My approach to financial planning is all about evolution, and for me, cashflow modelling has been at the core of this.
It has allowed me to provide a more robust advice service, and with greater client engagement.
For us at Epoch Wealth Management, cashflow modelling has also seen us evolve as a business, which led to the development of our own cashflow modelling application. This has now become i4C, which is run separately and independently of Epoch.
The pre-cashflow era
My early financial planning process started out like many others. It involved an initial information gathering meeting in order to provide recommendations which hopefully met the client’s objectives.
Clients often didn’t disclose the full facts of their financial circumstances, let alone their hopes and dreams. This often led to advice which focused on a specific area, rather than the whole picture.
With the best will in the world, my recommendations ended up being heavily product-focused. Stress-testing my advice wasn’t easy either, given the complexity of all the moving parts within a client’s plan. I was left feeling uneasy and felt sure there was a better way of working with clients.
Getting client buy-in to recommendations could be difficult, and it meant review meetings were often focused on investment returns – an area over which I had little control.
One of the reasons I became a financial planner was that I wanted to help people. While I enjoyed my job, I wasn’t satisfied that I was making the most of the opportunity to help my clients in the best way possible.
Evolve and adapt
Cashflow modelling has enabled me to eliminate the parts of my job I didn’t enjoy. It moves us away from just looking at the lump of money or assets the client has put in front of us and lets us really look at their objectives and how best to achieve these.
As a result, clients are happier, and I get a lot more satisfaction out of my role.
The prospective clients I come across today have usually dealt with a financial planner before. Some have had good experiences, others less so.
In most cases there’s still a perception that a planner is someone who will fulfil a specific need a client thinks they have, such as setting up a pension or putting life insurance in place.
My first meeting is now all about the big picture. I take the time to explain the concept of holistic financial planning and the dangers of making decisions in isolation.
Cashflow modelling is integral to this, as it helps clients take a step back and look at what they hope to achieve throughout their lives.
I’ve found clients are much more willing to engage in the decision-making process and share their complete situation, as they understand that by doing so they will see a more realistic financial future.
I’ve been lucky enough to see first-hand clients make positive life-changing decisions they wouldn’t have made otherwise, which is a great feeling.
Cashflow modelling has also helped differentiate our firm when working with professional connections. It helps them get a better sense of a client’s overall objectives, which firms like solicitors and accountants may not always be privy to.
Cashflow modelling in practice
There have been a few times over recent months where cashflow modelling has helped demonstrate the value of financial planning.
In one case, a client had recently sold a company and wanted to understand if they could gift a large proportion of the proceeds to their children while maintaining their lifestyle.
Following a review meeting, and having worked through several worst-case scenarios, they realised they could make the gifts they wanted to and still have a very good life.
In another case, a client was weighing up retiring straightaway versus staying on at work a few more years.
The cashflow modelling process showed the client could choose either route, but also demonstrated that staying on a few more years would help them achieve their other stated objective of buying a second home abroad.
As with doing anything new, there were some initial challenges along the way.
There were existing clients who had to be persuaded to buy into the concept of ‘bigger picture’ financial planning, especially when they had previously associated us with products and tax wrappers.
Over time, there would be specific situations that needed cashflow modelling in order to provide a definitive answer. Then clients could see the value of being able to model scenarios before actually making a decision.
There were also some practical issues around using technology live with clients. This can be daunting, depending on how confident (or not) you feel about technology generally, but these can be overcome with training and support.
My one piece of advice for those new to adopting cashflow modelling would be to try it for out the first time on a client you know well, to help take the pressure off a bit.
Overall, my clients are better able to make what are often life-changing decisions, and to do so with confidence. I couldn’t go back to the old way of doing things.