Talking cashflow and due diligence at Powwow North of the Border

By James Macaulay

We were back at Aegon’s offices in Edinburgh for our fourth Powwow North of the Border, no scones this time, but lots of chocolate and sweets.

Topics

It was difficult to choose from the great suggestions raised in the powwow survey, but after much soul searching, we settled on:

  • Due diligence (with the help of the lang cat Steve Nelson)
  • Cashflow – because who does not like cashflow

In addition, we helped use the power of the hive mind to help Aegon with their retirement proposition development.

Chat on the day

After an intro from the team at Aegon, we dived right in to due diligence.

This involved looking at the various processes we all follow, key parts of which are:

  • Who it is for:
    • Client segmentation
    • PROD requirements
  • What it is for – products, including:
    • EIS/VCT
    • Platforms
    • Tools
    • Back office systems
  • How we do it – the tools:
    • Micap, Allenbridge & Martin Churchill were all mentioned for tax efficient products
    • The Langcat directory – Steve was very restrained and left it to the rest of us to say how useful their research is
    • Defaqto for just about everything
    • Synaptic for some things
    • And FE Analytics, because who does not love FE for fund research
  • The Challenges – what we find difficult
    • Keeping up to date
    • Compliance
    • Consistency – everyone agreed that Platforms made this difficult as MIFiD II charging is different depending on what platform you use. Best endeavours are key!!!

The discussion then moved onto cashflow with a poll on who used what, with Voyant being the most popular followed by Cashcalc and Xtools (within Xplan). No one mentioned Truth (the first seminar this has happened).

We all agreed that assumptions were key to a “good” cashflow but there were different approaches around the room with some firms sourcing this from Dynamic Planner, while others went for a different approach based around a 5% default growth rate.

Everyone agreed that it was important to build in market falls to make the plan more robust.

Cashflow was used for many scenarios but DB Transfers and drawdown were popular, with a couple of people using it for protection.

Paraplanners built the cashflow across most firms but it was mainly advisers who presented this, although several people had direct experience of doing this.

A discussion then arose around stochastic modelling, safe withdrawal rates and the potential for misunderstanding by clients on how “safe” this was.

We all had different approaches but agreed there was significant scope for clients to misunderstand how safe this was. Royal London was mentioned as having a good tool to help with this.

After a brief break (more chocolate) we resumed with a segment on the future of retirement from Aegon, where we looked at how retirement has changed since pension freedoms and how most people are taking benefits.

The key part of this is that there needs to be innovation in the industry; however, there is little consumer demand at this time.

A market correction may change this as there is no appetite for this when all is going well. This changes when things go badly as people start to look for alternatives when they have lost money (which is exactly what they should not do).

After a brief discussion on the different income options the Powwow was brought to a close with thanks given to all the sponsors, especially Aegon for hosting us.

Everyone was encouraged to look at the Big Tent as it is where paraplanners help each other, and to have a look at the previous Howwows online.

We’re hoping our next Powwow will cross the M8 to Glasgow and we’re looking forward to meeting new paraplanning groups.