Today’s financial advice clients are expecting more out of the planning process: More personalization, coordination, and visualization for the future they’re building toward. They’re not working a 9 to 5 for decades and then retiring. Instead, their finances are complex: They’re creating streams of passive income, building businesses, working in the gig economy, and pursuing financial independence.<\/p>\n
Enter the midyear cash flow plan. This simple client review meeting can yield empowering results that can deliver on those expectations.<\/p>\n
Cash flow management is about more than subtracting total outflows from total inflows to produce a net cash flow number, or setting a budget. A budget is not cash flow. You’re tracking actual expenses versus planned expenses, and that’s somewhat like driving down the road while looking at the rearview mirror. Your focus is on spending.<\/p>\n
Cash flow is the\u00a0whole<\/em>\u00a0picture\u2014not just a corner of it. It’s organizing your income and your spending, and taxes. It means helping clients plan for big purchases, maximizing what they spend, and generally helping them get the most out of their resources.<\/p>\n That’s why leading-edge practices lean into cash flow planning. A survey of RIAs showed that 94 percent of firms classified as \u201celite” offered cash flow planning.1<\/sup>\u00a0Around 35 percent of all advisors offer the service.2<\/sup><\/p>\n With technology, advisors can easily take on this granular task. A client portal that aggregates all accounts\u2014held away assets and liabilities<\/a>\u2014as well as those under care into one comprehensive financial picture has become table stakes. A 2022 study showed that 62 percent of practices use a client portal, though 73 percent of clients desire one.3<\/sup><\/p>\n Consumers understand that there’s value in analyzing the details of where the money is going. Around 88 percent of consumers say that offering an advisor access to their monthly spending activities to develop a spending plan would be impactful, according to a survey commissioned by the CFP Board.4<\/sup><\/p>\n Below we examine three scenarios of what a midyear cash flow check-in might look like, including resources that can help you further personalize the interaction.<\/p>\n As you’re running the numbers for a midyear cash flow check-in with your client, you see that there’s a substantial inflow. During the meeting, your client explains that it was a retention bonus.<\/p>\n Now comes the part where you can add value\u2014going back to what your client has told you about their spending\u00a0priorities<\/a>\u00a0and their short- and long-term goals to propose ways to maximize this windfall. You’ll also want to suggest ways to minimize the tax impact that comes along with the bonus, and because it’s midyear, you have many options for doing that.<\/p>\n With interactive financial planning software, you can walk them through a couple of options for using the bonus money and show how it impacts their financial plan. This can help them make the decision with confidence and remain engaged in what is now a living, breathing plan that updates along with the important moments in their life.<\/p>\n For more insight into how advisors keep pre-retirees engaged in their planning, watch Prove the Power of Planning to the DIY Investor:<\/p>\nAn Impactful Client Review Meeting<\/strong><\/h2>\n
Scenario 1: Pre-retiree with a Windfall<\/strong><\/h2>\n