Whilst Chancellor’s advisers enjoy the whole financial planning process from an initial introduction from an existing client or a professional introducer such as a Solicitor or Accountant, right up to implementing any recommendations, one of their favourite services of those that we offer is cash flow modelling.
Wherever the potential new client may be on their journey throughout life, in many cases the service allows them to see if their future goals and plans are realistic.
One such example is where someone has not had the opportunity to build up a large private pension fund but has one eye on early retirement. The client may have other assets at their immediate disposal such as cash deposits, Individual Savings Accounts (ISAs) and/or equity in their domestic residence that they may be prepared to access. In the longer term they may be expecting an inheritance from a friend or a family member. They may also need to spend some of their capital on a major purchase such as a new car or some home improvements. All of these factors can be taken into account.
By inputting a number of assumptions on such factors as the desired retirement age, the income required, an estimated growth rate on the existing investments and an estimated future rate of inflation, the computer modelling can give a broad indication as to whether the plans are likely to be achievable – or if not, what action could potentially be taken to aim to make it more of a possibility. The action could include taking a different risk stance on some or all of the existing investments, deferring the potential early retirement date for a few more years or fully funding any pension arrangement or other tax efficient investment arrangements. A pension is a long term investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
The system can produce information in an easy to digest graphical format and can be printed out for consideration at a future date.
Clearly any assumptions are just that – they can’t be guaranteed as nobody can claim to see into the future on these aspects. That is why it is prudent to schedule a regular review of both the current financial situation and the assumptions that have been used. As anyone who regularly consults the financial media will be aware, there is much press speculation about the possibility of a rise in the rate of inflation, which may or may not come to fruition.
Chancellor do, where appropriate, include this cash flow modelling service as part of our clients’ annual review process.
Many clients are at least aware of, if not completely concerned at this stage, the costs of paying for nursing or residential care in the future. By using a typical rate of care home fees in the local area and looking at existing and future levels of income from investments and private and State pensions, the service can often provide peace of mind that the individual can look forward to the level of care in their old age that they would like if that situation occurs.
To learn more about the service which the Financial Conduct Authority do not regulate, and how it could potentially benefit you, please do not hesitate to contact one of Chancellor’s Chartered Financial Planners, Grant Farnell or David Torkington who will be pleased to assist.