The Value of Cash Flow Modelling in Wealth Management

First things first, what actually is a cash flow model? Well, a cash flow model is a detailed picture of a clients’ assets, investments, debts, income and expenditure, which are projected forward, year by year, using assumed rates of growth, income, inflation, wage rises and interest rates.

This is an incredibly useful way of looking at finances as a whole as, by matching a client’s present and expected future liabilities with their income and capital, a financial adviser can make recommendations that will make sure the client is able to provide for themselves for the rest of their life.

However, as with all assumptions, these assessments of growth, income, tax and the rest have the potential to be incorrect, which is why regular reviews and reassessments are required to ensure the client’s finances remain healthy. Advisers can also use this to plan for various scenarios, allowing for adaptations to things like the markets going up or down.

Once this model is formed, decisions can be made based on what is contained within the cash flow, from how much to save and spend, to how funds should be invested to achieve the required return. With cash flow modelling there is a lot that needs to be managed and it works best when the client is fully involved in the process and understands all the variables.

As we previously mentioned, cash flow modelling becomes particularly valuable when advisers start modelling different scenarios based on decisions that clients may make, including lifestyle choices or investment decisions. This allows clients to have a clear summary of their financial arrangements and to decide on their goals then begin working towards them.

Cash flow modelling also allows clients to make provisions for death or illness, either of themselves or of their parents. In short, it forms an incredibly valuable aspect of wealth management and retirement planning, no matter your income or personal wealth.

If you want advice on wealth management or planning for retirement, get in touch with us today at or call 01992 500 261 now and see how we can help address your financial future.

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.

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About gpfm   

gpfm are an independent financial planning company dedicated to the provision of personal, professional and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.