Cashflow modelling
All the members of the Investment for Life team are great fans of Microsoft Excel.
The register of recommendations to clients is maintained on a bespoke excel spreadsheet that the team has developed in-house over the years, “which ensures we have an ongoing and up-to-date record of where we are with every client,” Jo says.
The cashflow-modelling tool has also been developed by the planner using Excel. “We prefer to use our own modelling system because when we see the answers we know how it’s calculated; we’re not just looking at the final charts we’re also looking at all the numbers that are going into that and we understand what it’s doing,” Jo explains. “I’ve looked at other cashflow modeling tools and some of them are really good but they’re not always transparent. You can’t always see what’s going on in there.”
The downside of using Excel is that the team has to do the updating of the spreadsheet itself, which, Jo admits, is an ongoing process. It’s also not for everyone. “Excel is a different language and if you don’t talk that language then outsourcing to a third party provider probably would be beneficial,” she says.
For Jo, cashflow analysis lies at the heart of financial planning. “I love it. I don’t think you can do the job without it. I know there are people who say ‘I’m not a financial planner I don’t need to do a cashflow model’, but I don’t see why you wouldn’t use it if you could,” she says.
“There are times when Mike might ask me for something that’s particularly complex or a client has rung up and asked for something quite detailed and almost always the answer is to put the information into the client’s cashflow model and look at a range of scenarios so I can really see the effects and how the position might change if you did one thing over another. It gives you the answers and why wouldn’t you use something that gives you the answers?”
Investment approach
Similarly, when it comes to investment selection, the firm has developed its own process, which Jo will run taking the results to the planner. “Then we’ll discuss them before deciding what to do next,” Jo says.
She also carries out the regular analysis of funds and fund performance. “I’ll run a quarterly analysis on our existing funds using FE Analytics. The investment committee, of which I am part, will then make the decisions. But the planner has the final say as the buck stops with him,” she says.
The firm favours a passive approach to investment, using index trackers, funds from Dimensional and ETFs, and taking a long-term view. They tailor portfolios to meet specific client needs. This process includes understanding what a model portfolio might look like, but then integrating client’s current investments so they end up with something that’s in line with their overall risk profile. Tailoring takes a lot of work, but it’s really worthwhile for the client.
So what does she look for when reviewing a fund? “The funds that we use are well established but I would look at the risk being taken, and I will always look at the fund breakdown, and what the fund managers say they are doing and what they are actually doing, to see if they align. Some may say they are tracking an index but in reality they’re not and their remit is far wider than that,” she says.
“Then I’ll look at the usual things, how much it costs, how long it’s been running what its performance is like, how it matches its own benchmark and how it compares against the benchmark we think it should be compared against, because you’ll see funds benchmarked against an index that just isn’t relevant or realistic.”
Platform
The firm’s funds are mainly held on platform, the primary platform being Transact “but we advise off platform as well,” Jo says. Asked why Transact is the primary platform, she says: “The firm used Transact in the past when it was really the only platform that was available, so lots of our clients were already using it. The suitability of Transact is checked at least annually – or when there is a major change in the platform space and we find that it remains the best option for clients. Other platforms are getting closer – but not close enough to believe that change is in the best interest of the clients who use it.”
With the platform market and offerings changing so quickly over the past year or so the firm currently undertakes due diligence every six months,” she says. “There are lots of changes in the platform market at the moment, so you can’t always leave it for a whole year; we’ll do it even more often if it needs to be done.”
The firm has set criteria of client requirements that it needs from a platform “and we approach it from that angle,” Jo says, “rather than looking at what the platform can offer us. In that way we filter out the platforms that don’t give us what we want and narrow it down to the few that do.
“But at the end of the day, if you like the platform you’re using and you’re clients like it and it’s all working well, you need a very good reason to change.”
Community spirit
One area she admits to spending “a little time” on during the average day is Twitter. This is the way she maintains contact with her fellow paraplanners around the country. It is part of the healthy, supportive community of paraplanners that will discuss issues, give guidance and from time to time pick up the phone to talk through a problem or to get advice on the best provider or product for a particular situation.
“The phone will ring and there will be a paraplanner who I have been tweeting with and we’ll talk some things through,” Jo says. It’s an important part of the enjoyment of the job, she adds. “We’re a sharing bunch. I’ve never met another paraplanner who isn’t prepared to share about what they do or to learn from others doing the same job. There is never a stupid question to ask another paraplanner because nobody thinks they’ve got all the answers. Paraplanners understand that if we all work in some sort of harmony and help each other out, all our clients benefit from it.”
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