Dynamic Planner has added a tool to its service that enables adviser firms to link a client’s portfolio risk profile to their cash flow plan.
The firm said Dynamic Planner Cash flow will help advisers plan clients’ cash flow in real time as well as help them demonstrate investment suitability and the value they add.
A press release announcing the tool said it combines powerful technology with an independent asset risk model and uses real-time Monte Carlo modelling of risk-based cash flows calculated on a monthly basis, rather than annual.
The tool fits in with Dynamic Planner’s existing range of services including its risk-profiling technology which the firm argued gives advisers access to “one system” financial planning.
It said using one system for everything helps “take miscalibration risk out the equation” without having to decide upon and manually enter growth assumptions.
“The final cash flow, as a result, more accurately projects what a client’s future looks like and more robustly tests their capacity for risk,” the press release said.
Dynamic Planner proposition director Chris Jones told Portfolio Adviser the ability to calculate monthly cash flows is an advantage because most other Monte Carlo simulations can only do annual projections.
“You can tell that because if you use a typical tool and say, ‘Okay, let’s see what happens if you take out £1,000 a month and then let’s see what happens if you take out £12,000 at the start of the year it gives the same answer. When in reality there is a big difference; it’s massive in fact and that is an advice choice. That conversation can only happen if the cash flow is picked up monthly.
“So the Monte Carlo simulation engine is really powerful and we probably couldn’t have done it even three years ago, because you didn’t have the computing power to do it.”
Jones added: “We’ve had a really good bull run and it’s almost like people weren’t bothering because they didn’t have to and now advisers need to show their value and to remind the client what they’re investing for in the first place.”
In the press release, Dynamic Planner chief executive Ben Goss said Covid and Brexit had put the ability to provide solid, robust, and risk-based cash flow planning for clients to the top of advice firms’ wish lists.
He added: “We spent many months consulting with advisers to identify exactly what they needed but didn’t yet have – something that was powerful, yet easy to use and so cost effective it could be used for every client no matter what their portfolio was worth.
“At the heart of what advisers told us they needed, was to clearly show that they were working hand in glove with the FCA’s stance on demonstrating suitability. Using our Cash flow enables them to do this through our asset risk model, in combination with real-time, risk-based cash flows.”
In a client testimonial sent to Portfolio Adviser, Ridgeways Financial Planning director David Mills said: “It helps me a deliver a fully holistic, advised process. Rather than providing investment advice in isolation, I can now link it to a client’s income objectives and show graphically that they can achieve their objective by following my advice.”
