Cash Flow Modelling

At Beaufort Wealth Management Limited we use cash flow modelling.  By matching a client’s present and expected future liabilities with their income and capital an adviser can make recommendations that will “ensure the client doesn’t run out of money before they run out of life.”

The assumed rates of growth, income, tax and so on that are used to form the basis of any cash flow modelling exercise will always ultimately be wrong, therefore regular reviews and reassessments are required to ensure the client remains on track.  We can use it to plan scenarios, such as whether the markets go up or down, which in uncertain times is very reassuring.

All decisions are based on what is contained within the cash flow, from how much to save and spend, to how funds should be invested to achieve the required return. With cash flow modelling there is a lot that needs to be managed. The client needs to be fully involved in the process and understand that there are variables. Assumptions are necessary, as the alternative is to base advice on guesswork without any planning.

Where cash flow modelling becomes particularly useful is where advisers start modelling different scenarios based on decisions that clients may make, this maybe lifestyle choices or perhaps investment decisions.

As part of our cash flow modelling provision we provide a secure portal. The following video explains the purpose of a secure portal.

Beaufort Wealth Management Ltd - What is a secure Portal? from CashCalc

Lifetime cash flow plan enables our clients to:

• Produce a clear and detailed summary of their financial arrangements.
• Define their family’s version of the ‘good life’ and begin working towards it.
• Work towards achieving and maintaining financial independence.
• Ensure adequate provision is made for the financial consequences of the death or disablement of themselves or their partners.
• Plan to minimise their tax liabilities.
• Produce an analysis of their personal expenditure planning assumptions, balancing your cash inflows and their desired cash outflows.
• Estimate future cash flow on realistic assumptions.
• Develop an investment strategy for their capital and surplus income in accordance with risk/reward, flexibility and accessibility with which they are comfortable.
• Become aware of the tax issues that are likely to arise on their own death and that of their partner.
• If the cash flow model is reviewed annually, some years there may not be any change, or just small ‘tweaks’ but other years there may be something significant; either way the client needs to have a discussion with you so that they know things are up to date and to keep their own peace of mind knowing their plan is still on track.

It is really helpful tool, however it must be reiterated that certain assumptions have been made in the making of the plan and that the cash flow model is only as good as the inputted information, so it is critical that it is reviewed regularly.