Regulation 

FCA expected to crackdown on cash flow planning

Given that cash flow plans often run over 30, 40 years, Mr Percival said small differences in assumptions can make huge differences over that time, due to compound interest.

He said that is an area where potentially there has been some problems.

Mr Percival's 22-page guide explains when to use the tools, what types are available, doing due diligence on the tool, understanding it and how to use it, and it also has an appendix with a list of suggested assumptions to use, on how to source them.

However, Mr Percival isn't reviewing the different tools in the market.

He warned that advisers that make mistakes in their cashflow plans "leave themselves open to action from the FCA," especially around DB transfers.

Mr Percival decided to produce the document after a conversation with Alistair Cunningham, financial planning director at Wingate Financial Planning, who felt more guidance was needed on this matter.

Mr Cunningham said: "A long-term cashflow plan is essential for most meaningful financial advice, especially around retirement.

"However the tools employed are just like any other piece of software, and all have limitations and indeed errors which need to be mitigated.

"Many plans are very sensitive to assumptions, and I am concerned some individuals are making decisions based on poorly executed plans."

maria.espadinha@ft.com