Cashflow modelling is an extremely good tool where ‘appropriate’, the Personal Finance Society’s chief executive says.

Following a long running debate in the latter half of this year on Financial Planning Today, Keith Richards explained his own position.

An FPT poll found 78% of readers thought cashflow modelling was essential to ‘true’ Financial Planning.

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Mr Richards said: “I think it’s a very important enabler in Financial Planning but not necessarily in every case.

“So I think the differentiation is, where appropriate, cashflow modelling is an extremely good tool to illustrate the road map and address the needs of the client's true financial plan.

"The assumption that every single client you deal with will need comprehensive cashflow modelling I think is where you end up with a divide in the market where advisers say that may not be necessarily the case or the client may not be prepared to go into that level of detail.”

He said: “We come back to those who only want to do true Financial Planning, who might say to the client 'unless you follow this process I can’t offer you a service', whereas many others will still use cashflow modelling but only where they feel there’s an appropriate need to enable the delivery of their service.”

Speaking about how the FCA would approach it, he said: “The regulator wouldn’t say it is essential but they recognise it can be a very effective tool to delivering a good plan and making it more visible and relevant to consumer.”

The regulator’s view is about an individual’s needs and circumstances, he said.

Mr Richards said: “We have to be careful with language which suggests there’s a one size fits all. That’s where mis-selling happens in the past, where you take a formulaic approach to every one.”

Speaking about the poll result, which showed 22% of readers saying cashflow modelling was not essential to ‘true’ Financial Planning, he said: “I think a lot of people actually violently agree but I think it can sound very polarised when you put it to a vote.”