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In practice: Financial forecasting software

In practice




Nick Lincoln, owner of Values to Vision, has been using financial forecasting software since 2008. ABR editor Rob Kingsbury spoke to him at a recent Voyant Mastery training session about why and how he uses it and whether it has affected the bottom line of the business

Nick Lincoln began using financial forecasting software in 2008, around the time he set up his lifestyle financial planning company, Values to Vision. He first used Prestwood Software’s Truth and switched to Voyant in 2011.

Rob Kingsbury: What affect has using financial forecasting software had on your business?

Nick Lincoln: “It’s had a massive impact. It’s taken my business from being one that was investment centric and focused on trying to deliver outperformance and to beat the market, to a service whereby I help clients make sense of their money and understand their financial futures. It hasn’t taken the investment conversation away but it’s made it unimportant. Properly done, financial planning is far more valuable than the investment part of what we do.

The software is based on a number of assumptions but I know that I’m helping people to plan for their future in a way that is meaningful to them; with fund picking it’s just luck.

From a purely pragmatic perspective, it also helps keeps your business sticky, because clients aren’t just focused on investment performance. If you can show them how their future could look and that they will be alright, then they will love you and stay with you.

Also, now the rules around pensions and annual allowance are so complicated, I don’t know how anyone can give proper financial advice without providing a really good financial forecast that is unique to that client and their goals.

RK: Do you have an example of how you are using it?

NL: I’ve just been advising a couple with potential combined pension pots of over £2m. To be able to talk to them about pension freedoms and show them on the screen when they can walk away from work and that now they can pass on some or all of their pension money to their children is so powerful.

Most people go to a financial adviser with one question – they may not ask it directly but it’s always there – and that’s ‘Am I going to be alright?’ Having this technology means financial planning is now an interactive process. The days of printing of a static word document and sending it through the post for clients to wade through are coming to an end – now it’s collaborative, you sit down with the client and go through the options. With the ability to add in different scenarios within the meeting I find the clients start asking more questions and become far more engaged with what they can do and achieve for themselves. If you can show them how they stand on the screen in graphics, pictures being easier to understand, they totally get into it.

RK: Can it make a business more profitable?

NL: Using financial forecasting can make your business more profitable because you can charge higher fees as you are providing a much bigger, added value service. It’s not a service based on fund picking and chasing the markets, which is out of your control, it’s about really helping people see where they are and where they can be in the future. I’m not charging people for the investment side; they are paying me for financial planning and guiding their future.

With new clients I make a charge for the financial forecast presentation on its own – typically, £597. I think if you give it away people don’t value it. If they then go forward and become a client I charge a percentage of assets under management, which is typically 1%, and future financial forecasting is included within that fee.

And it’s enabled me to have more profitable clients. My business used to be about investment picking and charging 0.5% and now it is about proper financial planning for which I charge 1%.

Having more profitable clients means I need fewer clients and I spend very little time prospecting for new clients. It also means I spend more of my time serving existing clients, which is what the FCA wants and what clients want; they need to know you are there for them and will be for the duration. Natural causes aside, I haven’t lost a client in seven years – that’s because they really buy into the service.

RK: How difficult is financial forecasting software to use?

NL: Like any sophisticated software, it takes time to learn but the more you use it the easier it becomes. The best way to start to use it is to create a model for yourself, because you know your own situation and you can see how using the software will turn out. Then you use it with the clients you know really well, who you know will laugh should you goof up in front of them. Now, I’m answering quite serious questions from clients on the fly, so to speak, within client meetings.

This is not software that you dip in and out of. You can’t just use it with a select number of clients, for example, because that dilutes your message and as financial services change so the software has to change, so you need to keep up-to-date because clients will expect you to be able to give them an answer.

But once you start using it a lot it becomes second nature. Then whatever client you come across you will be able to model a realistic approximation of their financial future for them.

RK: Do you need regular training?

NL: If you are just starting out using the software I think you do. Unless you have one of those minds that can pick up technology just like that. Even when you get to a more advanced level, it helps to brush up your knowledge and you can pick up new ways of doing things, that can be useful in client presentations.

Also it can help if, like me, you work on your own and you haven’t got someone in the office also using the software that you can bounce ideas off. Then it’s a must to refresh your knowledge of the system and what it can deliver, especially in the light of changes to legislation and regulation.

RK: Will financial forecasting software become de facto for financial planning firms?

NL: I think it should be now. If you are calling yourself a financial planning firm then you’ve got to be using financial forecasting software. In my view, if it’s not done collaboratively then it’s not done properly. We have to be using software that reflects the complexity of the financial services environment in which we now live.

Visit Values to Vision website

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Visit Prestwood Software website

Visit Voyant website


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