A little nostalgia is a good thing 

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Behold!  A group-photo of a bunch of people who have meant a great deal to me, throughout my life.  These are the teaching and administrative staff at King Edward VI Grammar School in Chelmsford, Essex.  The picture was taken in 1978, the year I left to go to University. 

Thirty-eight years may have passed, but I find I can still put names to most of these faces, a majority of whom I remember with appreciation and a degree of fondness.  There are one or two in that picture where the emotion predominantly associated with them is fear, but generally speaking I realise that I was blessed with excellent teachers, although I suspect that they were perhaps not equally blessed in the quality of their pupils.  As a group these men and women possessed a substance and quality that one rarely encounters today, and embody a model of education now almost entirely submerged under SATS and league-tables.

Many of these folks I have, of course, completely lost touch with.  Some still meet up annually with the old boys from my year for our annual pie-fest, but most of them exist only in my memory, viewed through the rose-tinted spectacles of an adolescent.

Of course, more than a few are no longer with us, which is perhaps no real shock as their ages are writ large in a group portrait such as this one.  There are surprises, however.  Dead centre is our Headmaster, Nigel Fanshawe, a man who was also my father's headmaster.  I have the dubious privilege of being one of the last pupils to be caned by him.  It was not a life-changing experience - I attended his study for the rite of corporal punishment with my English exercise book already stuffed down my trousers, but in any case his heart was clearly not in it.

Nigel Fanshawe remained a mentally-alert individual right up to the end of his life.  Indeed, he died one day short of his 104th birthday.  A few years previously, he had been the subject of an interview in the Daily Telegraph, demonstrating that he had continued to keep up to date with educational developments, throughout his retirement.  A remarkable man in many ways, but for my focus today, his remarkableness lies in his longevity.  As I consult my own set of mortality tables, I see that, assuming I fit the national average, I have another 29 years to play with.  This means I will have underperformed Nigel Fanshawe by some 18 years.

Or, to put it another way, there is an 18% disparity between 'the statistics' and the reality, in this case.  All financial planning practitioners employ some form of lifetime cashflow analysis in order to support their investment advice.  Or perhaps to put it another way, they'd be completely bonkers not to.  It certainly is impossible to provide reliable advice on decumulation strategies within retirement, without this central plank to our analysis.  So, what assumptions do we use?  If we just relied upon national averages, we'll find ourselves (and our clients) caught short.  How often do we rework our analyses?  The very act of updating a cashflow presupposes that we are active in updating the ubiquitous 'FactFind', the central repository of data that defines the parameters of each client's financial world.  We cannot do one without the other, yet many advisers demonstrate a lack of concern for the currency and comprehensiveness of the data available to them for modeling - which has the effect of turning 'financial planning' into either a bit of wishful thinking, or - worse - a piece of rather cynical marketing.

My old headmaster finished his course comfortably and securely as far as I know.  But he is the kind of exception that suggests that our reliance upon statistics is unreliable (assuming that we do attempt to factor longevity into our calculations) without the addition of another significant factor.  It seems to me that the only answer to this is an advisory proposition which is relentlessly disciplined in providing regular (annual?) reviews.  After all, if a financial planner had met with Nigel Fanshawe when he hit 99, the projected longevity (at that age) would be pretty much spot on.

The ValidPath Way...

We're happy to encourage the use of any of the reliable systems now available to handle lifetime cashflow modeling.  Some of our Members use Voyant or Distribution Technology for this purpose, and a couple have even gone to the lengths of designing their own system.  In an effort to support this vital element of financial planning, we have provided our Members with free access to CashCalc's excellent suite of diagnostic tools, including an extremely effective lifetime cashflow modeling and reporting module.
Kevin Moss, 12/05/2016