Cashflow planning sits at the very heart of proper financial planning and is where the value lies, according to panellists at the CISI Financial Planning Conference 2024.
Hosted in Manchester, this particular session welcomed Adam Leci, technical consultant at Truth, Jeremy Brett, managing director at Brett Investment, Gabby Butten, financial planner at Boosst and Andrew Elson, financial planner and director at Berry & Oak.
They looked at best practice for cashflow modelling, framed around some of the common mistakes that even top practitioners may be making.
“Cashflow modelling adds value for your clients. I still see a lot of firms' websites that talk about cash flow modelling as a service that they offer to their clients. Perhaps instead we should be advertising confidence. We should be advertising decision making, ownership. It's not the cash flow, it's the confidence the cash flow gives to clients,” Leci explained.
The panel went through some myths about cashflow planning and attempted to turn these on their heads.
The first myth which the panellists tackled was that cashflow planning did not need to be done live.
Brett said: “We use it live and the point I'd like to make about that is who owns a plan? We've had instances of clients that come to us that have had a report but the ownership is with the adviser.
"When you sit and have a dynamic session, when there's an interaction with the client, it starts to become real, and the ownership becomes theirs, and then they begin to take responsibility for the actions that they then take.
“So what I would say to anyone who's not doing it live, is just give it a go. It's actually great fun. It's the best part of the meeting and there's so much that actually flows. It's a hub of what you do with the client. But there's so much really valuable things that actually come from that. So if you're not doing it, just give it a go.”
Income need in retirement
The second myth the panel explored was that clients have an income need in retirement.
Leci explained: “The question really is, is income need enough? It's a bit of a pet hate for me when it comes to cashflow modelling for two reasons. The first is that it's overly simplistic. What we're doing is nonsense if the future that we're presenting doesn't actually represent what they want to do, their goals, their objectives, their desires for what they want their retirement to look like.
“The other problem I have with income need is that it's not income need. Clients don't need £5,000 a month worth of income, they want to spend money. So it's expenditure that should be the driver.
“Phrasing it from the client's perspective and looking at it from the client's perspective is really valuable. If we look at it from what do our clients want to do? Then it's an expenditure need, rather than an income need.”
