This document discusses the importance and benefits of cash flow modelling and planning. It emphasizes engaging clients in discussion about their goals, objectives, expenses and income to develop a clear cash flow plan. A successful cash flow plan can help clients better organize their finances, achieve their goals and maintain their lifestyle even if risks occur. It also benefits advisers by strengthening client relationships and generating greater fee income through ongoing monitoring and adjustments to the plan over time.

1. Cash flow modelling
More than just a fancy chart

3. “A professional service for
clients who need objective
assistance in organising their
financial affairs to achieve
their financial and lifestyle
goals”
Institute of Financial Planning

4. Is cash flow planning
compulsory?

5. Focus on...
• The importance of the cash flow process
• How to engage clients in the discussion
• Sharing best practice
• The benefits to the client

6. Those that can’t see the
future.....

7. Those that can’t see they
can’t see the future.....

8. Lifetime planning
Estate planning
Savings strategies

9. Investment risk
Shortfalls
Getting real

11. Creating ways to help
people make more sense
of money

12. Framing
Context
Engagement

13. “Financial plans
are worthless”

14. “The process of
planning is invaluable”

15. Planning process
1. Establish goals & objectives
2. Gather data
3. Analyse information
4. Develop plan
5. Implement plan
6. Monitor and adjust

16. Best practice

17. “One of the keys to successful
financial planning is learning
to let go of precision.”
Carl Richards @behaviorgap

18. Things in common
• Clear service proposition
• Platform & investment process
• Agendas
• Great questioning skills
• Charge
• Team approach

19. Key roles
Adviser Paraplanner
Leads relationship Gathers data
Presents plan Analysis
Provides advice Prepares plan

20. No objectives..no plan!
• Clear & concise
• Prioritised
• Timescales
• Agreed & written down
• Reviewed regularly

21. Financial objectives
• Increase my spendable income
• Pay less tax
• Improve retirement income
• Increase investment returns
• Pay off mortgage

22. Emotional objectives
• Increase my financial security
• Achieve financial independence
• Safeguard my family
• Understand more about my money
• Give more to charity

23. As a minimum maintain the
lifestyle I want under any
circumstances however
long I live

24. Useful questions
• So what?
• Why?
• What would need to happen for...?
• Can you afford to do the things you want?
• Do you have enough time to do them?
• What would make you feel uncomfortable?
• What would make you panic?

25. Lifestyle planning
• Define it
• Cost it
• Fund it
• Transfer surplus
• Manage risk
• Be tax efficient

26. Assumptions
• Inflation
• Earnings growth
• Investment returns
• Tax
• Mortality
• Capital conversion

27. Real value of money
Assumption Notional Real
NAE 4.5% 1.5%
Savings 2% -1%
Investments 6% 3%
School fees 6.8% 3.8%
House prices 3% 0%

28. Assumptions
In principle, simply as a planning
assumption.....
If you can’t fault the assumptions, it’s
reasonable to accept the
conclusions......

29. Net worth
Asset Value
Property £500,000
Cash savings £68,000
Investments £142,000
Business interests £250,000
Personal effects £50,000
Pension funds £230,000
Total £1,240,000

30. Liquidity ratio
21%
Cash & investments
£210,000

31. Budget
Source Amount per month
Fixed expenses £2,000
Variable expenses £1,500
Total expenses £3,500
Net income £4,500
Disposable income £1,000
Spendable income ?????

32. Cash flow in action

33. Show client.....
• If on target
• What return is needed?
• How much more ..... is needed?
• When (or if) they can stop work
• How much they can give away
• Capacity & tolerance for loss

34. Making sure you don’t run
out of money!

35. Multiple scenarios
• If all goes to plan
• Someone dies
• Serious illness
• Retire early
• Sell business
• School fees planning

36. Risk profiling

37. A solution
• Robust, repeatable process
• In-depth discussion
• Full understanding of all risks
• Don’t rely on risk profile tools
• What return is needed?
• Is any risk needed?
• Capacity & tolerance for loss

38. Investor behaviour

39. “We took risks, we knew we took
them; things have come out
against us, and therefore we have
no cause for complaint.”
Robert Falcon Scott

40. Cash flow tools

41. The market

42. The market
Certior
Truth
Voyant
Dynamic Planner
PlanLab
Moneyscope
Excel
Calculator
£0 £50 £100 £150 £200

43. Calculators

44. Calculators

45. Excel
-300,000
-200,000
-100,000
0
100,000
200,000
300,000
400,000
61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
£InvestmentCapital
Bob's Age

46. Goal seek

47. Solutions
0
50,000
100,000
150,000
200,000
250,000
300,000
61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
£InvestmentCapital
Bob's Age

52. Benefits
• Better client relationships
• In control
• Greater fee income
• Generational planning
• No market moans!

53. A good read

54. Focus on...
• The importance of the cash flow process
• How to engage clients in the discussion
• Sharing best practice
• The benefits to the client

55. www.moneyscopehq.com