Dynamic Planner adds sense check feature to cashflow forecasting

1 July 2021

Dynamic Planner has added three new features to its cashflow planning software, incorporating a new format for its Monte Carlo forecasting which it says helps advice firms provide a sense check on the reality of life planning.

The cashflow planning software was launched in November 2020 as part of a £5m ongoing investment into Dynamic Planner, with a view to give to advice firms the ability to use one system across their processes, thereby providing a single definition of risk and a single set of assumptions to mitigate against miscalibration of risk.

Two of the new features are designed to make the system more user friendly and provide clarity when using the system, while the third is to better show potential outcomes based on the in-built stochastic Monte Carlo forecaster.

Chris Jones, proposition director, Dynamic Planner said the new chart features are designed to help advisers and paraplanners to assist clients in better understanding probability within the cashflow forecast.

Explaining the upgrade to the Monte Carlo forecaster, Jones said it provided a sense check of the reality of market probabilities. “One of the attributes of Monte Carlo forecasting is that when you put in any variables it runs 6,000 possibilities and shows you mean and the 95th and the 5th percentile.

“The problem is that when you apply any of those averaging metrics, it turns what is quite a bumpy real-life experience into a relatively straight line. To show 6,000 lines on a chart makes it unreadable so we have set up the system to show 40 random lines. We think that is quite powerful in showing people the reality of life planning.”

As well as showing 40 random lines, the graph incorporates a mid range, highlighted in blue, which is the gap between the 25th and 50th percentile – “where reasonably, output is likely to sit for half of all investment paths,” Jones says.

“This allows adviser to better frame the possibilities and to help clients better understand the variables involved when putting together a plan.”

The feature is activated by clicking the ‘Show possible investment paths’ button on the screen.

Whoever is demonstrating the cashflow, the adviser or the paraplanner, can highlight individual lines on the chart to show the client in a meeting what may happen over the time period. However, the illustration cannot be printed or incorporated into a report with the Monte Carlo data showing. “We’ve included it for purely explanatory reasons,” Jones says.

Explaining the other two added features, Jones says the first now identifies a future expenditure as a goal. “So, for example, if a client wanted to ensure they have school fees for their children at a certain age, plan for a wedding or buy a boat ten years down the line, it can now be clearly marked as a defined goal with a piece of iconography to help make it stand out on the screen.”

The final update is the ability to visually break down income and outgoings into segmented items, to give a clearer picture of where the client’s income is coming from and where their money is being spent in their outgoings (see chart below).

Jones says: “The latter features make the software more user-friendly for the client but the Monte Carlo changes we feel are a USP in this market.”


Professional Paraplanner