Engaging clients with long-term financial planning
In a rapidly evolving financial advice sector, one long-standing factor remains as important as ever: the relationship between the client and the adviser.
In the latest episode of the intelliflo insider podcast, Darren Waller (associate and adviser at Generation Financial Services), Ed Grobler (assistant director and financial planner at Brewin Dolphin) and Aishling Costello (senior cashflow consultant at intelliflo) discuss the role of cashflow planning tools in long-term financial planning and how they can support advisers in helping clients feel confident in their choices.
Any adviser mapping out a client’s future knows only too well that life is too unpredictable to be able to make decisions with any real certainty. On the off-chance that any reminder was needed, the arrival of the Covid-19 pandemic two years ago underlined the challenges inherent in long-term planning.
How can technology like cashflow modelling tools help give clients greater confidence about their financial choices?
Life’s uncertainties mean many clients are understandably anxious about making big decisions. Ed believes that having a solid financial plan in place and a clear picture of their long-term future is crucial to helping clients “embrace the fluidity of the journey, rather than fear it.” Cashflow planning is an important part of this process.
Cashflow modelling is an increasingly popular tool to support financial advisers in helping clients meet their long-term goals. In Aishling’s experience, its greatest benefit lies in “demonstrating the value of the advice already given to the client, which helps build confidence in their long-term relationship with the adviser”.
Cashflow modelling gives clients the important ‘light bulb moments’, in which they understand what the adviser is doing and why they are doing it. “This helps bring the client into the whole advice process. Rather than just accepting the instructions and advice that’s given, they are part of that conversation,” she adds. In this sense, cashflow work cements the relationship between the client and adviser and helps to achieve the buy-in to the advice process that can be crucial in the early stages of that relationship.
Darren agrees that cashflow planning helps bring the data to life, making the plan more real for clients.
Ed notes that cashflow planning tools helps clients to ‘tune in’ to the advice process and get them on board with the plan. Before using these tools, when talking to clients about their spending they often didn’t understand the importance drilling into the detail. “When you can sit them in front of a tool that shows them the impact of their spending and how changing it just a little bit hugely skews their future.”
It helps them to drop their guard and open up more, which in Ed’s experience, helps to build the relationship with the adviser and drive referrals. “It’s because it highlights the fact we’re not product sellers, we’re not going to ask about their objectives and then ignore them and flog whatever we want to flog. It’s all about trying to achieve a client’s objectives.”
Is cashflow planning most effect for those with a lot of assets and taxation issues, or is there a case for it being used across the whole client book?
Clearly cashflow planning has many advantages, yet intelliflo research shows that only a third of advisers offer cashflow modelling to all their clients. Many firms reserve these tools for their most complex clients.
However, in Aishling’s view, there’s a role for it regardless of where the client is in life and how much money they have. As she points out, it can have a real impact on clients younger clients and those without huge earning potential, where small changes to their spending can make a big difference in the long term, not least in helping to ensure they don’t run out of money later in life. “If you give a cashflow model to everyone in your client bank, you’re giving everyone back their control and understanding of their own lives and positions.”
Thinking about the frequency of using these tools, Darren believes it varies based on client need: “We normally say every couple of years, but it depends on the client. If their circumstances change regularly, then it needs to be done more often.” However, if their situation and goals don’t change much, there’s less need to revisit the plan frequently.
There are clear benefits to the adviser as well as the client, says Ed. Cashflow modelling can have the effect of helping to proof-test or sense-check advice before presenting to the client.
What advice, would you give to those using cashflow planning tools for the first time?
Ed advises new users to just jump in and give it a go. At the same time, to get the best out of the tools, he warns advisers to not to think of it as something overly complicated and difficult to understand as that will come across to clients. Instead, he says: “If you think of it as a tool where you can press a button and suddenly you’re transported to a parallel world where you can play about with stuff safely and see the impact that changing one or two things can has, then it’s hugely empowering for people.”
Aishling reminds new users to take advantage of all the support available while you’re getting to grips with the solution, “The worst thing you can do is sit there scratching your head and wasting your time trying to work it out.”
Darren tried it out on friends and family when he first used cashflow modelling tools and believes practice makes perfect. “Start small and work up to bigger cases. It’s all about the details, for instance just changing the expenses slightly can alter the projections hugely in 20- or 30-years’ time. The more you put in, the more you get out of it.”
What impact does cashflow modelling have on clients’ lives?
Clients often make sweeping changes on the back of cashflow modelling. For instance, Darren advised a retired couple who were worried about running out of money later in life. Using cashflow planning tools, he was able to evidence that they were financially secure enough to take a dream trip to the Maldives every year for 15 years and still leave an inheritance for their children.
Ed agrees it can be life changing for some people, citing the example of a senior, very well-paid accountant who was stressed in her work and deeply unhappy with her commute from the suburbs. As a result of her discussion with Ed and their subsequent cashflow modelling exercise, she felt financially able to move to the coast and take a job earning a third of her previous salary, but where she is much more content.