After our poll found 78% of respondents believed that it is essential to true Financial Planning (245 votes), Mr Martin, chief executive of Smart Financial, explains why he agrees with the majority.
Mr Martin, the former chairman of the IFP Manchester branch and ex-assessor of the CFP licence, also responds to fellow Chartered Financial Planner Martin Bamford CFPTM Charterd MCSI’s recent article.
Being of a fairly robust construction (or heartless depending on your viewpoint) it’s not often that my heart sinks.
It is normally limited to sporting events where I get sucked into believing that, against all odds, the team / person that I’m routing for is going to win, only for the other lot to prove that they were better (or a cheating referee to intervene) and rip that hope away from me.
However, two things have made my heart sink in the last couple of weeks, firstly the fact that in 2016 there is still enough uncertainty to necessitate a poll regarding the importance of cashflow modelling within the Financial Planning community and secondly that Martin Bamford, who I know well and agree with most of the time, suggests that it’s not always required.
Simply, It is required every time for every client, in ever meeting and should
form the basis of every discussion that we have with our clients.
Some clever clogs will no doubt point out that there will be the 1 in a million client who is a single person who is worth £10mill, has no relatives, spends 50p per week, knows they are dying tomorrow and has no interest whatsoever in what happens with their money after their death. There will always be extreme
exception but it would be heinous to lose the point and muddy the message
for the outliers.
Martin’s reasoning seems to be mostly around the risk of modelling badly, I would agree entirely, a poor model is extremely dangerous but the answer is to produce good models not cease modelling!
Cashflow modelling is real a skill and one that I did not possess until it was taught to me by Neil Bailey of Sensible Financial Planning in around 2004 and tested during the CFP process in 2005.
It was taught to me on spreadsheets, which were exceptionally clever, complex and difficult to comprehend initially although as he confirmed when I met him recently, ‘It took you longer to grasp than the others as ‘you are a bit thick!’’
As a result of that grounding, and ego boost, the models that we build are very carefully built, great care is taken on the assumptions and discussions had with the clients to ensure the appropriateness of those assumptions.
The models are checked by more than one pair of eyes and are reviewed and updated at least once a year to ensure that our clients are continuing to point broadly in the right direction.
And that is the key point, a plan without a model is worthless and a model without regular review and update is fairly worthless.
Clients are on a journey, they need help to evaluate the options available to them both in their life goals and the in the tools available to assist them.
Cashflow modelling is the only way to do this properly and we should shout it from the rooftops as it is the single most powerful tool to influence client behaviour that we have.