I firmly believe that providing future cashflow planning (FCP) to your clients, will seriously enhance the value of your business.
Isn't that one of the big challenges that is exercising the minds of most financial planners today? After all, you are I'm sure, investing significant time and energy in improving your business. One of the rewards that you hope to reap from this investment is a valuable business when you decide to exit. So how can future cashflow planning help you to build value in your business?
Future cashflow planning is the cornerstone of an enhanced client proposition
This might sound like a lofty claim but the evidence is there. Numerous financial planners in the UK and further afield (and indeed in Ireland!) have spoken to me at length of how FCP has enabled them to unlock new conversations with their clients, and to completely change their client relationships. FCP enables them to really wrap their arms around their client's financial lives and build a financial picture of every year into the client's future.
This is very different to the traditional financial plan of simply identifying needs and plugging those needs with products.... And at the end of the day, a firm with higher value client propositions is a more valuable business, than a firm of a similar size with a less developed client proposition because more value = higher remuneration = higher firm value.
The charts below transmit a pretty clear message of the power of FCP in terms of client loyalty. By tailoring and teaching the researchers mean that the adviser is delivering a sophisticated advice lead proposition rather than simple product advice.
This graph below shows that AUM under management is on average 40% higher in a high value advice lead model.
Future cashflow planning driver higher ongoing fees / trail commissions
Many financial planning firms are now offering different levels of ongoing service to different groups of clients. Upon examination of these different service packages, the key difference between high value and low value packages is access for the client to FCP. So apart from FCP justifying significantly higher fees at the initial development of the financial plan, the ongoing updating of the future cashflow plan enables advisers to charge higher ongoing fees.
The main model still used today in valuing financial advice firms is the multiple of annual income model. So if FCP drives up your annual income, your firm is worth more.
Future cashflow planning drives stickier client relationships
One of the main benefits of using an FCP approach is how much more engaging the process is from the client's point of view. Instead of simply reporting on what happened in the markets in the past year, the focus is future orientated. In fact the past becomes unimportant as the client buys into the financial plan more and more. How they are now positioned to meet their future financial goals becomes the main concern. The longer term orientation injects patience into investment decisions. Short term buoyancy becomes unimportant in comparison to the longer term vision. The software automatically gives a new picture every year of the client's future financial outlook. New information can also be handled on the go in client meetings. This is transformative.
For instance: does that new job and increased income make retiring early a possibility?
Clients will come back year after year to learn more. Client retention is another key determinant of business value. Future cashflow builds client loyalty. Client loyalty builds business value.
So, if you want to exponentially increase the value of your financial planning business I think it's clear that FCP is the answer...
I think it's time you trialed our software...don't you?