In this first instalment of a series of guides, Ray Adams of Niche Chartered Financial Planners reveals his tips for successful cash flow planning.
Within any operation, one of the most useful things you can do is to take a typically complex task and simplify it. Given the importance of cash flow planning for an IFA, being able to simplify this labour-intensive task would be particularly advantageous. But can it be done?
The financial advice industry has been evolving rapidly since the onset of the digital age, and several computer-based tools have been developed that make the job of cash flow planning a lot easier. However, the complexities still remain, and there are many conflicting views within the industry as to the best application of technology for this core element of financial planning. Many IFAs still use traditional methods and find that these have served them very well up to now. However, the march of technology makes it almost certain that advisers across the board will need to adapt their methods in order to remain competitive and successful.
Deciding which tech to embrace
So what is the best way forward? Opinion is unhelpfully divided. Rebecca Taylor, president of the Institute of Financial Planning, has been vocal in encouraging IFAs to consider building their own cash flow modelling tools, while on the other hand Andrew Hart, aka The Voyantist, strongly endorses the use of the existing cash flow software which requires extensive training.
These different points of view do not give IFAs a definitive steer, and indeed there probably is no right answer to suit everyone. A more sensible approach is simply to implement and utilise whatever solution suits your company and its current needs. Here at Niche we felt the existing crop of software providers did not offer a suitable service, and with few alternative options available we took it upon ourselves and built our own software.
By simplifying the software (thus contradicting the approach of most existing software providers) and releasing it onto the market, we believe we succeeded in enhancing the use of digital technology for those who have potentially never benefitted from computer based planning before. We are of the opinion that financial advisers should never need training in order to use financial planning software effectively. After all, financial advisers already have the qualifications, knowledge and expertise necessary to succeed in their field – so really, it’s the responsibility of the people who actually create the software to deliver a product which advisers can intuitively understand and know how to use.
Therefore, although we strongly encourage IFAs to start utilising technology to assist with cash flow planning, we also warn them not to rush into subscribing to a software provider, but instead to evaluate the market and decide which products are genuinely suited to their needs.
That is tip number one.