust advice, demonstrating their value. It is important that the cashflow software used calculates the tax correctly in every year of the plan, as assuming that the tax rates remain consistent for the entirety of the forecast could lead to poor advice being given.

It is also important that financial planners move away from situations where they look at planning decisions in isolation. For example, a decision made between two mortgages may make financial sense in isolation but when factored into the wider plan is no longer is the best course of action. Having software that allows for all your holistic planning in one integrated solution is therefore key.

Most financial planners will probably recognise the shift in the market towards cashflow modelling, but many are still struggling to make it central to their proposition for all clients. This has been partly down to a lack of available software that is both feature rich and easy to use, enabling appropriate cashflow planning for all clients from the simplest to the most complex. 

However, just as importantly, firms need to realise that they cannot simply incorporate a new system into their current processes and expect to realise all the benefits.  To realise the full benefits of cashflow modelling, it needs to be central to the proposition for all clients. Implementing this will require significant change management. Not only in terms of systems and process but in terms of culture and most importantly the way financial planners work, think and manage their relationships with clients.  Many financial planners who have successfully embraced cashflow modelling now consider themselves life coaches as much as financial planners. It is therefore essential to make sure that new practitioners of cashflow modelling are equipped to take on this new role as a life coach as well as on how to use the cashflow system itself.

Navigating a changing industry

Over the next few years, planners will face a different variety of client requirements and as such, will be asked to respond to their changing needs. With increased life expectancy and industry changes, such as pension freedoms and the move away from defined benefit pensions, the challenge of making our clients’ money last for the duration, but still allowing them to achieve their life dreams and goals is more challenging than ever.

As part of this changing landscape, financial planners need to constantly re-evaluate their advice processes, with a need to initiate a break from the traditional functions often associated with financial planning in order to keep up with the times and provide clients with significant value. Indeed, a re-evaluation of how we should plan successfully for later life needs to be led by financial planners, who are not afraid to ask the difficult questions, in turn allowing them to provide worthwhile financial advice for their client’s future.

Intelliflo users can now rollout i4C’s sophisticated cashflow modelling software by accessing the iOStore.