Summary:
The 'Cashflow Chart' lets you visualize and explain cash flow scenarios to your clients, demonstrating the value of your advice.
The feature clearly illustrates income, spending, withdrawals, and contributions over time.
We provide four different scenarios to see the difference in cash flow over time.
The chart is in real terms, which means that it is inflation-adjusted
The chart comes in 'Basic' and 'In-Depth'. The 'Basic Cashflow Chart' provides an overview, while the 'In-Depth Cashflow Chart' offers a detailed breakdown of the cash flow components.
Description:
The Cashflow Chart feature empowers you to visualize and present different financial scenarios for your clients in a highly intuitive, graphical manner. This feature facilitates powerful conversations and shows the value of your advice by illustrating various aspects such as income, spending, contributions, withdrawals, and taxes over time.
Here's how to leverage this feature to deepen your client conversations and help them make more informed financial decisions.
Basic vs In-depth Cashflow Chart:
The 'Basic Cashflow Chart' offers a broad view of the income, withdrawals, spending, and contributions over time. You can easily see when there is a surplus, shortfall, or withdrawal. The Total need is the sum of contributions from Income sources and total spending.
However, if you want to delve deeper into the specifics of cash flow, use the 'In-Depth Cashflow Chart'. This feature breaks down each cash flow component (e.g., income sources, different expenses, withdrawals) to provide a more detailed view of your client's financial situation.
Why do Income sources increase while expenditure remains flat in the cashflow chart?
The cash flow chart shows money movements with adjustments for inflation, meaning price changes over time won't affect how we see income and expenses—they'll look steady. But, we set limits (caps) and minimums (collars) on different types of income. This means spending stays the same when we adjust for inflation, but the money coming in might go up or down.
Example
Timeline applies to the State Pension, a system known as the triple lock. In simpler terms, the triple lock guarantees that the State Pension will increase yearly by at least 2.5%, or in line with inflation - whichever is the highest. This helps ensure that pensioners like Mr and Mrs Smith can maintain a decent standard of living.
Imagine it's a new year, inflation is at 2%, and the State Pension is £10,000. First, the State Pension would increase to £10,200, in line with inflation. But wait, there's more! Because the triple lock guarantees a minimum increase of 2.5%, the State Pension would go up to at least £10,250.
When it comes to the cash flow chart, we show real values. This means that we adjust the State Pension increase for inflation. The growth you see in the cash flow chart may be different:
In the case of inflation smaller than 2.5% for a given year, converting to real will cause the State pension to increase in value.
If the inflation for a given year is more than 2.5%, then the value will remain the same in real terms.
So there you have it. The State Pension increase in the cash flow chart may appear higher than expected due to how it's adjusted for inflation due to the triple lock system. By knowing how inflation and the triple lock affect the State Pension increase, you can provide more accurate and reliable advice to your clients.
Conclusion:
The 'Cashflow Chart' chart empowers you to offer a more comprehensive service to your clients. As you guide them through their financial planning journey, this feature helps you present complex financial concepts in a more accessible and visual way, demonstrating the value of your advice.