In our experience MOST people DO NOT have a Lifetime Cashflow Forecast.
But without this many of life’s big questions cannot be answered accurately. With a proper model we can tell clients, how much money they need for a secure future; how much they need to earn; when they can afford to stop work; how much they need to sell their business for; how much they can give away to their children BEFORE they die; how much replacement capital and income is needed if someone dies or becomes ill; how much they need for nursing care etc etc.
Without a proper cashflow forecast any recommendations or advice will be at best an estimate and at worst a wild guess!
A cashflow model takes account of a client’s current income, expenditure, assets and liabilities and then projects forward to incorporate the cost of their desired future lifestyle and specific financial goals.
By inputting various scenarios into a cashflow model, we are able to look at any potential financial disasters and conflicts and determine priorities for the future.
As a matter of course we model some really worst case scenarios – poor investment returns; high inflation; a 40% portfolio loss; increased expenditure of 10% pa for life; immediate cash gifts to children and nursing care fees of £35,000 pa for 10 years. If clients do not run out of money before age 100 in these scenarios, we can be confident they will have a secure future and they can happily sleep at night.
Many people invest significant sums of money into low, medium or high risk portfolios without having any idea about whether the portfolio will deliver the returns necessary for them to live the lifestyle they want. We meet clients who are taking far too much risk when they don’t need to and also clients whose portfolios are so conservative that they will never grow enough to achieve their goals.
The general impression of the public is that financial advice is all about investments, pensions and ISAs (because that is all the popular press seems to focus on.) But, proper Financial Planning is about the much bigger picture – helping people to make life changing decisions for their future security and happiness.
We do not believe this can be done properly without fully understanding a client’s objectives and the compilation of a robust and very personal Lifetime Cashflow Forecast.
If you would like to know more, please call for a chat.