When involved on Financial Planning, we all know the following for certain:
- Life, living and investing do not go in straight lines
- We cannot predict the future
These two huge uncomfortable elephants are always present in the advice room. As Financial Planners people rely upon us to guide them through the issues that they bring even if they may be blind to them.
In this role, we can become fearful that if what we present and offer does not show positive outcomes, then our clients will be unhappy with us and go elsewhere. Questions could be asked of our fees.
Sometimes we must tell clients bad news about their Financial Planning.
When faced with this perennial dilemma and uncertainty, it can be all too easy to latch onto things that may offer some form of 'guarantee' for an outcome. I don't just mean funds or investments here; this also seeps into the use of software such as cashflow modelling.
I have used cashflow modelling for over 10 years now as a way of presenting the numerical facts a client gives me in a pictorial and dynamic format.
I am careful not to let this dominate proceedings - the client is the focus. Cashflow modelling is just a very good tool that brings to life their current and potential financial future which they are unlikely to have seen before.
So, I treat cashflow modelling with the reverence it deserves.
When we spend a lot of money on software, and are trained how to use it, this has the potential to lead us down the path where we perceive it as having a value greater than what we as advisers can offer without it - a sort of advanced 'endowment effect'.
If we remain unaware of this there is the risk that we can place such a piece of software at the front and centre of a Financial Planning proposition that leaves no room for us or the client!
There is a danger that this can result in death by cashflow modelling where a plethora of outcomes charts and graphs are shown that paralyse the client in the hope that we can offer a positive outcome and good news. There can be the tendency for us as Financial Planners to hide behind this glass wall of data and use it as a crutch to support our Financial Planning process.
The only thing we can guarantee with our clients is that nothing is guaranteed. What we discuss in this year’s forward planning meeting will be different to next and so on. The software we use will help us with all of this but it is not a panacea and does not replace us.
Our clients pay us for this personal interaction and understanding. Ultimately, they are not interested in what software we use or how good we are at using it.
John Rook CFP Chartered MCSI Chartered Wealth Manager is director of financial services at Kench & Co Financial Services, Henley on Thames