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Cashflow planning key to advisers' 'biggest challenges'

Cashflow planning key to advisers' 'biggest challenges'

Advisers have been encouraged to double down on cashflow modelling as the answer to a "surge" of clients facing financial hardship in the wake of the coronavirus crisis, a national advice business has urged. 

Simon Goldthorpe, joint executive chairman of advice firm Beaufort Group, warned the increasing demographic of clients navigating economic uncertainty presented one of the "biggest challenges for advisers in 2021".

He said: "While lots of peoples’ finances were impacted in some way last year, the real problem comes when those who’ve been staying afloat find themselves faced with yet another lockdown and a lack of job prospects.

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"Not only does this make getting by that bit more challenging, it also starts to present a material risk to their retirement plans.

"As advisers, we’re in the business of growing wealth and we’re all used to having those ‘easy’ clients, whose annual review involves congratulating them for being on track to meeting their goals before sending them on their way." 

But the advice boss warned the pandemic had changed this and many people were now facing "a big red line through their plans", which called for a new set of skills from advisers. 

Data published by the FCA earlier this month found the coronavirus pandemic had propelled the number of vulnerable adults in the UK to almost 28m last year prompting warnings of growing financial inequality among the population. 

The regulator's work also found the number of adults with low financial resilience had grown throughout 2020, increasing from 10.7m to 14.2m. 

Low financial resilience can include factors such as over-indebtedness, low levels of savings or low or erratic earnings. 

In October one in three adults predicted their household income to fall during the next six months, while 25 per cent expected to struggle to make ends meet.

Goldthorpe said: "Cashflow modelling is the most practical tool advisers have at their disposal right now.

"It’s the only thing that will help clients truly understand how long they can cope without income before it’ll really start to impact their plan, helping map any potential financial impact now or in the future and enabling the client and financial adviser to adapt their strategy for any shortfall.

"This is the absolute best thing we can do to comfort struggling clients right now, especially as the situation shows little sign of improving this year."

He added it was "vital to take early action" to help clients gain confidence in their financial future. 

Research from Intelliflo earlier this year found more than two thirds of advisers and paraplanners (67 per cent) felt cashflow modelling had helped reduce client worry during the pandemic. 

Almost all respondents to the firm's 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.