A leading FCA figure’s forecast that cash flow planning will soon become mainstream is “very encouraging”, the incoming IFP President says.
Alan Dick CFP^CM, who is about to take over the presidency from Rebecca Taylor FIFP CFP^CM, welcomed comments made by Rory Percival, the FCA technical specialist.

Speaking to about 90 professionals from the Paraplanning sector at the Paraplanners Powwow last Thursday, Mr Percival said: “I think cash flow planning will become mainstream in the next couple of years, which I think is a good development.”

Mr Percival, a former Financial Planner, stressed this was his personal view, and that he was not speaking from an official FCA policy standpoint.

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Mr Dick, director at Forty Two Financial Planning in Kilmarnock, said: “It is very encouraging to hear someone of Rory’s stature making such positive comments about cash flow modelling as an important tool for the delivery of good client outcomes. However, it is important to remember that Rory made these comments in a personal capacity. So far, I am not aware of any specific FCA stance on the matter.”

Asked how he perceives the general attitude towards cash flow modelling to be among the adviser community more widely at the moment, he said: “Cash flow modelling is definitely becoming more mainstream as more and more advisers are starting to see the benefits for their businesses and their clients.”

But he believes “too many advisers” still think of cash flow modelling as just “a piece of complex software”.

He said: “This shouldn’t be the case; the software is only a tool to help create the cash flow forecast. While complex software can be used, and is often helpful, a basic cash flow doesn’t need to be rocket science. Simple cash flow forecasts can easily be created in Excel or even with a financial calculator and a piece of paper if you are that way inclined.

“Once an adviser or planner has used cash flow modelling they find it almost impossible to contemplate life without it. The use of a cash flow forecast in creating an actionable financial plan is often like a light bulb being switched on.

“However, like all tools the outcome is only as good as the operator. There are dangers if sophisticated modelling tools are used in the wrong hands. If cash flow modelling is to become truly mainstream it will be important to ensure that the planners and Paraplanners operating these tools are properly trained and qualified.”

Mr Dick believes cash flow planning is crucial and said: “Cash flow models are one of the most empowering tools in the Financial Planning arsenal. Clearly, any financial plan will change in future and clients’ objectives will evolve over time and the cash flow model should be flexible enough to cope with this.

"In fact the cash flow model allows the client and planner to examine the impact of planned changes in strategy before going ahead.”

He said: “The process of Financial Planning is all about helping clients achieve their financial goals. In order to this you have to first know what those goals are and put a financial cost on them at a given point in time. The only way I can see that being achieved is through a cash flow forecast of some sort.”

Mr Dick, who has been Vice President of the IFP under Ms Taylor’s reign, will take the helm at the AGM at Celtic Manor. This takes place on 5 October before the annual conference begins.