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.