I’m a huge fanboy of Future Cashflow Planning in general (and Voyant specifically) for 2 main reasons. Firstly when my own financial planner started using Voyant, it transformed our financial planning discussions. And I have also seen the hugely positive impact that Voyant has had on so many businesses around the country. I believe that it is a key factor in increasing the value of these businesses. Voyant is available to every adviser, so can any advisers really ignore it anymore? At this stage, I think it is no longer optional for advisers…
Most advisers are investing significant time and energy in improving your business. One of the rewards that you hope to reap from this investment is a more valuable business when you finally decide to exit. So how can future cashflow planning (FCP) help you to build value in your business?
It adds so much value to clients
Financial planners in Ireland, the UK and further afield have spoken to me at length of how FCP has enabled them to unlock new conversations with their clients, and to completely change the relationship. FCP enables them to really wrap their arms around their clients’ financial lives and build a financial picture of every year into the client’s future, right up to death.
This is very different to the traditional financial plan of simply identifying needs and plugging those needs with products…. And at the end of the day, a firm with higher value client propositions is a more valuable business than a firm of a similar size with a less developed client proposition. More value to clients = higher remuneration = higher firm value.
Future cashflow planning drives higher ongoing fees / trail commissions
Many financial planning firms are now offering different levels of ongoing service to different groups of clients. When examining these different service packages, access for the client to FCP is the key difference between the high value and low value service packages. So apart from FCP justifying significantly higher fees at the initial development of the financial plan, the ongoing updating of the future cashflow plan as a result of changes in client circumstances, investment markets etc. will enable advisers to charge higher ongoing fees. The beauty of Voyant is that the original plan is retained so the client’s growth story can be viewed year after year.
The main model still used today in valuing financial advice firms is the multiple of annual income model. So if FCP drives up your annual income, your firm is worth more.
Future cashflow planning drives stickier client relationships
One of the main benefits of using an FCP approach is how much more interesting it is from the client’s point of view. Instead of simply reporting on what happened in the markets in the past year ,the focus is future orientated. In fact the past becomes less important as the client buys into the financial plan more and more. How they are now positioned to meet their future financial goals becomes the only concern. The longer term orientation injects patience in investment decisions. Short term buoyancy becomes less important in comparison to the longer term vision. The software automatically gives a new picture every year of the client’s future financial outlook and is completely dynamic, updating the client’s picture in line with those changes. New information can be handled on the go interactively.
- Does that new job and increased income make retiring early a possibility?
- Can you afford to buy that holiday home in 5 years’ time… or maybe next year?
- Can you afford to start gifting the maximum amount to your children this year?
Clients will come back year after year to learn more. Client retention is another key determinant of business value. Future cashflow planning builds client loyalty. Client loyalty builds business value.
So, if you want to really increase the value of your financial planning business, I believe that FCP is no longer optional for advisers.