On being deliberate
It has been encouraging to see how ValidPath Members are continuing to build their advisory propositions - not merely in order to survive in RDR World, but in order to continually improve the financial outcomes available to their clients. In that respect, it's good to see Voyant being used as a pivotal part of such a proposition - as well as the alternative system, CashCalc, which ValidPath makes available free to its Members.
As we have written before, it is not difficult to see how virtually any area of financial-planning can be significantly improved (for all concerned) through the adoption of lifetime cashflow planning. Some areas of advice, such as those directly related to the new pension freedoms, are impossible to deliver without it. Indeed, that should not be a surprise to any of us: any advice which is essentially about decumulation strategies needs some kind of underlying diagnostics to help predict likely outcomes. You can either invest in a relatively expensive, high-end system such as Voyant, fritter away the rest of your life inventing something from scratch, or access the fully-functional CashCalc system which we've made available to our Members.
Building this methodology into your advice model is a deliberate step. Whether or not you choose to purchase the software, or simply access something handed to you on a plate, there is that essential first step the Adviser takes away from an 'old way' of doing things, and towards a 'new way'. It is an important decision, because it then affects everything you do for your clients. It changes your perception of not just risk itself, but where the risk lies, within the process of delivering outcomes. It moves the emphasis away from the product, to the kinds of consideration that require attention before any product gets selected. It forces the Adviser to think more carefully about the assumptions that we use routinely - and that may well impact upon how we interact with the client.
Lifetime (discounted) cashflow planning is not merely about having another interesting, techie bit of software installed on the laptop, or available to us via the wonders of the interweb. In short, it represents a more deliberate, thoughtful approach to the journey that both Adviser and client embark upon together - a little like a satnav, it can assist in intelligently avoiding holdups, and can actively seek out desirable waypoints, en route to the destination. Treat it like a black box, and you may end up attempting to squeeze your articulated lorry into a footpath, but use it methodically and routinely, and both you and the client will get there, safely and effectively.
Of course, there are some predictable difficulties which one should not ignore. Those clients who evince a kind of tunnel vision in respect of their own plans, may express frustration about an advice process which is more inclined to test out the value and risks associated with a given course of action. Certain kinds of financial need lend themselves more to that tendency than others - mortgages, for example - and so Advisers will need to think hard about how they deal in practice with insistent clients. Of course, if a client is intent upon a course of action which is the financial equivalent of hurling oneself off a cliff, then slowing them down a little may actually be the humane and responsible action.
Let's be careful out there, folks. The deliberative disciplines encouraged by lifetime cashflow planning reduce risk for both your client, and for you.