7 Reasons Cash Flow Conversations Matter To Your Financial Advising Clients

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According to a Forbes study, 46% of respondents who indicated they are living paycheck to paycheck attributed that to lacking budgeting or financial planning. 46%.

This means that now, more than ever, advisors should be talking about cash flow to help empower clients to actively participate in their financial decision-making process.

But, why isn’t this topic talked about more?

Here at Consolidated Planning, part of our planning philosophy is rooted in cash flow. It all started when four advisors developed and shared a philosophy about planning that put the client first, challenged conventional wisdom, and contrasted with the transactional nature of the industry.

And talking about cash flow is far from transactional. In this article we’ll share seven reasons you should talk to your clients about their cash flow, why a holistic approach to planning matters, and how you can work to fill the gaps in your clients financial picture, all to build longevity in your practice.


Why You Should Talk To Your Clients About Cash Flow

It’s no secret that cash is king, but if that’s true, why do consumers and advisors alike skirt around the topic of cash flow? Here’s why cash flow SHOULD be part of your conversations:


#1 Budgeting and Spending Control

In order to budget and control spending, your clients need to understand their income and expenses. Talking about cash flow and its relationship to their budget enables them to set realistic budgets and control their spending. 

Realistic is key here. Prioritizing cash flow doesn’t mean money won’t be spent, it just means there is a time and place and it’s (hopefully) accounted for in the budget.


#2 Goal Setting and Achievement

Think of a time you set a goal – whether personal or professional. Wasn’t it more desirable to work towards when it was an achievable goal? Start small that way you can ensure your client chooses a realistic and sustainable approach to achieving both their short term and long term objectives.

What matters here is helping your clients align their financial goals with their cash flow and adequately tracking that progress.

Seeing progress, no matter how small, is what keeps the flywheel spinning overtime. Their success is your success.


#3 Lifestyle Planning

Regardless of current cash flow, there is usually some kind of discrepancy in where consumers are and where they want to be. Making informed decisions about major upcoming life events, like purchasing a home, or starting a family, can help your clients bridge that gap in their desired lifestyle.


#4 Emergency Fund Management

The majority of experts would agree that an emergency fund should have somewhere between 3-6 months of expenses. However, according to a 2023 Bankrate study, nearly 30% of people had some emergency savings, but not enough to cover three months of expenses.

Talking about cash flow can help facilitate the creation and maintenance of necessary emergency funds. There is so much power in having sufficient liquidity to cover unexpected expenses due to proper cash flow management.


#5 Debt Management

For clients with unsettled debt, and no plan for paying those debts down, building cash flow can help clients pay for the repayment. Ensuring they can begin allocation funds for this repayment helps reduce overall financial stress.


#6 Investment Strategy

While Consolidated Planning focuses on protection and cash flow first, that isn’t all. However, once cash flow exists for your clients, it makes more sense for them to see what they can allocate to different investment vehicles that are right for their lifestyle and goals.

You can help support the development of a diversified investment strategy based on available cash flows, not the other way around. This allows your client to assess and implement strategies to mitigate risks through insurance or other risk management tools.


#7 Retirement Planning

Today’s cash flow affects tomorrow’s cash flow. Therefore, how your clients plan for that cash flow today can help estimate future cash flows possible and necessary for retirement. Especially a desirable retirement.

You can help your clients determine if they are saving enough (or at all) to retire. From there, plans can be adjusted to better meet these goals.

According to a survey by Bankrate, as of September 2022, 55% of American workers said they felt behind and 35% felt “significantly behind” when it comes to saving for retirement. That’s a significant number and a great opportunity to provide better retirement planning to consumers.


Provide A More Holistic Approach To Financial Advising

In a perfect world, cash flow accumulation would follow a linear, if not continually upward, pattern of the inflows and outflows of cash. However, in many situations, cash flow accumulation is non-linear due to seasonality, economic cycles, irregular expenses, investment returns, and other variables.

BUT, giving your clients the knowledge and clear framework around their cash flows gives them not only a sense of financial independence but the adaptability when it comes to changes in income and expenses.

Helping your clients build this framework means accounting for assets, liabilities, cash flow, and protection needs. Cash flow helps your clients fund protection, fuel their assets, and limit their liabilities all while helping you build your financial advising practice that follows a consultative approach.

To learn more about how following the planning philosophy at Consolidated Planning builds your practice, talk with a team member.

Talk with a recruiter


2024-171262 Exp. 3/2026

Published:  March 26, 2024