Cashflow planning is an intrinsically complex process. Advisers must take in lots of data and analyse it against various ‘what-if’ scenarios. Add to that the fact that advisers often have to get their data from different systems and stand-alone tools. It quickly becomes a laborious and time-consuming process. Indeed, advisers often need up to ten tools to serve a single client. Multiply this by the number of clients and the problem intensifies exponentially – just like the workload. And, of course, the adviser must be sure they are always compliant with FCA regulations. The end result, something that the customer can easily understand and is meaningful, is very hard to get to!
A good example of this complexity is within asset diversification. This is clearly a good idea to spread risk so that no matter what the broader markets do or whether there is a specific event, the client’s assets are still performing well, and wealth is preserved. But for this to work in terms of informing the cashflow planning process, the adviser needs access to simulation tools, usually held in a different system to cashflow planning. The adviser would need to perform the simulation and then input data from that into the cashflow planning tool.
This is just one example of many – and it demonstrates the need to use a unique tool, a modular solution that can be extended to input data into each service. Using one platform makes it easier to ensure the software is kept up-to-date and compliant with both multi-source taxation and FCA rules.
Manually customer data aggregation from multiple tools is, de facto, a risky business. The probability of error is high. Collecting and aggregating customer data from various tools before it can be analysed is not efficient. Furthermore, this lacks a consistent understanding of the big picture and is a poor starting point for the adviser.
But if we can deliver cash flow planning an integrated solution, then all relevant financial services, such as investment advisory, portfolio management, and cash flow planning can be hosted on one platform. This means automatic and secure data transfer across all wealth management services. Having all customer data available in one source-of-truth platform significantly improves data quality and simplifies a comprehensive analysis. It saves valuable time and allows simulating hypothetical scenarios much better Indeed, a study by Dilmegani, found that automated data transfer and analysis may improve data accuracy from 62% to 99% relative to non-automated solutions.
This results in optimised cash flow planning advice, which is also supported by findings of a 2021 survey conducted by UiPath. It found that 86% of executives believe that process automation enables their employees to spend less time on repetitive, time-consuming tasks and focus more on creative work. Likewise, 63% believe that it increases overall productivity.
Moreover, the high degree of automation resulting from an integrated solution has considerable benefits in terms of cost. Caton found that process automation of mundane time-consuming tasks may save companies a significant cost. McKinsey estimated that corresponding process automation offers a potential return on investment from 30% to 200% within the first year alone.
If the adviser and clients spend time looking at the client’s finances together and drawing up various scenarios, the client gains a clear picture of his or her financial situation. This enables financial security and reliability in planning and allows clients to build a strong sense of their own wealth.
It also means that there is potential to extend the discussion into other areas and thus augment the service offering with additional services. This significantly increases the cross-selling potential for additional financial services.
A good cash flow planning tool provides the adviser with the ability to educate and inform their customers and engage in meaningful, insightful conversations with them. These will lead to an improved customer experience, stronger customer loyalty, a higher share of wallet and ideally to further referrals.
aixigo’s Cash Flow Planner offers extensive possibilities for future cash flow simulations in an advice context. Based on the data inserted as well as the regulatory framework of the FCA, the application’s algorithms estimate income and asset development over a particular period. All taxes (including income tax, capital gains tax, lifetime allowance, inheritance tax, pension transfer fees, etc.) are considered. Specific tax bands, thresholds, and rates of increase for all relevant regions are likewise taken into account.
More information on aixigo's solution can be found here.
