By Sarah Siddons, Principal of Siddons & Co Financial Planning in Ilkley.
As part of my client meetings, I aways establish & then review the progress of my clients’ financial and personal goals and check whether they’re on track to achieve them.
To help with these conversations, I use an interactive cashflow modelling tool called Voyant.
This particular software models the client’s income and expenditure from the present day, into retirement and for the remainder of their life, based on a number of assumptions including inflation, growth rates, interest rates, taxes, retirement age etc.
It helps bring their financial future alive in a visual format, and these visuals can play a crucial role in addressing significant questions such as:
What would happen if…? Can I afford to…? Will I be okay if…?
For example: when can I afford to retire? Can I retire earlier than planned? What if I downsize? Can we afford private education for my children?
To answer these questions, we can try different “what if” scenarios to see what effect a simple change in investment decisions now, can make to their financial situation later in life.
For example, this could be starting or increasing pension contributions during their working life, meaning they may be able to afford to retire earlier, if that is the desired goal. Another scenario could be investing regularly into tax efficient investments such as ISAs to provide a source of tax-free income stream to complement their occupational pensions in retirement.
Always with the most important question front of mind: How much will they need to maintain their lifestyle in retirement and are they in danger of their money running out in their lifetime?
With Voyant, any shortfall in capital shows up in their graph as red. And this visual representation can be a real wake-up call to encourage clients to take action and make changes now.
My clients understand the importance of getting rid of the red and we can work together to put a strategy in place to hopefully fix the problem – showing the clear value of advice.
The earlier people check, the less money it takes to fix any potential cashflow problems in retirement.
The case studies below explain how this cashflow modelling software helped my clients answer some of their questions about their financial future, leading to better client outcomes.
Although the following case studies relate to actual examples, where we have helped our clients by providing solutions, the names and figures have been changed for confidentiality purposes.
Case Study – Client number 1
(Current situation – family with 2 earners, expenses of £4k per month, £51k current pension provision plus State Pensions.)
A married couple, aged 48 and 49 years old, have recently become clients of mine. They own their company and by their own admission had done little to no retirement planning since starting their own business several years ago.
We modelled their report using their current savings and existing pension provisions and worked on the assumption that they would stop working at 65, with a 4% net growth projection.
Unfortunately, it showed a large shortfall in their retirement (depicted as lots of red in the graph) and illustrated they would only have their state pensions to live off from ages 69/70.
By starting to make pension contributions of £15,000 each from their company, we could show that they would be able to afford to maintain their current lifestyle in retirement, with the company pension contributions also acting as a corporation tax reducer for their business.
Case Study – Client number 2
My clients (married couple) asked me when they would be able to retire.
Using Voyant I was able to demonstrate that they were in the fortunate position to have sufficient funds to potentially last them their lifetime even if they both decided to retire at age 55. The gap between 55 and their state retirement age could be filled by taking an income from their investments which they will continue to build over the intervening years so they can meet their expenses, until their occupational & state pensions come into payment.
Case Study – Client number 3
My client who is already retired wanted to know what their financial position looks like now, what they can afford to take as income from their various investments and what the likely size of their estate will be to pass on to their children.
After using cashflow modelling, my client felt reassured he was on track with his financial goals, giving him a greater sense of control over his finances and enabling us to start a conversation about how he might start to pass his wealth on to his family.
If you would like to explore your uncharted financial future using Voyant and check whether you are on track to achieve a comfortable retirement, get in touch by calling 01943 262600 | www.siddonsand.co.
The advice provided to these clients was given after a full evaluation of their specific needs, circumstances and requirements. The solutions provided would not be suitable for most investors and the information provided does not constitute advice.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
Siddons & Co Financial Planning is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products
SJP Approved 06/06/2024