In response to recent FCA concerns highlighted in industry discussions about the quality of cashflow modelling within the FCA’s review of Retirement Income Planning, FinCalc is here to address key findings and improve your firm’s approach to retirement-related advice. Let’s take a closer look at how FinCalc can help demonstrate good outcomes using cashflow modelling:
- Accurate Data Input:
- With FinCalc, you can ensure the accuracy and completeness of client-provided information, leading to more informed decisions based on verified data. Using gross salary numbers ensures that our monthly tax calculations provide accurate net income figures. You can also utilise the essential, discretionary and lifestyle expenditure options to accurately estimate present and future expenses. FinCalc also integrates with a number of CRM systems, enabling you to avoid rekeying errors by importing data directly from these systems into your cashflow modelling.
- Justifiable Rates of Return:
- Align assumptions with recommended investments effortlessly using FinCalc. Our software empowers you to project realistic rates of return, considering factors such as charges and taxes, thus avoiding unjustified projections. You can also link attitude to risk levels directly to rates of return. These returns can be fixed growth rates or variable growth rates that can help clients understand sequencing risk in drawdown.
- Planning for Uncertainty:
- FinCalc enables you to express future income and expenditure in real terms, allowing clients to prepare for potential longevity risks effectively. Plus, with extended projections beyond average life expectancy, you can ensure your clients are fully equipped for their retirement journey. You can also illustrate rare but feasible falls in value by using one-off drops within our capacity for loss output and stress testing options.
- Consistency in Communications:
- FinCalc provides clear explanations across various communications, fostering client understanding and confidence in retirement planning. No more discrepancies or misunderstandings with multiple reporting options confirming data used, assumptions and a ‘what’s different’ page for each scenario created.
- Thorough Review of Outputs:
- With FinCalc, you can meticulously review cashflow modelling outputs, identifying critical factors such as reliance on illiquid assets or potential tax implications. Ensure your recommendations are accurate and tailored to your clients’ needs using our scenario planning options.
FinCalc protects against Poor Practice
Some of the examples stated in this guidance of poor practice were actually very worrying. For example, the FCA found some cashflow models:
- allowed access to client’s main residence as a liquid asset.
- allowed access to pensions before minimum pension age.
- made no allowance for the impact of tax on proposed withdrawals.
At FinCalc, we differentiate between liquid and illiquid assets meaning that property cannot be accessed to fill any shortfalls without disposing of the asset. We also protect against accessing pensions before minimum pension age unless there is a protected minimum pension age applied to a plan. We also show the impact of tax on pension withdrawals and provide a full income tax breakdown so that different retirement income strategies can be compared.
By incorporating FinCalc into your firm’s practices, you can significantly improve the quality of your cashflow modelling and deliver more suitable retirement-related advice to your clients. Don’t miss out on this opportunity to revolutionise your retirement planning process with FinCalc!
Ready to elevate your retirement planning game? Reach out to learn more about how FinCalc can support your firm’s objectives and deliver better outcomes for your clients.
Gavin Shears
Senior Product Consultant