The dedicated Liquidity Analysis tool, located within the Dashboard > Liquidity tab of each client plan, allows you to clearly demonstrate to a client the value of a liquid emergency fund. This tool pulls in asset and expense information from the Profile, allowing you to easily dial in a liquidity target and compare that dollar amount to a client's actual liquidity:
Key Takeaways:
Identify a client's target liquidity, actual liquidity, and surplus/deficit within the Summary tab.
Dial in your liquidity target and fine-tune a client's actual liquidity using the Action Items.
View current monthly expenses and current liquidity values within the Details tab.
Elevate your practice with the Liquidity tool
This tool powerfully visualizes the importance of reserving cash funds in case of unforeseen setbacks, emergency situations, or spontaneous spending opportunities.
Include a thoughtful conversation around liquidity in a client meeting to continue to elevate both your insight and your genuine care for the client's best interest.
Upon first opening the Liquidity module, you will be taken to the Summary tab. At the top of this page you will find a Liquidity Analysis chart, displaying a target value for the client's emergency fund, their current liquid assets, and the surplus or deficit between the two. You can hover your mouse over the bar chart to see specific dollar values.
To fine-tune the Target Liquidity, start by opening the Action Items at the bottom of the page. Here, you will find a slider that can be used to set how many months of covered expenses you would like the target to cover. The client's monthly expenses will be pulled in from the Profile section, and a dollar amount will be automatically calculated. The default selection is 3 months of covered expenses, but you can choose anywhere between 1 and 12 months as your target:
You can view the client's Current monthly expenses at the top of the action items, in the Covered expenses section. You can also set a Proposed expense buffer to add additional expenses to the monthly amount being pulled in from the Profile. The Total covered expenses will consist of the current monthly expenses, in addition to any proposed expense buffer that is entered:
The client's Actual Liquidity can be customized by opening the Action Items at the bottom of the page, and then clicking the Edit button. By default, a client's actual liquidity will be comprised of all bank account assets, in addition to cash within taxable investment accounts. You can choose to exclude either of these items by unchecking the boxes to the left. You will also have the option to include cash value life insurance into a client's actual liquidity.
After making your selections and clicking the Save button in the lower right of the drawer, the client's actual liquidity will be updated to reflect your changes.
The Details tab provides greater insight into the specific dollar values that make up a client's Current monthly expenses and Current Liquidity. Information will be pulled in from the data entry in the Profile section, and will populate by category within this area:
See below for an overview of each line item within the Current monthly expenses section of the Details tab. For additional information on where and how certain expenses are entered, you can click the blue hyperlinks within each description.
Living expense: For clients in pre-retirement, the living expenses value will be a reflection of the monthly value entered into the Pre-Retirement Living Expenses card (Profile > Expenses). For clients in retirement, the Retirement Living Expenses (Profile > Goals) will be used.
Housing includes all expenses associated with the Primary Home, including mortgage principal and interest, property tax, insurance and maintenance fees. Both mortgages and properties are entered in the Profile > Net Worth area.
Debt reflects payments from any other loans (Profile > Net Worth) within the plan, excluding mortgage and credit card payments. New Loan income cards (Profile > Income) and Extra Debt Payment cards (Profile > Expenses) taking place in the first year of the cash flows will also be included.
