John Whitehead, our resident Cashflow guru, delves into 5 reasons why you should use Cashflow Modelling with your clients.
1. Communicate your plan in a different language
Not everyone understands the figures and in some cases, clients and/or their partners actively detest being presented with a list of numbers or an Excel spreadsheet.
Some people also find it difficult to visualise the impact of events that are in the future – retirement, ill health/death, estate planning, long term care and so on.
Cashflow modelling allows you to illustrate the plan or plans in an easy to absorb format. The data is still there if you want it, but importantly there are clear illustrations that can help your clients SEE what those future events may look like, and what impact they may have.
2. Clearly illustrate the impact of YOU
One of my favourite phrases is ‘The world without you vs the world with you’.
A good cashflow base plan combined with a planning scenario, can clearly demonstrate the effect you can have on your clients and their future aspirations, no matte their level of wealth.
Explaining the plan and what your advice could mean for their future lifestyle choices is one thing, but SHOWING them creates an additional and powerful level of engagement.
What is it they say about a picture painting a thousand words?
3. Test your theories and deliver your ‘Best Plan’
There are often many routes that can be taken to help a client achieve a future they want, and will be happy with.
Whether this is based on a specific investment strategy or a tax efficient withdrawal plan, or combination of both (obviously most likely), appropriate funding of investments, reality check on current or future lifestyle choices and so on.
Using the power of the software, it is possible to create and illustrate multiple options, and to see the potential outcomes, identifying which best suit the client’s current and future needs and wants.
This gives you the time to focus on your ‘Best Plan’.
4. Transparency and Fair Value Exchange
One of the many advantages of cashflow modelling is the fact that it clearly shows the fees that the client will pay, and these are automatically built into the illustrations.
In a world where scrutiny of fees is ever present, this demonstrates a clear level of transparency, that ultimately creates a greater level of trust and engagement with your clients.
Also, as more attention is given to the delivery of value, the provision of professional and bespoke cashflow model/models adds a valuable dimension, to the service your clients receive, whether at first meeting or annual review.
Cashflow modelling can certainly be seen as a key differentiator when considering the concept of fair value exchange.
5. Collateral Benefits
There are many such benefits to be acheived through proper cashflow modelling, some examples of which are:
- Capturing ALL the client’s assets – often when viewing THEIR plans, clients will identify missing items that they had previously not mentioned or forgotten. Who, after all, wants an incomplete plan?
- Engagement is increased significantly, as your clients will own THEIR plans, and will start to ask how certain life events may affect them.
- The quality of referrals can and will improve – imagine a discussion between two friends about their financial future (we all know it happens). Your client talks about THEIR plans and their friend asks:
What is a cashflow model?
Cue the referral!!
- A clear and revisable route map, which is easy to understand, completely flexible and allows your clients to look at the possibilities and how you, THEIR PLANNER, can help them get there.
