Pensions dashboards are expected to give savers a better overview of their retirement funds.
But for advised clients, it is cash flow modelling that is and has been a key to retirement planning.
“We have put cash flow at the heart of retirement planning for over 20 years,” says Fiona Tait, advice and compliance director at Intelligent Pensions, a financial planning firm. “It’s still not a regulatory requirement, but it is the most effective way of illustrating long-term income needs.
“The cash flow model makes it possible for a client with no real understanding of pensions and investments to clearly visualise how much they can afford to spend each year, based on a robust and credible estimate of life expectancy.”
While clients may not need a comprehensive knowledge of pensions and investments to appreciate a cash flow model, Steph Willcox, head actuary at Dynamic Planner, a financial planning platform, says “if you want people to connect with their cash flow plan, it needs to be relevant to them”.
“If you can start showing those goals you’ve heard your clients talk about in their cash flow plan, it automatically means you’re giving them a personalised cash flow plan that is going to generate so much more buy-in when they see their life and the things they wanted to do: give money to their grandchildren, or go on big holidays.
“It’s so much better than having something generic, like ‘Let’s assume you spend £30,000 a year in retirement’. That doesn’t speak to people the same way as showing them the actual flow of expenditures over their life, and the things they’re planning for. So personalisation is number one.”
But what about people who do not connect with graphs? “If you do have people who do not connect with numbers, or they don’t want to see charts, you can still have a conversation without [saying] ‘Let’s look at all of these charts and see what they’re showing you’,” says Willcox.
“It really needs to be focused on how you think your clients are going to best react to this information.
“For some people, that is going to be drilling down into the numbers completely. For others it is going to be a brief overview of the charts, and then a conversation around what that actually means for them in terms of their life.”
You don’t want to include 25 charts if you know they’re not going to connect with that, because they’re not going to go back and read it again.
Willcox adds: “We quite often find that when people take away a report at the end, that report is where you really want to make sure you’re showing them information they’re going to take in moving forwards.
