Brett agreed that income was just a figure and did not represent the life a client wanted to lead and does not fully demonstrate to the client what they could actually do with their lives.
Butten agreed with Brett and added: “If you don't bring money forward, then you lose opportunities early on in your retirement if you assume flat-rate spending all the way through. So we know there's going to be a point in people's lives where they have less health. They don't want to get on the plane. They don't want to spend this money doing so much.
“So if we assume that they will spend the same forever, we're losing expenditure opportunities now for our client, and we're doing them a bit of a disservice.”
Not understanding how cashflow works
The third myth the panel explored was that the financial planners themselves did not need to understand how the model their firm was using worked as it was primarily paraplanners who built cashflow plans.
Leci said: “This one I hear a lot, primarily because the people that I speak to are the people who have been tasked with doing due diligence on cash flows. Especially now that more firms use cashflow modelling, what I tend to find is that junior members of staff get this responsibility delegated to them.
“Managing directors and senior planners potentially don't have the time to do this. So what they'll say is, 'chief paraplanner, please go and speak to half a dozen cashflow providers and get demos booked in, because it's you that's going to be doing this on a day-to- day basis. You're going to be producing the models for me, I don't really care. Just choose what you want, what works better for you', and there's pros and cons to this.
“The massive positive of this is that paraplanners are getting involved with the planning process. But the danger here is a potential lack of understanding on the part of the planner.
"If the planner is presenting the advice to the client, what happens if the client questions that advice? Is the adviser in a position to justify the basis for the model if they don't understand how the model works?”
Butten believed it was “hugely detrimental” if a planner did not understand the cashflow model or was not able to make changes live and was basing the advice solely on what they saw on the pictures.
“You're losing 80 per cent of the value we add as a planner if you're not able to change, build, react to questions that may be asked in that meeting with your clients,” she added.
Elson discussed how in his firm the paraplanner would build the base plan but then the planners would sit down together and look at what they could do for that particular client.
