The Value of Cash Flow Planning with Target-Maps
Have you ever run into a situation where a client has asked if you can help them quickly determine if they can reach a new goal in light of the other financial commitments they have?
For example, let’s say they're already planning for retirement, funding education expenses for their two kids, and paying off their home mortgage ten years early.
But the day before your meeting they saw a lake house listed at a great price. They want to know how it will impact their other goals if they buy that second home.
In most cases, you might need to take time after the meeting to go back and review their plan, run some calculations, and then present an updated plan to them. Meanwhile, your client is sitting at home waiting for an answer.
Helping clients to understand their financial situation and see the possible gaps in their plan is just the first step in using Asset-Map to influence your conversations.
To get to the next level and engage clients on an even deeper level, you can use Target-Maps to extend your conversations and model how a client’s current situation will impact their future lifestyle—and quickly draw up a new Target-Map to help gauge funding for new ideas like a lake house.
In this article, we’ll explain the full value of Target-Maps and how they support your planning process.
The Value of Target-Maps
Target-Maps help you evaluate the ideas behind what a client wants to fund. They accomplish this by looking at what a client has right now to fund those future goals and then helping you see what that means moving forward.
When you’re in conversation with a client about something they want to achieve, a Target-Map gives you the quantitative assistance you need to help them focus on what actions they can take today to have success tomorrow.
That said, Target-Maps aren’t designed to predict the future, and we aren’t trying to figure out the possible balance of an account thirty years from now. Instead, the goal is to show your clients the gaps between what they have and what they want so they can prioritize funding in ways that will lead to success.
As an advisor, you help your clients make reasonable decisions based on reasonable assumptions. Putting that important work into an easy-to-read visual is the power of a Target-Map.
How to Use Target-Maps
Your clients want to know three things when they work with you:
You know me
You know my situation
You know my options
Target-Maps help you demonstrate that you know your clients’ situation by helping you illustrate if they are underfunded, overfunded, or funding accurately for the right goals.
When you’re meeting with a client, Target-Maps should be used to run an analysis of specific situations to see how well-funded a client would be for both planned and unplanned scenarios.
We’ve built Target-Map templates for a variety of scenarios to get you started:
Loss of Life
Long-Term Care
Education Funding
Retirement Planning
Long-Term Disability
In each of these instances, a client who hasn’t planned can encounter disruption to cash flow at best and the inability to reach any of their future goals at worst. And for other situations (like buying that new lake house) you can create a custom Target-Map to run the analysis you need.
Target-Maps are designed to help you get a plan in place for these “what if” events in a client’s life so you can create proactive conversations that address a problem, quantify their needs, and present evidence for how to solve it.
It’s All in the (Cash Flow) Details
As every financial planner knows, the devil is always in the details. And the devil you know is better than the devil you don’t. (Why are there so many phrases about the devil? We’ll save that topic for another blog.)
A Target-Map covers the details by bringing forth cash flow details. The analysis is based on your client’s current and future cash flow expectations.
We do that by using the same logic and design for each Target-Map. Each is framed around three sections:
What you want
What you have
What it means
When it comes to displaying cash flow details, this structure shows you a different look at cash flow in each.
What you want shows how you need to communicate the way spending evolves over time. We always automatically apply COLA to make sure your calculations look ahead accurately.
What you have, fittingly enough, shows a client’s current sources of cash flow so you can allocate them to the appropriate goals and determine what’s covered and what’s not.
What it means gives you additional details that you need to know to discuss each clients’ cash flow needs with the insight and expertise they expect from their financial advisor.
In every case, the Target-Map displays the capital required for a goal compared to the capital available, and each source of cash can be customized with a click.
Continuing the Conversation
When the meeting is over and you want to send your client on their way with your Target-Map analysis to remind them of what you discussed, you have a few simple options.
One option is to click Download PDF to get a single-page output of the Target-Map analysis. This option, though, is designed for internal use.
If you want to provide the client with a physical or digital copy, you’ll want to select Reports so you can get a full report that also includes a cover page and disclosure.
From the start of a conversation, when you need to get deeper into the details of a client’s life, to the end, where you want to hand them a takeaway about your discussion, a Target-Map can make it easy to evaluate goals—and then set a cash-based plan for achieving them.