Advisers urged to unlock full potential of cashflow modelling

Advisers urged to unlock full potential of cashflow modelling
Credit: Chris Ratcliffe/Bloomberg

Advice firms have been encouraged to realise the full value of cashflow modelling as new research shows only a third of advisers use the tool with all their clients.

Intelliflo said both advisers and clients benefit from the use of cashflow modelling but it warned that advice firms failed to use the tool regularly or at crucial junctures.

More than two thirds of advisers and paraplanners (67 per cent) told the firm cashflow modelling had helped reduce client worry during the pandemic, and almost all respondents to its survey (92 per cent) agreed the tool assisted clients to understand the effects of market movements on their retirement pots.

Intelliflo polled 330 advice firm employees in November 2020 and found that cashflow modelling technology was the most popular tool for 70 per cent of advisers and paraplanners.

Almost nine in 10 (88 per cent) also agreed that such modelling helped demonstrate the value of advice to clients, and that clients felt more engaged in the process as a result of this technology.

Features such as ease of use, graphs and reports, and inbuilt tax calculation are seen as the main benefits of cashflow modelling tools.

But Intelliflo said there was a mismatch between the value advisers saw in cashflow modelling and those that utilised the tool to its full effect.

Only a third (34 per cent) offer the service to all their clients, while 8 per cent do not offer it at all.

Nick Eatock, chief executive of Intelliflo, said: “Throughout life there will be numerous events that affect a client’s assets and long-term plan. Perhaps none more so than now. 

“Advisers appreciate the value of cashflow modelling in demonstrating the value of advice and helping their clients plan for the future, but are yet to realise its full potential.”

Mr Eatock added that cashflow modelling was a great example of the powerful combination of people and technology in delivering advice.

Martin Bamford, head of client education at Informed Choice, agreed. He said cash flow forecasting was an "essential" part of the financial planning process and that it was hard to see how advisers delivered suitable advice without these tools.

He added: "Since we started creating a cash flow model for every client, it has transformed our value proposition and more fully connected what we do with the lifetime achievements of our clients."

But Tim Morris, IFA at Russel and Co, was more sceptical, adding that technically minded clients such as engineers or those with mathematical backgrounds could be critical of its flaws. 

He said that while he was an advocate of the tool it did not provide value for every client.

Mr Morris said: "It does for the majority of clients at retirement and in drawdown, but there’s not sufficient value for many clients who have 10+ years until retirement to build it into every client review.

"Most will not want to look that far into the future in great detail. There are too many moving factors along the way. It’s an important, rather than integral part of my proposition."