Why Cash Flow Planning Is the Advice Clients Want 

The pandemic has been a catalyst for change. This global, shared experience has accelerated technological advances and cultural shifts that underpin work and engagement practices. As a result, consumers are reassessing their life and money priorities at a time when there is more flexibility than ever to decide when, where and how you earn money. Plans are changing, and financial advice needs to adapt to support these changes.        

Generic retirement planning is no longer the answer. It’s time for financial advisors to embrace cash flow-based planning and advice. Doing so can better serve a more diverse, digitally engaged consumer, organize an expanding set of inputs, deliver value above and beyond investment returns, and provide control and flexibility at each stage of the wealth cycle. Those who will continue business as usual will miss out as key shifts continue.    

COVID has left many questioning the idea of careerism, triggering an uptick in passive income generation and the gig economy. This trend was already taking flight. Millennials and Generation Zers led the way before the pandemic, but it has been amplified across generations since.

Estimates from Gallup show that the U.S. gig workforce could be made up of 50 million to 60 million people. This is important for financial advisors because clients are increasingly taking on diverse and volatile sources of income. Many are unadvised or don’t have exposure to the capital markets or traditional employer-based savings plans.  Financial planning is essential to optimize efforts and to create added freedom and flexibility.    

Given this shift in mentality around work, cash flow-based planning has emerged as a strong solution. Gone are the days when cash flow management was a task that applied only to businesses. Consumers often have a personal-CEO mentality today. They seek the benefits of understanding cash flow in their personal lives and households. They even see it as a way to future-proof against uncertainty and instability.

Yet many financial advisors are slow to adapt, to see clients for who they are and how they want to operate. There is an embedded view that to plan for the future, an investor needs to have clear financial goals. In fact, asking about these goals is often the first step of a financial advisory journey. Advisors often expect answers such as retiring early, paying off debt, supporting kids through college or building an emergency fund.

These types of cookie-cutter financial goals, however, are suitable only for a certain segment of the workforce that operates mostly in a traditional, 9-to-5 environment. This is what many workers are leaving behind or potentially never entering.

It’s difficult, and in some cases, meaningless, for the modern prospect or client to predict their lives in a decade or two down the line and to set financial goals accordingly. They would rather follow general behaviors that will allow them to pursue their passions and focus on generating funds to help facilitate that journey. 

In turn, it’s up to financial advisors to help clients by building cash flow statements and balance sheets based on their lifestyle, updating them yearly based on savings and spending choices, investment availability and market fluctuations, and providing sound guidance on how to align their investments accordingly.

So, how is this made possible? Through technology. Modern cash flow planning technologies not only offer flexibility but also visually engaging outputs that prompt real-time conversations between advisors and clients. Features such as live adjustments that explore different planning scenarios and show the direct impact of the advice result in more productive, meaningful exchanges.

Consumers today want to be involved in every step of their financial planning process rather than blindly follow static instructions set up by their financial advisors. Plus, those that actively participate are much more likely to adopt, adapt and stick to the plan.

Cash flow planning technologies ultimately strengthen relationships between advisors and clients. They visually demonstrate the direct impact of planning and the long-term value of advice. This empowers clients and advisors to make more informed decisions. Furthermore, these technologies help firms maximize return on investment and profitability, surface insights and opportunities, minimize compliance burdens and boost efficiencies.

Building cash flow planning infrastructure in-house to serve and support clients is prohibitive and cumbersome. Strategic technology partners can offer an intuitive, end-to-end platform that can incorporate all scenarios into a single, dynamic financial roadmap. However simple or complex a client’s details, the best cash flow planning technologies can aggregate disparate types of data, accounts and enable planning for all. 

The biggest roadblock to implementing a cash flow-based planning strategy is shifting the mindset and processes of those reluctant to change. The hesitation is understandable. Data input used to be highly laborious. This would cause inefficiencies, telephone translation, indecision, and time-wasting.

Modern technologies can provide a more effective, seamless way to work collaboratively and directly with clients to add value at every step of the financial advice process. There is a significant appetite for this change among modern investors, so it’s time for advisors to catch up. Those that do so will be well positioned to grow their practice, expand client wallet share and increase retention.

Blake Kannady is chief product officer of intelliflo, a single, API-driven platform that manages the end-to-end advisory experience for organizations of all sizes. Visit https://www.intelliflo.com/us for more information.