Back in the dark ages when I started out in financial services, all I had were a pen and paper with which to draw a “lifeline” for clients to facilitate discussions around their life choices, goals and dreams.
This became a powerful tool for me when debating the benefits of life cover, drawing out my clients’ aspirations before moving to the closing question: “So tell me, when are you going to die?”
It was a hard-hitting question and many clients pointed to a date well in to their retirement.
What I did not realise at the time was that having initiated such debates around clients’ what-ifs and assumptions about retirement, I then failed repeatedly to capitalise on this line of thinking.
With hindsight, ending each client debate with merely a whole-of-life product sale constituted multiple wasted opportunities.
When I moved later to work in Asia and Australia, I was introduced to cashflow modelling technology.
Cashflow modelling is a device that allows adviser firms to build their planning pro-cesses and meetings around their clients’ needs. It gives firms the chance to show “adviser alpha” via a highly emotive process, ensuring clients genuinely understand that the planning process is all about them, their lives, goals and aspirations.
Jumping forward to today and the regulatory focus on relationships and culture, there is a great opportunity for all advice-driven firms to achieve the benefits of cashflow modelling technologies.
I wonder why only 10 per cent of the adviser and financial planner population uses cashflow modelling tools, given the demonstrable benefits they offer not just in improving the relationship between an advice firm and their client but for other stakeholders such as the Financial Conduct Authority.
As the head of a consultancy, I have carried out analysis of these so-called enabler tools. Below, I break down and compare the three major cashflow modelling tools.
Prestwood: There is a reason why Prestwood founder Paul Etheridge is known as the godfather of financial planning. Prestwood is the Rolls Royce of cash flow modelling software available in the UK.
The software is offered in two versions: Professional and Truth. Both offer an impressive range of cash flow calculators, comprising all the necessary features such as net-worth, income, expenditure, estate, education, retirement, assumption controls, scenario-planning, client needs and business analysis.
Professional offers a fully integrated back office system which ties in with client relationship management systems and information for regulatory returns such as fee and commission tracking.
Disappointingly, this system is still not web-based, though I hear this will be made available over the next few months. On screen outputs for cash flow are also not as inspiring or easy to discern as they could be.
But Prestwood still represents an excellent choice for advisers who need back office integration and a full support service to help incorporate cash flow modelling into their planning process.
Voyant: Built in the US, this system was launched in the UK in June 2009 and has been a hit from the start. As you would expect from a US built system it does what it says on the tin, but it also does it with some style.
It is purely cash flow driven and thus offers none of the back office functionality Prestwood does. But it does have the capability to integrate with Curo from Time 4 Advice and Salesforce, and is also in talks with facilitating integration with Intelligent Office.
The impressive pre and post-retirement time line and drag and drop features allow advisers and their clients to play with the ‘what if?’ scenarios, trade-offs and assumptions, providing clients with a visual interactive experience.
The screen graphics outputs are also very impressive. They are colour coded and highlight the asset mix in bright colours, with the option of a more detailed, and colourful, asset breakdown if required.
Voyant’s other advantages are that is web-based, and relatively user-friendly from the first use.
Plan Plus: The newish kid on the block, this Canadian-designed system is more along the lines of a traditional calculator tool, but offers simplicity in design and process flows which highlights any shortfalls effectively.
While it may not be as pretty as Voyant, this system is efficient, the cash flow outputs look good, and are very clear in pinpointing the trade-offs clients need to make to ensure their goals are met.
With platforms and paraplanners getting on the cash flow modelling bandwagon, this is definitely a growing market. What is important is how advisers use these tools as part of the planning process.
All three systems integrate FinaMetrica risk profiling tools as an add-on feature, essentially giving cash flow modelling tools the ability to facilitate a really powerful conversation between adviser and client.
Cash flow modelling is a device that allows adviser firms to build their planning processes and meetings around their clients’ needs. It gives firms the opportunity to demonstrate “adviser alpha” through what is a highly emotive process, ensuring clients really understand the planning process is all about them, their goals, their aspirations and their lives.
By putting cash flow modelling at the heart of the planning process it moves the client/planner relationship into the field of coaching and mentoring. If taken seriously, use of cash flow modelling can lead to truly ground-breaking results for clients and their advisers.
Chris Davies is managing director of Engage Insight