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Cash flow modelling – The next new shiny financial services product…

Is the financial services industry still obsessed with products? Financial planner Casey thinks so, as he explains…

I have been working in financial services for nearly 20 years and many far more erudite people than me have quite rightly said ‘the only constant in this industry is change’.

Now I am sure someone reading this, will immediately take umbrage that I have used the word ‘industry’, to describe what others may espouse as being ‘our noble profession’.

But, if you are describing financial services and the provision of financial advice as a whole, ‘industry’ is, in my humble opinion, the correct descriptor.

The only other constant I have seen over that same 20-year period has been the financial services industry use of ‘products’.

Over two decades we’ve seen ridiculously high headline return rates of ‘with-profit’ bonds in the 2000s and ultra-high-allocation investment bonds.

There have been low-cost group stakeholder pensions and overly complicated multi-asset investment portfolios.

More recently, we’ve seen investment platforms with endless investment choices, SIPPs which allow you to invest in things you hadn’t ever thought of, and absolute return funds that promised positive returns in all market conditions (over a market cycle).

Products have been the lifeblood of financial services companies, wealth managers, banks and, in turn, financial advisers for all my years working in this industry. This is simply because products, and the sale (intermediation) of such products, whether through a holistic advice model or a direct sales approach, have been the predominant mechanism for remuneration.

Put simply… you have always needed a product and to sell (advise on) something to get paid. It may be blunt and to the point – but it is true.

On the road to becoming a true profession

Personally, I believe financial planning is on the road to becoming a true profession, which may well be seen as a ‘noble profession’ sometime in the future.

However, the problem still exists that the obsession with the product is now leading our burgeoning profession (and, in particular, the newest recruits to the job title ‘financial planner’) to look for the latest product.

But financial planning isn’t a product. It is an extremely valuable service that has a cost which should be paid for directly by the end client.

Financial advice, which involves the transaction of implementing a product recommendation, has a plethora of products. But these products are well-trodden paths. In fact, these paths have been left decimated and contaminated after years of rebirth, abuse and mis-selling scandals.

So, what could the next generation of highly qualified, fee-based, financial planning professionals identify as the next big product?

The next ‘big thing’

Well, it seems that ‘cash flow modelling’ is that golden goose. It’s the one thing that looks different, sounds intriguing, and hasn’t been promoted by a collapsed insurance company or a bank. This is new and shiny! This is modern technology, with graphs and charts! This is what the people want!

Or do they? Financial planning firms are now launching client seminars just focusing on cash flow modelling.

Unfortunately, cash flow modelling is NOT a product: it is a TOOL.

It is financial forecasting software that has been used by financial planning professionals for many years to help clients visualise a potential financial future. It is based on assumptions (educated guesses), it is interactive, and clients do really engage with the graphical output and the visual imagery.

However, it is a tool that supports the initial financial planning service, and most importantly the ongoing financial planning service as things change and life throws its inevitable curveballs.

Be confident about financial planning

It is such a shame, that following the Retail Distribution Review and the great strides we have made towards the development of a true profession, our ‘industry’ still can’t stop looking backwards and focusing on those things that have caused such damage in the past.

A cash flow planning tool used properly (with prudent assumptions), live in meetings with a client, is a hugely valuable string to a financial planner’s bow, but they are certainly not products.

So, unless, you are a software provider or are planning to launch the next Truth, Voyant or Cashcalc software, please don’t try and sell a potential new client cash flow modelling as the latest shiny product.

Be bold, be brave, and be confident about the phenomenal professional service that is ‘financial planning’.


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