Later on, the pandemic forced many clients to focus on their future and what they really wanted. For some this has meant a lifestyle change such as partial retirement or retiring earlier than they originally anticipated.
Cassidy says: “As the economic fallout is felt more broadly by the population, we expect to see more people’s life circumstances change significantly [and] that financial plans will need to be [adjusted].
“Whether that [change] be redundancy or having to care for someone, cash flow modelling can really help clients see how achievable their financial plan is by modelling different scenarios and income levels.”
Popular but not ubiquitous
A survey by the Lang Cat in the last quarter of 2020, found that just 10 per cent of advisers said they did not use cash flow modelling.
“The vast majority are using it,” says Mike Barrett, director of the Lang Cat. “What has driven that is the nature of advice and clients.
“Advisers tend to be focused on the at-retirement market – where people are transitioning from work to retirement – and cash flow is essential to being able to deliver that kind of advice.
“The clients are asking, 'When can I afford to retire and how long can I afford to live?’ Cash flow gives you that holistic view of combining all your assets, property, cash, etc. It is really important.”
The use of cash flow modelling and planning tools by advisers has increased significantly in recent years, but it is still by no means ubiquitous.
The study by Intelliflo found not all advisers and paraplanners were using cash flow modelling to its full effect, as only a third (34 per cent) offered cash flow modelling to all clients, and 8 per cent did not offer it at all. For this group, time was the greatest barrier as a quarter (25 per cent) said they did not have the time to input the data.
In addition, the survey revealed that many were missing out on using cash flow modelling at vital moments.
There are still a third (34 per cent) of advisers and paraplanners using cash flow planning less than once a year, and less than half are using it at significant milestones such as retirement (39 per cent), when a client’s lifestyle changes (36 per cent), or when they receive a lump sum (24 per cent).
Almost a quarter (23 per cent) of advisers are also not using their cash flow tools live with clients, missing out on the opportunity to engage clients in the advisory process, the study concluded.
