Top tips from the experts to nail cashflow modelling first time
Cashflow modelling is a tool that can add real value. Not only does it demonstrate the value of your advice, but it also supports long-term client relationships and helps clients take real ownership of their financial plan. So, if you’re looking to get the most out of cashflow planning, here are a few top tips to help you nail it first time.
Invest time at the outset
If you plan to incorporate cashflow modelling into your processes, it’s important that you do this consistently and effectively.
So, it’s worth investing a few hours at the outset putting together an internal ‘compliance guide’. This ensures that the process is consistent and repeatable for all clients.
Keep it simple
It can pay to keep things simple, especially at first; don’t over complicate the client’s current personal finance situation or the first year of the plan.
Cashflow planning doesn’t have to be complicated. Your chosen tool should be user-friendly, intuitive, and easy to integrate into your processes. And, when inputs and outputs are displayed logically, it will transform client understanding. If clients can see the direct effect of your advice, it can be hugely powerful.
Model ‘what-if?’ scenarios
The beauty of cashflow modelling is that you can use scenarios to model ‘what-if?’ and bucket list items as well as anything else that isn’t a hard fact.
You know that you constantly add value to your client’s plan. However, in difficult investment climates, judging performance solely on investment returns could put you at a disadvantage. How do you demonstrate the value of your financial planning advice?
With compound growth over many years, a simple piece of planning advice today could have a seriously positive impact on a client’s investment and tax positions. Often, this will significantly outweigh the cost of advice.
Modelling these scenarios helps you to show the client in black and white just how beneficial your advice can be for their future.
Get your clients engaged
Clients can sometimes find it difficult to understand how their retirement provisions will change over time. Cashflow planning illustrates how factors such as tax, stock market volatility, and investment growth affect their wealth.
It also helps intergenerational families understand the process, so financial advisers can form long-term relationships with younger clients through accessible financial planning.
Rather than you giving advice and your client choosing whether to accept it, cashflow modelling makes your client feel part of the financial planning process. So, the earlier you can get your clients engaged as part of the process, the more value it adds.
Apply it to all income levels
There are very few clients who would not benefit from some level of cashflow analysis. Your clients don’t need significant assets to want to know whether they can afford to send their child to university or whether they will have enough money to live on when they retire.
Cashflow modelling can help you answer everyday questions surrounding pensions, mortgages, and Inheritance Tax – irrespective of a client’s income or wealth.
Ask thought-provoking questions
It’s important to prepare some thought-provoking questions before meeting a client:
What do they want to do when they retire?
What is on their bucket list?
What legacy do they want to leave to their heirs?
What would they do if markets crash?
How would they pay for later-life care?
As part of the process, it’s also important that you encourage your clients to ask questions back. Engaging clients in the process means you can show them different ‘what-if?’ scenarios that help demonstrate the benefit of your advice.
Cashflow modelling doesn’t have to be complicated. intelliflo planning is a user-friendly, intuitive platform that allows you to easily and clearly demonstrate the value your advice brings.