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To cashflow or not to cashflow is not the question

To cashflow or not to cashflow is not the question!

This might seem pretty obvious – after all, we all know the value of cashflow modelling.  In fact, the key questions are actually: which method should you use?- and when?  Let me explain why.

Which method should you use?

It all depends on where you are in the PlanHappy Lifestyle Financial Planning process.

Just to clarify – when we talk about cashflow modelling ‘methods’, we’re not talking about software packages.  By ‘method’ we mean how we interact with the client – or not – during that delivery.  There are 2 methods, and both are very different:

  1. The ‘Fixed Method’ – this is where we produce a cashflow model to answer a particular question or show a particular concept.  We might then work through that with a client.
  2. The ‘Interactive Method’ – in contrast, this is where we have a computer in the room and we are moving things around live with the client and trying out different scenarios to see what might work.

Both methods have their place.  And each should definitely be used ‘in its place.’ This is because:

  • Each method is best suited to different stages of the financial planning process.

What’s the best method for ‘Life Coaching’?

If you are introducing cashflow models at the Life Coaching stage with your client, you need to use the fixed method.  Here’s why:

This stage is all about the ‘big’ questions and the ‘big’ answers.  These are:

  • emotional
  • human
  • personal

These can be hard to reveal and explore so we need to stop your client from straying into their comfort zone – the realms of ‘little’ and ‘transactional’ questions.  Using the fixed method helps you to stay focused on the big, human questions.

Think of the role of an Architect, and the way they interact with their client.  Initially, they are trying to understand:

  • what sort of house they might design.
  • they are interested in how their client’s home needs to function, how they want to ‘feel’ when they live there and the purpose of each space within it.
  • it’s all about big questions with very human
  • they are directly linked to how the client feels, their aspirations and vision for a best life.

When the Architect next meets with the client, they return with some initial concept drawings.  And they are just that.  They are simple ideas and concepts that the Architect uses to open their client’s mind to new possibilities – things that their client may have never even thought about.

They are using a fixed method to stop their client from getting carried away with the detail – this allows them to focus on the big picture, the big questions and the human issues.

What the Architect is not doing, is sitting with a laptop and 3D modelling software, discussing carpets and lighting.

When you are working through the Life Coaching stage with your client, you want to do the same. 

Using the fixed method, you are able to use your cashflow modelling to disprove limiting beliefs or misconceptions.  You can open your client’s mind because you are focusing on broad concepts that relate to the big questions and the human issues.  This method allows you to reprogram their way of thinking so that they are receptive to new ideas and possibilities.  The fixed method allows opportunities in.  It allows clarity.  It allows your client to imagine what their best life could look like.

What’s the best method for ‘Financial Advice’?

If you are using cashflow modelling at the Financial Advice stage with your client, it’s much more appropriate to use the interactive method.  Here’s why:

At this stage, you are beginning to work out how to deliver your client’s best life.  You are now interested in the ‘little’ questions and the ‘little’ answers.  And these are:

  • technical
  • transactional
  • universal

If we look back at the Architect analogy, this is where they might begin discussing different lighting, the position of walls, carpet design, render colours and window designs.  It’s about trying different options, seeing how different scenarios might look.  They are chopping and changing and moving things around.  It’s immersive and interactive.

You can see that this sort of detail would not have been constructive earlier on in the process – their client would have been so distracted that they would not have been able to ‘see’ the overall design or concept.  The bigger picture would have been lost in a constant stream of ‘little’ questions.

But using the interactive method at the financial advice stage means you are able to use your cashflow modelling to explore the detail – the different products and routes that will help your client to achieve their big, human goals and aspirations.

So remember….

When you approach cashflow modelling with your client, the key questions are:

  1. Is it the right time to use it within your financial planning process?
  2. Which method of delivery is the right one to use?

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