Financial Planning/Financial Advice

bill_on_line

Hi Group

Went for an interview as a trainee Paraplanner (as i did not want to be in a sales position) at a local Financial Adviser/Financial Planning firm on wednesday this week, i was not sucessfull.

I was working as a tied financial adviser up to 2006 with FPC Cemap bridge, longterm care and life time mortgage qualifications.

Any way the interviewer/buisness owner was stating that they where not just financil adviser firm but the "superior" financial planners. Did i known anything about cash flow modelling, i answered no and my knowledge was seriously out of date.

I did a bit of searching on the internet and it appears to me that cash flow modelling is not much more than looking at ones income and expenditure (which i did as an tied FA for afford ability and recommended premiums) over the longterm. I really question the benefit of such modeling as in my own past redundancy, unemployment, inflation and the economic situation can make such difference to income and expenditure whats the point of predicting the long term future.

Also as an FA we would ask a client about their asperations and life goals so we could take these in to account with the advice given. Finacial planning seems a bit hairy fairy and moving away from the financial products at the time that are most suitable.

Just wanted some opinions

Thanks
Bill

Wilkins

bill_on_line wrote: »

I really question the benefit of such modeling as in my own past redundancy, unemployment, inflation and the economic situation can make such difference to income and expenditure whats the point of predicting the long term future.

Surely cash-flow modelling would take account of all these possibilities, i.e. take account of different scenarios?

I did this over several years, modelling several different 'what-ifs' before I was able to take early retirement.

I am not a financial adviser nor have I ever received any financial advice.

Linton

bill_on_line wrote: »

....... Finacial planning seems a bit hairy fairy and moving away from the financial products at the time that are most suitable.

Just wanted some opinions

Thanks
Bill

My opinion - how do you know what financial products are most suitable unless you can show what they achieve under various assumptions?

When I was planning my retirement I developed various cash flow and investment plans based on Excel and the modeller in MS Money to for example check what would happen if I died early, how resilient the plan was to different inflation rates, what was the maximum annual spend before I was in danger of running out of money before I died, the tax implications of various options etc etc. If I was paying for financial planning I would expect that the planner would be able to point out the various risks and assumptions and their impact on the success of the plan.

mania112

Some IFAs LOVE cash flow modelling and others HATE it.

It's easy to love because it becomes easier for the IFA to illustrate the usefulness of the advice they're providing.

What if 'this' happens? Can you afford to cover it? No, well then you need some XYZ.

And yes, the modern software considers all sorts of permutations. I think it's fair to say Voyant is the most popular one out there.

jamesd

How do you know what to recommend for say pension contributions or the mixture between pension and non-pension retirement income investing without doing at lest some modelling of potential future cash flows?

How do you have an informed discussion with a client about the possible impacts of various investment-related events and life events without some sort of modelling to illustrate those effects? Say, without some sort of model or stock market variability to inform the choice of amount to invest while achieving an acceptable chance of success in a desired timeframe?

dunstonh

Any way the interviewer/buisness owner was stating that they where not just financil adviser firm but the "superior" financial planners.

Arrogant a**e holes more like.

Did i known anything about cash flow modelling, i answered no and my knowledge was seriously out of date.

Some business models highly promote the use of cashflow modelling and tend to slag off other adviser models that do not use it the same way. What you were told suggests this is one of those.

I did a bit of searching on the internet and it appears to me that cash flow modelling is not much more than looking at ones income and expenditure (which i did as an tied FA for afford ability and recommended premiums) over the longterm. I really question the benefit of such modeling as in my own past redundancy, unemployment, inflation and the economic situation can make such difference to income and expenditure whats the point of predicting the long term future.

Some consumers can make good use of extreme cashflow modelling. However, most consumers need no more than a needs analysis. Countless number of times I have come across people who were "sold" the benefits of cashflow modelling. Yet they didnt have the financial discipline and/or the willingness to continuously keep it up to date. When you read the cashflow modelling data from just few years back, let alone further back you frequently see how inaccurate it is if left to fester.

The model is valid and with the right consumer it can work. However, it is not superior. Needs analysis is a form of cashflow modelling. Just not taken to the nth degree. So, all models can work. Just need to use the right model with the right client.

I just hate the ones that slag off others for not using cashflow modelling with everybody. it isnt the actual model I hate.

Linton

Surely it is a matter of what is appropriate. If one was planning to retire at State Pension Age and wanted supplementary income at that stage cash flow modelling seems pretty pointless.

In my case I have pensions which could be deferred replaced by use of savings, flexible drawdown to be emptied without paying higher rate tax, large one-off expenditures and the need to ensure my spouse has plenty of money should I die early. I dont think I could sleep easy at night without some idea of how it could all pan out, when major actions need to be taken and evidence that there is plenty of slack in the plan demonstrated by a detailed cashflow analysis. There isnt a great need to keep the plan up to date as regards the details, all that is required is an occasional sanity check.

Freecall

dunstonh wrote: »

a**e holes

Language dunstonh!

We don't want you to be in trouble again.

bill_on_line

Linton wrote: »

My opinion - how do you know what financial products are most suitable unless you can show what they achieve under various assumptions?

Hi Linton

We used product illustrations with 3 different growth rates, to show some possibilities if plan was kept in force.

I agree not as nearly comprehensive as cash flow modeling, but most customers could not stomach the premiums in more negative senarios.

Bill

OldBeanz

Linton wrote: »

...occasional sanity check.

We have a sanity clause each year in December. :j

Freecall

OldBeanz wrote: »

We have a sanity clause each year in December. :j

Wow, Santa jokes and still only November.

Ho, ho,ho.....

:beer: