Dynamic Planner has launched a cashflow planning service which calculates on real data for the client within its risk profiling and financial planning process.
Demonstrating the tool to Professional Paraplanner, CEO Ben Goss (pictured) said “Covid, Brexit and everything in between, has catapulted the ability to provide solid, robust, and risk-based cash flow planning for all clients – clearly showing that they are working hand in glove with the FCA’s stance on demonstrating suitability – to the top of advice firms’ wish lists.
The single system aspect enables the seamless linking of a client’s risk profile and portfolio to their cashflow plan. This, Goss said, avoids having to decide upon and manually enter growth assumptions and as a result, the final cashflow “more accurately projects what a client’s future looks like and more robustly tests their capacity for risk”.
Using the cashflow planning service within Dynamic Planner, linked to the risk profiling, client reviews and recommendations modules within Dynamic Planner Elements, he said, “takes miscalibration out of the equation… something that can occur if you use different definitions of risk and return in the planning and advice process.”
Researching how the cashflow service should look, Goss said, included asking advice firms “exactly what they needed but didn’t yet have”.
“Advisers and paraplanners told us the cashflow tools they were using were either very simple but did not effectively reflect the risk that the client had signed up to or was in the portfolio, or they were very sophisticated tools but cumbersome and difficult to use and again didn’t reflect the risk.
“So we designed something that is quick and easy to use but powerful in what it offers, because it is driven by and linked to the client’s profile and portfolios in Dynamic Planner.
“It utilises real funds, real products, real valuations, calculates the tax the client is going to pay and is a monthly model.
“There is no other risk-based cashflow model on the market that uses a monthly calculation, including real-time Monte Carlo modelling, to assess potential returns and losses that the client might make. And that is based on their actual portfolio rather than a fictitious summary that might be entered.
“We are constantly running one in 20 year storm calculations so clients can see what they should be preparing for on a consistent basis.”
The service links also to the concept of Life Phases included in Dynamic Planner, any number of which may be added by the advice firm and used to map out key phases in a client’s life, such as around retirement. Income and expenditure within the cashflow service can then be attached against those phases, so the client can easily be shown how drawing out more or less money at a certain time in their life may affect the overall longevity of their wealth.
The development of the cashflow service is part of a £5m ongoing investment into Dynamic Planner to enable firms to have one system they can use across their processes, Goss said. Around 75% of Dynamic Planner users currently use cashflow planning. “We believe using one system, providing a single definition of risk and using a single set of assumptions, is the only way to ensure miscalibration risk is mitigated against.”
The cashflow service is live from 3 November 2020.