Having Enough Isn't Enough

CASHFLOW MODELLING software on its own is pretty useless.

And that comes from someone who designs it for a living.

In essence, it is a professional tool to aid in the provision of a solution for the client.

Every profession has something similar. Some way of calculating how much needs to be put in (X) in order to get what is needed out (Y).

For example, a civil engineer uses software to calculate how much concrete and steel are needed (X) for the bridge to stand up (Y).

The software comes up with the answer (X), and that is all the customer needs to know.

They don’t need to be shown the calculations you’ve done or the pretty bar charts because….well

• That would be narcissistic and weird

And

• All the customer wants to know is ‘How much concrete and steel is needed for the bridge to stand up?’.

But in order to calculate what ‘enough’ looks like (X), we need to know the detail behind the (Y).

The specification, if you like…

• How long is the bridge?
• How many vehicles will drive over it?
• What is the maximum weight it will need to take?
• What are the environmental factors, wind speed, ground conditions, etc?

And this goes into the software and it comes up with the answer of how much concrete and steel are needed (X).

But in financial planning we sometimes get so chuffed that we have a doozy software system with colours and bar charts that we forget that we need the Y to calculate the X and instead put in the X and see what comes out.

But, it’s not for the customer to tell you whether they like any one of a thousand outcomes. It’s for the planner to help the customer define the outcome they want (Y) and then show them how to achieve it (X).

As financial planners, we need the ‘FOR WHAT?’ (Y) just as much as the civil engineer does.

• How long is the bridge? (How long might we live?)
• How many vehicles will drive over it? (What does a great day in your life look like?)
• What is the maximum weight it will need to take? (What big-ticket stuff do we want to cater for?)
• What are the environmental factors, wind speed, ground conditions, etc? (What do we need to account for that is out of our control?—inflation, market movements, etc)

So, next time you’re driving over a bridge, have a think about how you hope they did the calculations… either:

• They calculated how much concrete and steel was needed for it to stand up.

Or

• They put some concrete and steel in and are waiting to see whether that was enough for it to stand up. (But if not, they have a pretty chart to help show you why you died.)

Happy driving!

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