Last week (in Icing On The Cake) I wrote about showing the client everything is going to be alright. This is vital. However, by using a cashflow model you can not only show them everything is going to be alright, you can focus on delivering a lifestyle outcome; that is, a lifestyle that is meaningful for your clients using the assets they have available, without the fear of running out of money.
Let me give you an example:
Your client comes in for their review meeting. This year there is a major financial crisis and investment markets have fallen by 50%. Your client has been watching the news every night and is now terrified that this is the end of civilisation as they know it. Their portfolio, which is diversified (and therefore not 100% exposed to sharemarkets) has fallen 29% (which is still a hefty fall). At this review meeting you update their cashflow model with the latest values of their pensions and investments, adjust your assumptions about the future to reflect any changes and run the numbers again.
One of two outcomes is likely for a client in this situation:
- If they have enough capital you may be able to demonstrate that if markets bounce back within 4 years, they will still be alright.
- For clients who are seriously adversely affected (because they never really had enough money at the start of the process) you can help them calculate how to adjust their spending to some degree while the crisis plays out.
The importance of delivering outcomes
A business (or adviser) that does everything right technically and gets great investment returns will be valuable to their clients. However, they may continue to come under some fee pressure from clients (even happy ones) because everyone knows that with investing, costs matter. Heaven forbid that the investment performance suffers at some point (and it must, even if you are good) because you may then find yourself under serious fee scrutiny or even searching for a new client.
On the other hand a business (or adviser) that delivers lifestyle outcomes to clients is almost indispensable. For most people the peace of mind that comes from this type of advice is priceless. While managing money forms part of the process, it cannot be the entire focus. The bigger picture should always be:
Can the client still live the life they want?
If the answer is yes, then everyone is happy. If the answer is no then sensible, practical steps can be taken to address the situation within the bounds of the clients’ circumstances
This is genuine financial advice.
The benefit to you
If you can deliver genuine lifestyle outcomes through your intelligent use of cashflow models, investment expertise and tax knowledge then you are delivering a truly premium service which will always have value, both to you and your business.
By Brett Davidson