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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Andrew Cartlidge 9th April 2019 at 3:15 pm

    Cashflow modelling software can be a useful tool in producing relevant calculations accurately and quickly to those providing advice. It may be a useful tool in influencing (not determining) professional opinion. Does it provide meaningful ‘solutions’ or ‘plans’ for those intending to rely on their investments for income? Too many advisers think that it does – as they rashly delegate to computer software in substitution for the professional judgements their clients are paying them to exercise – but which they are too often incapable of making. There are too many continuing variables for reliance on computerised modelling to provide meaningful long-term solutions. The FCA have made their legitimate concerns clear.

  2. Cash flow modelling is an adjunct. Fine for (say) up to 3 to 5 years any longer and it’s just a way of inflating the fee. Lifetime cash flow is a farce. Who but the Mystic Megs can even defend doing this? Even for the 3 to 5 year periods, the figures need to be revisited in the light of ever changing circumstances.

    • Absolutely agree Harry that there is a need for a regular review overtime.

      Your suggestion that lifetime cash flow is a farce though did make me laugh. It would only be a farce if used by unskilled people who don’t recognise that the future can’t be predicted with absolute certainty.

      What I do think is a “farce” though are illustrations that predict a straight line rate of investment growth for 10, 15 or 20 years into the future with continuity of contributions at a fixed level. Never seen that work out in 45 years of looking at them! 🙂

  3. I know that some IFAs make an art of cash flow modelling but these are so full of variables, uncertainties and assumptions that they can hardly be reliable for the advice process? A useful/interesting exercise, maybe, and some may find it helpful but good annual reviews and adjusting plans in the light of facts and changing/unexpected circumstances is, surely, the key to helping clients. I cannot see how making it compulsory improves advice.

  4. We use cashflow modelling with most clients simply as it is part of our back office system, so the info is there anyway. I do however agree with the three first posters.
    It is a useful tool, but since some clients are totally disinterested in the pretty pictures it produces, there is no way it should be made mandatory.

    • Julian Stevens 9th April 2019 at 5:23 pm

      The correct word is uninterested, Phil, not disinterested.

      A judge is disinterested in the outcome of a trial, i.e. having no interest in or bias towards or against either party.

      Most of my clients are completely uninterested in all the paperwork that the FCA dictates I must give them, whether they want it or not.

  5. Well for any cash flow modelling provider it’s a necessity……..

    For all others with a brain of their own …save the money the FCA will need it or may pay the next FSCS levy

  6. I don’t think it should be compulsory but it does add some tremendous value to the client experience as part of a thorough financial planning process.

    The key thing is not to think of it as providing something of certainty, but instead a way of modelling the future.

    In the same way that regulatory product illustrations are not guarantees of a future result (although unlike cash flow forecasting in many instances they are compulsory) cash flow forecasts need to be used with the planners brain fully switched on!

    The assumptions used should be agreed and understood by the the client.

    The best part is the use of “what if?” scenarios where actions can play out possible future outcomes.

    In practice what we have found is that if used well with clients and most importantly reviewed overtime financial planning (including cash flow forecasting) leads to better advice and better decision making

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