Adding value to clients through cashflow planning

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Nick Eatock, CEO of intelliflo writes that sometimes it takes a crisis to press home just how useful a certain tool or strategy can be. 

When the pandemic arrived in 2020, advisers were able to fully demonstrate how effective cashflow planning can help keep clients’ plans on track when unexpected events occur.
 
While many clients made it through the worst of the pandemic with their finances largely unaffected, others had to quickly review their financial situation, not least business owners and those whose incomes were suddenly reduced. Research by intelliflo at the end of last year among 330 advice firm professionals found almost seven in 10 agreed their clients have experienced significant changes to lifetime plans as a result of Covid. 
 
The full picture
 
The result has made cashflow modelling more important now than ever before. Two-thirds of respondents to our survey told us that cashflow modelling tools had helped reduce client worry during the pandemic. When plans were turned upside down by the crisis, cashflow modelling tools allowed advisers to analyse the financial implications of the different options facing their clients, and decide on the best course of action with confidence. 
 
Yet while 70% of advisers we surveyed identified cashflow software as the most important tool to help clients meet their long term goals, just a third use cashflow modelling with all clients and less than half use it at milestone moments.
 
Meeting expectations
 
There will be valid reasons in some cases for advisers not using cashflow modelling, but for some advisers, the lack of usage is based on misconceptions.
 
For instance, one objection we hear is that clients aren’t interested, or that it’s not for ‘my type’ of client. But such tools are becoming increasingly sophisticated, replacing guesswork with science and allowing advisers to discuss how different choices and scenarios will impact their client’s finances over the longer term. 
 
Historically, these tools have also been difficult to work with and time consuming to use, so many advisers felt their use could only be justified for very wealthy clients. Modern tools, however, are far more intuitive and user friendly, with simplified data entry saving time and ensuring accuracy, while the easy to understand outputs can be shared with clients without the need for further analysis or complex explanations.  
 
And with the pandemic accelerating the shift to digital working, shopping and other day-to-day interactions, clients increasingly engage with technology in their professional relationships. Expectations around digital engagement and personalisation were already rising before the pandemic, but as more transactions have migrated online, many consumers are now used to enhanced digital experiences and new levels of personalisation. 
 
Changes in our use of technology have impacted advisers too. Until recently, the primary presence of technology in advice operations has been in the back office, with a focus on improving efficiency and meeting compliance requirements. Digital processes have been less visible in client-facing work. That’s now changing, with cashflow modelling in the vanguard. 
 
Engage and enhance
 
The pandemic-driven changes in consumer experiences and expectations are here to stay, and will likely continue to accelerate. Cashflow planning tools give advisers an opportunity to take advantage. By allowing them to visualise how their financial future can be mapped out under different scenarios, advisers can use cashflow modelling to help clients better understand the impact of financial decisions and how advice is adding to their life (and the value they’re getting from their advice fees). 
 
Similarly, providing clients with eye-catching, clear outputs and sharing different modelling scenarios with them can be a very powerful way of securing emotional engagement in the advice process and their long-term finances. 
 
There’s an educational aspect too. Cashflow modelling can be used to demonstrate the impact of different risk levels, growth rates and other factors such as inflation and interest rates, with the potential side-effect of further deepening the engagement with the process. Showing a client how the adviser’s decisions have prevented negative scenarios from playing out, or how tax adjustments will impact on their financial position, serves to further reinforce the importance of the advice service. 
 
Clients looking further ahead can be presented with an accessible view of how receiving an inheritance, downsizing their home or losing their partner’s pension could affect their finances and their lifestyle. And cashflow planning tools come with a compliance benefit too, with the ability to track and demonstrate how and why certain decisions have been reached. 
 
A win-win situation
 
All of this helps explain why in our survey earlier this year, 88% of advisers agreed that cashflow software helped demonstrate the value of advice to their clients. With the same proportion agreeing that it made their clients more engaged in the financial planning process, it seems fair to assume that cashflow modelling solutions facilitate deeper conversations and strengthen long-term relationships with clients. 
 
Ultimately, anything that helps advisers demonstrate transparency, make better decisions and bring their work to life will make for more contented clients who engage with the process and understand the life-enhancing impact of good financial advice.
 

Author Profile
Beverly Chandler
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Managing Editor