In the second of her exclusive series for Professional Paraplanner, looking at how cash flow can best be used to add the greatest value to clients, Steph Willcox, head Actuary, Dynamic Planner, turns the csh flow spotlight on those starting families and buying houses.
As with those just starting out on their career journey, young families are likely to have competing financial goals, as well as stretched budget. They may have to contend with periods of lower income due to parental leave, large everyday expenditure on childcare, and large purchases that might include moving up, or getting on, the property ladder.
Saving for the future might not be the primary focus of these clients, but providing comfort and support through this challenging time will ensure that they remain focused on their longer term goals once they are able to, and allow them to understand the importance of saving where they can.
What should you focus on?
Although budgets will be tight, it’s likely that your clients will start to think about saving for their future, or their children’s future and will have more concrete goals in their minds. Reflecting these in your data is vital so that you can bring a cash flow plan to life and really help your clients to visualise their future. Setting up children by providing them with private schooling, house deposits or paying for weddings decades from now might be high priority, and helping your clients to see the life they could provide for their children will really help to bring their financial journey to life. Generating buy-in for the advice you are providing is so important, especially at younger ages where the result of long-term investing can be so impactful.
Demonstrating the effect of saving an extra £100 into a pension or investment each month might be the difference between achieving retirement goals or not, and could allow the family to move into a larger house sooner rather than later.
As with all younger clients, they are likely to be tech savvy, and communicating with them frequently and in an appropriate manner should be high on your to-do list. Keeping clients engaged with their finances, even if they don’t see you again for another year, will remind them of the choices they are constantly making and ensure they are keeping themselves on track for the goals you have discussed.
Additionally, once dependents come into the picture, cash flow planning can be used to show the effects of protection policies and ensure that your clients and their families are protected should the worst happen.
What is less important
Finances can change quickly during this period of life, and second guessing promotions or career changes would be a difficult task. Instead, it would be better to ensure your clients understand why they should keep their records with you up-to-date and you should ensure you can react and provide your clients with an updated cash flow plan quickly and efficiently if required.
Similarly, thinking too much about future taxation or estate planning is not likely to be useful when later-life taxes are likely to change many times before becoming applicable to your clients.
In summary
Continuing your client’s financial education through engaging cash flow planning is vital to ensure that your clients remain on board with the advice process and enables them to understand the value you are providing. Showing them a range of scenarios based on the financial choices they are currently making will help them to see the long-term effects of their decisions and ensure they understand the implications of your advice over time. You may want to consider providing a way for clients to check in on their finances in their own time to keep the engagement level high.
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