Cashflow forecasting has quickly become an integral tool within the financial advice industry. A rather obscure area of financial advice 10 years ago, it’s growth in the last decade can be accredited to a series of regulations, from RDR to the more recent Consumer Duty, that have gradually forced financial advisers to focus on the quality of their advice and how they justify their fees. With Pension freedoms also pushing more investors to seek regulated financial advice, cashflow providers have been busy building their software, to cater for the growing demand of investors wanting clarity on the future direction of their assets. After a decade of rapid growth and adoption, some cashflow providers are now turning their attention to the mortgage and protection market. A cashflow forecast simply helps a client understand their current financial position and gives them a view of their wealth in future years. The tooling itself doesn’t fall under any regulatory body, so a user doesn’t have to be qualified to provide this level of analysis. For these reasons, advisers outside of wealth management are starting to explore these tools themselves and use them to justify the service that they provide. Take Ryan and Samantha Cole for example. Their current wealth is £320k and at retirement, their pots are projected to be worth £526k. Given their current spending habits, the forecast can predict that after retirement, their wealth will gradually erode, but won’t run out. The Cashflow Wave About To Sweep Across The Mortgage & Protection Sector 14 SUMMER MORTGAGE NEWSLETTER David Scholes Head of New Business FE fundinfo Ryan is the principal earner though, so what would this look like if Ryan were to sadly pass away when he’s 60. The forecast now shows a different future, one where Samantha will struggle financially on her own, running out of capital on her 79th birthday, 7 years before her average life expectancy of 86. We can use cashflow forecasting to mimic insurance contracts, in this case that pay out on Ryan’s death and provide a powerful visual to our clients that for a small monthly premium, they can protect their future.
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