Prestwood Software Limited. 5 Darwin House, The Innovation Centre, Pensnett Estate, Kingswinford, DUDLEY, West Midlands, DY6 7YB

Transcription

1 Level 1 Training Course Notes Prestwood Software Limited 5 Darwin House, The Innovation Centre, Pensnett Estate, Kingswinford, DUDLEY, West Midlands, DY6 7YB Tel: Fax: software@prestwood-group.co.uk 1

2 Table of Contents GETTING STARTED... 5 CREATING CLIENTS... 8 CREATING NEW CLIENTS USING A TEMPLATE... 9 CREATING A NEW TEMPLATE... 9 IMPORTING CLIENTS FROM OTHER SYSTEMS Creating Clients By Importing Factfinds ADDING NEW ITEMS USING THE DATA ENTRY WIZARD WIZARD BASIC CLIENT DATA WIZARD QUICK LOCATE WIZARD SYSTEM SETTINGS WIZARD THE CHILD ITEM THE FOUR GOLDEN RULES OF DATA ENTRY Dates Values Persons What If s WIZARD THE EMPLOYMENT ITEM WIZARD UNIT TRUST ITEM WIZARD PERSONAL PENSION ITEM WIZARD FINAL SALARY ITEM WIZARD PROPERTY ITEM WIZARD CAR ITEM WIZARD BUSINESS INTEREST ITEM WIZARD MORTGAGE ITEM WIZARD MISCELLANEOUS ASSETS ITEM WIZARD STATE PENSION ITEM WIZARD MISCELLANEOUS INCOME ITEM WIZARD MISCELLANEOUS EXPENDITURE OPENING A CLIENT THE CLIENT PASSWORD SCREEN Removing a password from a client file Deleting a client file Archiving a client file WORKING WITH THE FACT FIND THE CLIENT FACT FIND SCREEN Scenario Selection Check Scenarios Flags Item View Item Search HOW DO I ADD MORE ITEMS TO THE CLIENT FACT FIND? Keyboard Shortcuts ITEM TABS & BUTTONS ITEM WHAT-IF SETTINGS General points about the What-if tab WORKING WITH CLIENT DATA GENERAL POINTS Speeding up data entry procedures by using the Copy facility

3 Removing unnecessary items by using the Delete facility Printing Items Cycling between items Changing Item Types by using the Move/Merge facility THE CHILD ITEM THE EMPLOYMENT ITEM WHAT IMPACT DOES THE DATA HAVE? THE NET WORTH STATEMENT THE PROPERTY ITEM Net Worth Asset Classes Net Worth What If Settings Date Sensitivity THE MORTGAGE ITEM The Mortgage Calculator Mortgage Item Redemption on Death Setting NET WORTH SUMMARY NET WORTH ASSETS CHART The Chart Toolbox NET WORTH NET WORTH (ASSETS VS LIABILITIES) CHART NET WORTH LIFELONG CHART THE PENSION STATEMENT CRYSTALLISATIONS ANNUAL ALLOWANCE THE PERSONAL PENSION ITEM Payment History Pension Benefits Pension Drawdown Pension GAD Rates Pension Disability Settings Pension Death Settings Final Salary Pensions THE INCOME STATEMENT INCOME STATEMENT INCOME TAX INCOME STATEMENT NET SPENDABLE INCOME INCOME CHART THE EXPENDITURE STATEMENT EXPENDITURE STATEMENT SUMMARY EXPENDITURE CHART EXPENDITURE STATEMENT INCOME AND EXPENDITURE EXPENDITURE STATEMENT LIFELONG EXPENDITURE SETTINGS SCENARIO & KEY DATE SETTINGS Scenario Assumptions Key Dates UNDERSTANDING THE CASH FLOW SCREENS THE SURPLUS ACCOUNT How is Surplus Account value calculated? A Positive Surplus Account What does this mean? A Negative Surplus Account What does this mean? What growth and overdraft rates should be used? THE CASH FLOW STATEMENT Finding Information from the Cash-Flow Statement

4 Cash-Flow Statement - The Inflows Outflows Chart Cash Flow Statement - Assumptions Tab Cash Flow Statement - The Capital Chart THE CASH FLOW TOOLS MORE INFLOWS CALCULATOR GROWTH CALCULATOR RATE STEPPER MORE EXPENDITURE CALCULATOR MARKET CRASH SIMULATOR KEY DATE CALCULATOR FACT FIND TARGETER OVERLAY CHART THE SCENARIOS AND CATASTROPHE SITUATIONS PLANNING ASSUMPTIONS ITEMS The Check Scenarios Option KEY DATES USING THE SOFTWARE TO SOLVE FUTURE CASH FLOW PROBLEMS POTENTIAL WHAT IF SITUATIONS WHAT IF SITUATIONS - USING KEY DATES WHAT IF SALE OF BUSINESS WHAT IF ADDITIONAL REGULAR INCOME WHAT IF CONTINUE WORKING AS A CONSULTANT (SELF EMPLOYED) WHAT IF ADDITIONAL CONTRIBUTIONS PAID INTO PENSION WHAT IF - DOWNSIZING A PROPERTY Downsize Key Date Using The Downsize Calculator WHAT IF EQUITY RELEASE WHAT IF REDUCE EXPENDITURE WHAT IF INCREASE RETURN ON INVESTMENT Growth Calculator ESTATE PLANNING Entering Will details Special Relationships Items Lifetime Transfers THE FACT FIND QUESTIONNAIRE Using Microsoft Word for Fact Finds Using Microsoft Excel for Fact Finds AUTODESIGNER WIZARD FACTFIND DESIGNER UPLOADING FACT FINDS PRODUCING REPORTS THEME DESIGNER Creating Merge Fields Changing your Header and Footer Adding merge fields to your Header and Footer

5 Getting started Double click on the Truth shortcut to launch Truth software. If you do not currently have a shortcut then please contact the Support team on If you are running the software remotely (Cloud hosted) then you will need your Cloud Username and Password to log in. You can access the Cloud hosted data via and then click on For best results, we recommend installing Citrix Receiver: Enter your Cloud username and password Figure 1 Logging In To The Cloud Click on the appropriate icon to launch Figure 2 Cloud Shortcuts 5

6 If you are running Truth software on a local hard drive or from your file server, then you will need to double-click your shortcut. If you have the optional User Names function active then you will need to enter this together with your password: The optional User Name function can restrict a user s permissions within the software. Figure 3 Local Copy / File Server Front Screen By default, the software will ask you to choose an existing client (Open Client) but you can also import from another system or create a new client To create a client, choose New Client To import data from another system or from another copy of Truth, choose Imports To change system defaults and the appearance of the system, click on Software Settings Open a client by entering the client number or the client s name or partner s name. You can also search by Product Reference Tip: Use the Help system for guidance or press F1 Figure 4 - The Opening Screen 6

7 When you have selected a client, a summary of that client s information is shown: Click Open to go into the client To delete or archive a client, or to add a password, click Figure 5 Preview Of Client Information 7

8 Creating Clients From File menu select Or from Clients menu select Figure 6 Creating A New Client At the bottom of the window, Wizard mode can be turned off or on as required. This will change the visible fields, so with Wizard Mode on, the number of input fields are reduced. Figure 7 Selecting A Template Or Wizard Mode If you choose a Template then a pre-determined fact find will be used. Templates can control the number of each item type, default values and settings, as well as the output from the written financial plan. Complete all necessary fields, choose a Template, (if required), and then click on 8

9 Creating New Clients Using A Template To create a client by using a template, select the required template from the drop-down box: Figure 8 Choosing An Existing Template Templates are customisable and new templates can be created Creating A New Template To create a new template, go to and select Complete the fields required for the template. If you wish to base the new template on an existing template, remember to choose the required template. Figure 9 Enter Generic Details For New Templates 9

10 Importing Clients From Other Systems You can create a new client, or overwrite an existing client, if the client exists on another back-office system, through the Import function Data can be imported from other copies of Truth, but also from: Avelo Plum CCD Intelligent Office Figure 10 Importing Options Make sure the data is up-to-date and in good shape before you export the data, then select the appropriate import option in Truth. Creating Clients By Importing Factfinds It is also possible to import data from spreadsheets. This is handled through the Factfind option. Details of this will be covered later in this workbook. 10

11 Adding New Items Click Open to go into the new client Figure 11 Basic Information Displayed, After Creating A Client After a client has been created or imported, select the client and click Open to go into the client and enter the items needed. By default, if the Data Entry Wizard has not been used, if no template has been selected or if no data has been imported then only the Client item will have been created, so all required information, such as a spouse or partner, will need to be added. Choose the required item type(s) from the Available Fact Find list by selecting the item type and clicking either Add option Figure 12 Add More Items As Needed In Wizard mode, when an item is added, the fields that are visible are reduced, making it easier to create a client. 11

12 Using the Data Entry Wizard From the File menu, go to and select The Data Entry Wizard is only ever used to create a client. You do not have to complete the data entry in one go and any clients that you are currently in the process of creating will be available through the Wizard. Figure 13 - The Data Entry Wizard Introduction To create a client, select New Client from here. Any clients that are still being worked on will also be listed. From the dropdown box, choose (NEW Client) to create a new client or, to continue working on a client that is not yet complete, select a client in progress: Figure 14 - Select New Client Or Client In Progress 12

13 When you select New Client a confirmation window will appear: To create a client, click on Yes to confirm that you wish to proceed. Wizard Basic Client Data Figure 15 - Create A New Client You must enter the client s basic details including the usually known as name. This should be the name that you want to use for the client throughout the software. Tip The software will format the date for you, as long as it is clear which is the day, the month and the year (e.g. type or 4/4/69 or 04/04/69 but remember to type the year in full if the year is before 1950). Tip. If your client has completed the WIZARD EXPENDITURE QUESTIONNAIRE IMPORT.xls you can import this data by clicking on the Import from Spreadsheet button. Select your client s spreadsheet from its saved location and click on Open. The data will be populated into the Wizard! Figure 16 - Client Basic Details Click other client. and a unique client number will be allocated. This number will never be used for any Figure 17 - New Client Number 13

14 On the next screen, if a spouse/partner is needed then tick the box before clicking Next to complete the Personal Details and review the client s planning assumptions. It is possible to skip this step and enter these details later, if required, but it is highly recommended that you complete this section now. Wizard Quick Locate Tip. Use the Quick Locate list to move around the Wizard. When you have selected an area, it will be emboldened blue. When you have entered data in a listed area, it will appear in red. Figure 18 - Entering Items And Quick Locate The Wizard will guide you through entering the items for the client. If an item is required click to confirm this is the case, then click on Next. Use the Quick Locate list to move around the Wizard. When you have selected an area, it will be emboldened blue. When you have already entered data in a section, it will appear in red. Wizard System Settings You must enter data when the field is coloured red. Tip: The right-hand side of the Wizard displays help on each field! You are able to select Retirement Age or, as we will refer to it later, Desired Future Lifestyle Age. The Projection up to Age is when the cashflow projection will stop. Review the default planning assumptions for Inflation, Net Future Return (on surplus income) and Overdraft Rate. Figure 19 - The Client Details 14

15 Please note that the first Personal Details screen that is displayed is for the client. If you have selected to add a spouse/partner then a screen allowing data entry for the spouse/partner will follow the client s screen, when you click Save. You can only enter one client and one partner item but all other item types can have multiple entries. When it is possible to have more than one of an item, enter the number you require here. Figure 20 - Entering More Than One Item Wizard The Child Item The Education Expenses section allows us to enter a rate of escalation which can be different from inflation. Tip: If the Child Benefit box is ticked, the software will include this tax-free income. The Wizard will tick this box automatically, depending only on the date of birth entered - it is not means-tested. Figure 21 - Entering A Child Item When there is no field to enter the rate of escalation, the expenses will increase at your chosen rate of inflation. We can enter expenses for Lucy in the white fields. The education expenses section allows us to enter a rate of escalation. When there is no rate entered next to the expenses the values will escalate at your chosen rate of inflation. 15

16 If the Child Benefit box is ticked, the software will include this tax-free income. The Wizard will tick this box automatically, depending on the date of birth entered. If no start date has been specified, the system will assume that the expense is on-going since at least the start of the tax year. Remember to type all values very carefully! Mistakes are easy to make and may be hard to spot later! To avoid making mistakes be very careful with the following field types what we refer to as: The Four Golden Rules of Data Entry There are four areas within each item that are crucial:- Dates Values Persons What If s Dates Dates control when values are correct. If a date is in the past then the values are in the past and the values will be scaled up or down according to growth rates (or interest rates), investments (or contributions) and withdrawals Dates also control the life-span of an item; when something starts or stops. Remember to use Key Dates if the start or end date could move. Values Monetary values (asset, income and expenditure values), as well as growth and escalation rates and frequency fields are all crucial. Never change a value unless you are changing the date that controls it. All value fields are controlled by a date field. Persons Who we choose from drop-down boxes affects the calculations. Such fields include the Owner, Grantee, Life Assured and Beneficiary fields, as well as whether P11D benefits are applicable, whether a property is owned individually, jointly or as joint tenants-in-common and so on. It may be for Income Tax or Inheritance Tax purposes or when it should pay and to whom it should pay. What If s The What If settings control whether an item should be excluded from a scenario (exclude an item if different values are required) and what should happen in the event of a catastrophe; should the item stop, start, increase, decrease or stay the same. 16

17 Wizard The Employment Item {C} means the software will add the client s Usually Known As name to the item description. Tip: Look at the Helpful Notes in the Wizard! If a salary escalation occurs part way through the financial year, enter the latest increase date. Pressing C in any date field opens the Date Calculator. For example: In the Date Employment Terminates field press C, select Peter and enter 60 in the date calculator, then click on OK. Peter s 60 th birthday date will be entered for you. Figure 22 - Entering Dates 17

18 Wizard Unit Trust Item Tip: Check date fields to ensure they are correct. Dates tell the system when the values were/are correct and the system will scale up values if they are dated in the past. Figure 23 - Entering A Unit Trust Wizard Personal Pension Item The pension Assumed Future Fund Growth rate should be before charges. The software assumes charges when calculating fund values. These charges are amendable through the Global Assumptions option. The Wizard assumes that an annuity will be purchased, but this can be changed later. Figure 24 - Entering A Personal Pension 18

19 Wizard Final Salary Item Tip: Look at the Helpful Notes in the Wizard for tips on what to enter. {P} means the software will add the partner s Usually Known As name to the item description. Jane s Final Salary Scheme Lump Sum 3/80 th s of salary for each year s service, so 3 is entered in the Accrual box. Figure 25 - Entering A Final Salary Item Wizard Property Item We can enter all the Property expenses here. Tip: If we want to change the expenses in the event of a catastrophe we must go to the What If tab in the Property item. Figure 26 - Entering A Property 19

20 Wizard Car Item Tip: To help calculate Benefits In Kind values for company cars, use the VCA Database, which holds information about CO2 emissions. Remember to select who should pay the tax on the Car and Fuel Benefit. For company cars, you must enter a Date of Registration and a List Price when New in the car item for the benefit to be calculated. Figure 27 - Entering A Company Car The date of disposal should be when the car benefit stops, which the Wizard will default to the Employment end date for the selected person. To help calculate Benefits In Kind values for company cars, use the VCA Database, which holds information about CO2 emissions. Also remember to enter the Date of Registration and the List Price When New, all of which affects the Benefits In Kind calculation. Figure 28 - VCA Database Window 20

21 Any expenses paid for by the client can be entered here. All expenses will escalate at the client s assumed rate of inflation. Depreciation can be shown as an annual expense or as a percentage per annum of the purchase price by entering a periodic replacement. Enter the period in years in the Replace Every field with a suitable percentage for Depreciation, as well as the Purchase Price and Purchase Date. This should be the date that Peter plans to stop driving a car of this type (or of similar costs). Remember to use the C key for the Date Calculator! Figure 29 - Entering Expenses For A Private Car Wizard Business Interest Item The value of the business must be entered in Value of Shares. The Value of Shares is the value that is used in the Net Worth statement, and the Cash Flow statement if it is sold, not the Estimated Value of Business. The date that this value is correct must be entered in the Date of Estimate field. Tip: Go to the Shareholders tab in the Business item to make any changes Figure 30 - Entering A Business Interest 21

22 Wizard Mortgage Item Enter Current Amount Outstanding and Date for Existing Loans. There is no need to enter an amount for loans in the future. Enter the value and frequency of mortgage payments here. If the original loan details are not known, but the loan pre-dates the current tax year, the amount is irrelevant so enter 1, but use a date before 6 th April. Tip: If you enter the loan in the current financial year this loan amount will appear in the income statement. If you do not want this to happen (because the loan was quite some time ago) make sure you enter the date of loan before 6 th April. Figure 31 - Entering A Mortgage Item Wizard Miscellaneous Assets Item A Directors Loan Account is best entered as a Miscellaneous Asset. The choice of Category and Growth Rate is important. Tip: The default category of Unencumbered Readily Realisable Assets means that the asset will be included in the Capital Value of the client s Cash Flow. Choosing Business Interests will keep the asset separate. This does mean, though, that you may need to add a Date of Sale, after the Wizard, if the capital is to be used. Figure 32 - Miscellaneous Asset Items 22

23 Wizard State Pension Item The system will calculate the date when the State Pension should start, but this can be overwritten. Tip: Enter an annual value here to reduce expenditure from a selected, future age. This will create a negative expenditure item with a monthly frequency. Figure 33 - State Pension Income Wizard Miscellaneous Income Item You can enter or change values in the yellow fields only. The white fields show values that have come from elsewhere in the Wizard. The basic State Pension amount can be amended, if required. Tip: Enter the amount of income that remains, if the owner dies, in the Survivor column. Figure 34 - Miscellaneous Income 23

24 Wizard Miscellaneous Expenditure Enter the expenditure values in as many items as possible. Enter 1 or 12 if you feel the item may be needed later. Tip: Enter the value of current expenditure then press the Tab key on your keyboard. The Wizard will fill in default values for the death catastrophes and for retirement Remember to change the default values where appropriate Figure 35 - Miscellaneous Expenditure Click on Finish when you have completed the Data Entry. Tip: You can go back into the Wizard as often as you like and create or amend data until the client has been opened through the Open Client option. Figure 36 - Data Entry Complete 24

25 Tip: The first time you open the client, after using the Wizard, the software will display this warning. If you choose Yes, you cannot revert back to using the Wizard. Click Yes to open the client. Further modification to the data will be done in the Fact Find screen, rather than the Wizard. Figure 37 Warning Message When Opening Client Created From Wizard 25

26 Opening A Client After creating a client, to open the client record, go to the Select Client option. Go to the menu and choose or from the menu, click on To open existing clients, enter the unique client number, select the client (or partner) from the alphabetical list or search for a Product Reference. Figure 38 - Select Client The Select Client window displays key information for the client. You do not need to go into a client and open specific items to find useful data, such as the names and ages of their children. What are Templates? Templates are there to save time when creating a client because you can specify default settings in the template file when creating a client. The template gives you two elements: 1. Data the items and the defaults in each item are copied across to the new client. 2. Report(s) the report designs in the template are copied into the client file. These can also be copied across to existing clients after the client has been created, using the Copy option. It is worth noting that the new client file will be an exact replica of the Template selected. It is unlikely that your new client s data will match exactly the items that have copied from the template, but you can refine the file by adding to the existing items and deleting any unnecessary items that have been copied from the template. 26

27 You can password protect a client file..if you need an extra level of security (best reserved for your own financial plan). The Client Password Screen From the Select Client screen, choose the client but don t click Open. Instead, click on Click here to add or change a client password. Figure 39 - Adding A Password To A Client File Figure 40 - Enter A Password And Then Confirm The Password As you enter a password, asterisks will be shown on screen as you type. 27

28 Removing a password from a client file To remove a password, enter the current password then leave New Password blank. Click on the Accept Password button and the client file will be opened. Deleting a client file From the Settings function permanently delete a client. in the Select Client window, you can Archiving a client file From the Settings function in the Select Client window, you can hide a client from the client list. Archived clients can be restored at any time. 28

29 Working with the Fact Find When you open a client, the Fact Find is displayed. There are numerous settings to control what is seen. The default display is listing all item categories for the Current Position The Client Fact Find Screen Click here to switch between a list of Available Fact Find items and the Client Fact Find. Check Scenarios Scenario Selection Item Search Flags Item View The headings reflect the category selected. A list of all items is shown by default. Figure 41 - The Fact Find Screen In this example, we have selected the Unit Trust category. The fields displayed are specific to the Unit Trust item type. Figure 42 Fact Find Headings Change According To The Selected Item Type 29

30 Scenario Selection The Scenario filter will show items relevant to the selected planning Scenario and the option chosen under the Check Scenarios option There are two scenarios by default: Current Position and What If. More Scenarios can be created through Settings To see which scenarios an item applies to, click on To see the catastrophe settings for the visible items, click on The Catastrophe option is only available if you have chosen an appropriate item type. The headings and options vary, according to the item type selected. In this example, we have selected Miscellaneous Expenditure items and have turned on the Scenario and Catastrophe Views Figure 43 - The Fact Find Screen With Scenario And Catastrophe Options Turned On 30

31 Check Scenarios The Check Scenarios option has four choices: When an option has been chosen it is highlighted, as above Displays only the items that are included in the selected scenario This option is not available when the Current Position has been selected. When used in a What If scenario, it will show only the items particular to the selected scenario Displays only the items that have scenario exclusions in place Displays every item from every scenario From the Check Scenarios option, All Items From All Scenarios has been selected, displaying all items and showing where an item is included (ticked) or excluded (blank). Figure 44 - Example Fact Find Screen With All Items From All Scenarios Displayed 31

32 Flags The Flag system is a useful way to show what needs to happen or has happened. Some flags can be set manually while others are set automatically by the system An item can be flagged as requiring attention When this has been actioned it can then be changed to show as checked Other Flags are available, such as when a Wrap Feed has been loaded. Use the Find Flags option to change the Fact Find list, to filter the items, to display only the required item types The Find Flags option allows the Fact Find list to be filtered. Figure 45 Fact Find With Flag Filter In Place 32

33 Item View A preview of an item, called the Item Pane, can be turned on The item preview can be: (i) turned off (ii) shown on the right of the window (iii) or at the bottom of the window There is also an option to view the item notes in a separate pane Any changes made should be saved. Remember to click Save. If notes have been entered, a symbol appears in this column. The optional Notes pane allows you to record useful information. Remember to save your changes! Click on or to toggle through the item list. Figure 46 Item Pane With Optional Notes Pane 33

34 Item Search If you want to find a particular item or group of items, you can use the Search facility. A partial match on the item descriptions will filter the list but you can also search on dates and values. When you have finished your search, click on You can search the current item type or all item types, looking at: Type a full or partial match on any text fields, dates or values. Select whether you want to search all items, or just the selected item type. Figure 47 Searching The Fact Find 34

35 How Do I Add More Items To The Client Fact Find? Select the required item type from the Available Fact Find and click on add; at the bottom of the Fact Find and on the right-hand toolbar. There are two options to The new item will appear as a blank item at the bottom of the Fact Find and will automatically open. In this example, we have turned on the options to see the Scenario and Catastrophe settings. Choose the required item type from the Available Fact Find list by selecting the item type and clicking either Add option Figure 48 - Creating A New Item When you click on the blank new item will automatically open. Tip: Entering T in the Last Updated Date Field will give you today s date. For a list of keyboard shortcuts enter C in any date field. Figure 49 - Data Entry For A New Item 35

36 Keyboard Shortcuts Pressing the C key on your keyboard will open the Date Calculator. A list of keyboard shortcuts on the right can be used to replace or change a date. Figure 50 Date Calculator With A Summary Of Keyboard Shortcuts Or Hotkeys 36

37 Item Tabs & Buttons Every item can contain so much information that it can t all be shown on one page, so the information is organised into different tabs. Avoid clicking on the X button in items as it will always prompt to save the item. It is the slowest way to close an item. Instead, either click Cancel to abandon or Save to save and close. Each item stores more information than can be shown on one screen, so data is organised in tabs. Here the Details 1 tab is emboldened to show where you are. If any text has been entered on the Notes tab then the heading is underlined. Click here to add another item, to copy, print or delete the current item or to move to another item. Click Save to save the data and close the item. Click Apply to save the data but keep the item open and make further changes. Click Cancel only if you want to ignore the data you have entered. This action also closes the item. Figure 51 - Item Tabs And Buttons To close an item, use either to save and close or use to abandon all changes and close the item. Avoid using as this will always ask if you wish to save the changes to the item even if you have already clicked to save.. 37

38 Figure 52 Save Item Prompt That Can Be Avoided It is much quicker, therefore, to close items by using to abandon any changes and close the item, or if you wish to make sure that the data has been saved. The data is validated when closing an item so if any compulsory fields have not been completed, you will be prompted to fill these in. Item What-If Settings All items have a What If tab. When you enter a new item and click on Save, if you have not completed the What If settings, default values will be applied and you will be prompted to check these. Check the catastrophe situations carefully. Click on OK to be taken to the What If tab. You are then able to amend the What-If assumptions. Remember. The software will apply default settings and these must be checked. Figure 53 - Check What If Settings 38

39 The software allows you to model different financial situations by using Scenarios. In addition to the defaults of Current Position and What If, you can create up to 8 other scenarios, though we recommend using just the two defaults. You must enter the percentage of the original value that will continue, for the normal duration, in each catastrophe. In this example, the expense remains the same even in the event of death or disablement of either the client or the partner. Tip: The percentages can be a reduced amount e.g. 50% or an increased amount e.g. 120% Figure 54 - What If Tab General points about the What-if tab 1. Always check the information stored on this tab and consider its effect. 2. If you have created a new item, when saving data, you will be automatically asked to check this tab if you have not populated it. However, if you created the client file using a template, you will not see any automatic prompt because this tab will have already been completed when the item was setup in the template. 3. The top portion of the screen allows you to include (ticked) or exclude (left blank) the item from the various scenarios; more scenarios can be created and this will be dealt with in detail later. 4. Income and Expenditure items show a percentage box to indicate what percentage of the original value would continue for the normal duration. The income and expenditure amounts could continue at the same amount, increase or decrease. They can also stop or start so items that are not needed in the No Catastrophe position could start in the event of a catastrophe. 5. With Assets, the catastrophe settings can only be set to be included or excluded and not expressed as a percentage. 39

40 Working with client data general points The following tools will save time: The Copy tool will create a duplicate of the original data which can now be amended. Figure 55 - The Items Toolbar Can Help Speed Up Data Entry. Speeding up data entry procedures by using the Copy facility There are often items in client files that contain similar data, for example, the client and partner may have investments with similar details. Once the entry for the first item is complete, highlight the item heading on the Client Items tree and click on the Copy Item tool on the client Item Control toolbar. The copied item will appear as Copy of (Description). Double click on this copy and enter the correct data for the next Unit Trust. Removing unnecessary items by using the Delete facility Printing Items To remove items permanently, highlight the item on the client s Fact Find and click on the Delete tool on the right-hand toolbar OR press the Delete key on your keyboard. To print an item, click the Print button on the right-hand toolbar Cycling between items Use the Up and Down arrows to view other items 40

41 Changing Item Types by using the Move/Merge facility If an item has been added in the wrong category, it may be possible to reclassify the item to the right item type by using the Move/Merge function, to move an item to a different client (or template) if required, or to merge the investment transactions (such as the Wrap valuations) to another item. Move Figure 56 Item Move/Merge Screen By using the Move/Merge function, it is possible to move an item to a different client (or template). Merge The option to merge the item s investment transactions with another item is only available if investment information has been populated. This can be useful if you have loaded a Wrap feed and the item type that has been created does not suit the investment. In this case, double-check your Wrap settings. Reclassify To reclassify an item to a different item type, select the reclassify option and then choose the required item type from the Select Item Type tab: 41

42 The available item types are limited to items similar to the existing item type. Figure 57 Reclassify Item Screen 42

43 The Child Item Remember. When no specific rate of escalation is mentioned for the expenses they will rise in line with your assumed rate of inflation. This rate can be found in Settings. Expense categories entered under the Regular Expenses and One-Off Expenses are specific to this child. The Data Entry Wizard assumes various defaults, including a monthly frequency. Figure 58 - The Child Expenses Tab Tip. If you want to specify your own defaults, you can create your own template and use this template when creating clients; this will save time because the template will use your chosen expenditure headings, categories, frequencies, default ages, etc. rather than the Data Entry Wizard s defaults. 43

44 The Employment Item If the employment commenced before the start of the current tax year it is not essential to enter the start date of employment. To enable an accurate tax calculation, enter the date of the last earnings increase Enter the Date of Last earnings increase for the tax for the year to be calculated accurately. If no change in employment is planned, the date employment terminates should be the client s planned retirement date. Tip. This can be either a fixed date e.g. the client s 60 th birthday OR a Key Date (variable event). To set up a new Key Date go to Settings. For Final Salary Pensions, this field allows you to control the salary figure used in the benefit calculation. Leave it blank for the system to calculate the final salary based upon the current salary and escalation rate. Figure 59 - The Employment Details Tab 44

45 What impact does the data have? The data will be used in various statements. You should check each statement in order to confirm that the data is correct. Anyone can make a mistake during the data entry process so remember those Four Golden Rules! Any item of data entered has the ability to affect Net Worth, Income, Expenditure and Cash Flow. Some of them will also affect the more specialised statements such as Education and Pension. The Net Worth Statement The Net Worth is shown initially as at today s date but you can move the statement forward in time, to show future Net Worth figures. Figure 60 - The Net Worth Statement. Tip: Throughout Truth Software, you can amend an item by double-clicking the item description. Use the Detail Slider to adjust the level of detail displayed The Net Worth can be shown in today s terms (inflation adjusted) or in actual terms You can animate the statement by clicking on the Play icon The delay between years can be adjusted in Software Settings 45

46 The Net Worth is shown initially as at today s date but you can move the statement forward in time to show future Net Worth figures. By clicking on the date, you can jump to any Key Date, age or tax year. Additional Components can be displayed on the same screen. In the Net Worth statement, this can include the Assets Chart and the Lifelong Net Worth Chart and you can also overlay the Net Worth Line on top of the Lifelong Chart 46

47 The Retirement Car Item Items created in the Data Entry Wizard can be amended to use a Key Date, rather than a static date, if the event may take place earlier or later. Tip: Key Dates can be changed instantaneously from the Cash Flow statement. Figure 61 - Enter A Purchase Date For A Future Asset Peter s Retirement Car For privately owned cars consider using the periodic replacement, as it is unlikely that the client or partner would buy another car shortly before they stop driving. This can be controlled with the Until age: 47

48 The Property Item Tip: You only need to enter the Purchase Date and Purchase Price fields if this property was bought within the current tax year or will be bought in the future. Enter the Date of Sale if there is a planned future sale. Figure 62 - The Property Item Details Tab The property item has a date for Last Updated, which controls when the expenditure values are correct, whereas the Current Value is deemed correct as at the Current Value as at date. Likewise, the rental income values have their own date field, Date of most recent rent increase. Each group of values (asset, income and expenditure) has a separate date to control when the information is correct. 48

49 Net Worth Asset Classes The Property is classed as Land and Property by default, keeping the Property value outside of the Cash Flow. Tip: If you wish to include the capital value of a Property in a Cash Flow, select Unencumbered Readily Realisable Assets or create (or rename) your own category through Settings. Figure 63 - The Property Asset Class Tab Open the Settings option to rename or create new headings and to change defaults Rename headings, as required Create new headings Change defaults Figure 64 Changing Categories And Defaults Through Settings 49

50 Net Worth What If Settings If you enter data for the Property in the Data Entry Wizard you will have to consider your What If settings. If you have used a template to create your client, the What If settings will be the same as those entered in your selected template. Note that the Data Entry Wizard will assume that 25% discount will apply to Council Tax expenditure in the event that the client or partner dies. If you enter data for the Property in the Data Entry Wizard you will have to consider your What If settings. If you have used a template the What If settings will be the same as those entered in your selected template. The assumption here is that the Gardener/Help in House expenses will double in all of the catastrophes. Figure 65 - The Property What If Tab 50

51 Date Sensitivity The system is very date sensitive. When the same date has been used for both the current value and for payments or withdrawals, the current value is always deemed to be correct first. The mortgage item was set up with today s date as the start date but Current values are always correct before any inflows our outflows on the same day. Figure 66 - Scrolling Forward On The Net Worth The current Net Worth Statement will list all assets and liabilities present at the beginning of the day. In the Peter Gray example the loan was taken out during the day. You must, therefore, scroll forward to see the liability. When scrolling up (or down), the system jumps to the start of the next Tax Year. To see the mortgage liability, we need to scroll forward to a future position, because the loan was set to start today but asset and liability values are always correct before any movement into or out of the items (i.e. before inflows or outflows on the same day). 51

52 The Mortgage Item If you wish to deduct the value of the outstanding liability from the client s Readily Realisable Assets click on Include Loan Value in Cashflow. You may wish to do this, for example, if the loan is for a buy-to-let property which you have reclassified as a Readily Realisable Asset. If there is no amount outstanding then there is no need to enter a value or a date. Figure 67 - The Mortgage Item Details Tab If the data is regarding a proposed (future) mortgage, don t enter a Current Amount Outstanding. If there is an amount outstanding, enter the date that the amount is correct as at and ensure that the date entered here for the current amount outstanding is after the date of the loan. If you enter the same date as the loan start date, it will count the loan again! Go to the Payment History tab and enter the proposed loan as shown: 52

53 Tip: Date the Loan in Payment History before the servicing payment. Tip: Remember that most clients borrow money once, so choose Single for the Loan Frequency! Figure 68 - The Payment History Tab The Mortgage Calculator The Mortgage Calculator can be found in the Mortgage Item. This very useful tool can be accessed from either the Payment History tab or the Repayment tab. Click on the Open Calculator button. If the payments specified are not enough to clear the debt by the redemption date then a calculated figure will be shown here. To add this additional servicing payment, click Add. To save changes back to the mortgage item, click Update. Figure 69 - The Mortgage Calculator Screen 53

54 To see a detailed schedule of our mortgage entry, click on the detailed calculation of the mortgage item: The schedule will show Figure 70 - Mortgage/Loan Calculator Showing Schedule Of Payments Mortgage Item Redemption on Death Setting The Data Entry Wizard assumes a mortgage continues in all the catastrophes. To redeem a mortgage immediately in the event of a catastrophe enter 0 in the appropriate fields. Figure 71 - To Redeem A Mortgage On Death 54

55 It s always important to check the What If settings and this applies to all items. Specifying whether an item stops, starts, increases or decreases in the event of a catastrophe is vital for the Cash Flow modelling. Net Worth Summary Drag the Detailed slider to change the view from Detailed to Semi-Detailed to Summary. Figure 72 - Net Worth Summary Tab Note: The Net Worth Summary will not let you double-click on an entry, as you can only double-click on an item description to amend an item. Net Worth Assets Chart The Assets Chart can be viewed on the Statement tab with the values, or in isolation by clicking on the Assets Chart tab. Tip: You can highlight a section of the chart by double-clicking. This adds a summary on the left. Figure 73 - Net Worth Assets Chart After Double-Clicking A Section 55

56 To customise any chart, click on the Chart Settings. Tip: To show the category description and value, right-click on any section of the chart. Figure 74 - The Assets Chart The Chart Toolbox You can change the Legend, the background and the border settings, through the General and Legend tabs. The Chart Settings toolbox will allow you to select the type of chart, chart colours and background colours for the chart. Each section of the chart can have its own colour defined. Tip: The choices you make are global and define how your chart will print out for every client and not just the client you are in, unless you apply a Client Type. Make sure you are happy with your choices for the printed version! Figure 75 - The Chart Toolbox 56

57 You can choose the colours for your charts in a number of ways: Web colours: The Web colours are standard colours. With the Custom option, you can enter the RGB values of colours useful when trying to match corporate colours. The System option allows you to match the colours applied to your operating system. Standard colour themes: 57

58 Custom colours: You can also create your own colours: Figure 76 - The Chart Toolbox Colour Palette You can specify your custom colours in RGB, Pantone or HSB values 58

59 Net Worth Net Worth (Assets vs Liabilities) Chart The Net Worth Chart shows the ratio and percentage of Assets vs. Liabilities. Figure 77 - The Net Worth Chart Net Worth Lifelong Chart The Net Worth line shows the comparison of Assets vs Liabilities and can be turned on or off. At the point when the Liabilities equals the Readily Realisable Assets, the client will have to consider selling other assets. Figure 78 - Net Worth Lifelong Chart Each category of asset and liability can be selected/deselected. This is useful when explaining to clients which assets are usable, and which are not. 59

60 The final step in presenting the Net Worth data to the client is to archive the updated values to the Net Worth History. In addition to the total Net Worth, the system will also store a breakdown of the asset categories. Over time, the History will show how a client s Net Worth has changed and a graph can be produced to illustrate this, when there are two or more entries in the table. Entries can be made manually, if needed, by typing in a date and total net worth value in the blank line. To compare a projection of past growth against a selected growth rate, enter a value here. Scroll across to see the breakdown of values of other asset categories. Figure 79 - Net Worth History Click to add a new entry to the Net Worth History table with today s values To produce a Net Worth History Chart, click on the Refresh icon To delete entries from the Net Worth History table, click the Delete icon To compare the actual growth achieved against a benchmark, change the Assumed Growth Rate Of Projected Net Worth to suit. 60

61 The Pension Statement The Pension Statement can calculate target premiums/projected pension income but can also check Lifetime Allowance limits and Annual Allowance limits. To launch the Pension Statement, go to the Planning menu and click on the Pension Statement Please note that both the Lifetime Allowance (Crystallisations) screen and the Annual Allowance screen will display automatically (you do not need to go into the Pension statement to check) if the client or partner exceed either of their limits. This can be turned off, through Settings Crystallisations Choose Client or Partner The software will give projected values of the crystallisation events and express these as a percentage of lifetime allowance. Past events should be entered by clicking on New Figure 80 - The Pension Statement Crystallisations Tab A warning is given where the Lifetime Allowance has been exceeded. The legend at the bottom gives information about the crystallisation events that appear in the grid. The Crystallisations tab displays useful information regarding the limits of pension benefits over the person s lifetime. If they have previously taken benefits from a pension scheme (which would affect the remaining lifetime allowance) then enter a manual crystallisation event at the bottom of the screen. If an entry shows in red then the Lifetime Allowance has been exceeded. 61

62 Annual Allowance View details about the contributions, the Annual Earnings and the Annual Allowance for each tax year, as well as the unused annual allowance carried forward. The legend at the bottom gives information about the contributions displayed in the grid. Figure 81 - The Pension Statement Annual Allowance Tab If an entry shows in red then the Annual Allowance has been exceeded. If an entry shows in orange then the Annual Earnings have been exceeded. If an entry shows in green then the pension is about to end and the Annual Earnings may be exceeded. If an entry shows in blue then the Money Purchase Annual Allowance rules apply, restricting the contributions allowance during a Pension Input Period because benefits have been taken. Remember that the Pension Input Period can be controlled within the pension items. Tip: The pension warnings can be turned off, if required, from the Settings screen by ticking Prevent Pension Checks In Scenario. Pension Warnings can be turned on or off by clicking here. Figure 82 - Pension Warnings Option In Settings 62

63 The Personal Pension Item The software will always use projected fund values from the product provider in preference to its own calculations Enter the latest value by clicking on (new) to add a new line Figure 83 - The Personal Pension Item Fund Value Tab Tip: Use projections from the selected pension provider whenever possible. The software will calculate an up-to-date pension fund value, if one does not exist, by looking at the date of the latest fund value, the Payment History (for premiums/withdrawals) since that date and then applies the Future Fund Growth rate, along with an average provider charge if no Projected Fund Values have been entered. Growth rates should, therefore, be gross rather than net of charges. 63

64 Payment History Tip: Remember to change the End Date on any contributions to match the Key Date selection on the Benefits tab. Figure 84 - The Personal Pension Item Payment History Pension items will potentially need a Key Date applied to the Payment History contributions End Date as well as to the Crystallisation Date of Benefits. 64

65 Pension Benefits If no entries exist on the Benefits tab, double-click onto (new) to specify how the pension fund will be taken; otherwise double-click onto the existing entries in turn, as required. For future benefits to be taken from the pension, double-click on (new). To delete a benefit, hover over the line then click on the delete icon. To see the income that should be provided by crystallising into drawdown, click the Drawdown Table. Figure 85 - The Personal Pension Item - Benefits Tab Multiple benefits ( crystallisation events ) can be specified, but taking both a tax free lump sum and a regular income can be handled with just one entry. Entering 100% as the value for annuity or drawdown and 25% in Tax Free will show both an income and a tax free lump sum. Enter the Age when the benefits are to be taken or use a Key Date (e.g. Desired Future Lifestyle Age ). Likewise, choose when the income should start. This could be the same as the Crystallisation, or different. Figure 86 - Creating New Personal Pension Benefits 65

66 The benefits can be specified in just one entry or through several entries. The options are for lump sums (which can be regular lump sums or singular), annuity purchase or drawdown. In each case, the tax-free cash can be specified as part of the benefit entry, or this can be entered as a separate entry if required (for example, if the tax-free cash is taken at retirement but the balance of the fund will be taken at a different date). With Pension Freedom, the tax-free cash can be divided into smaller tranches and taken over a longer period. When amending the pension, if you wish to use the Key Date functionality for the Benefits To Be Taken From field, then consider amending the Payment History so that the End Date also uses the same Key Date (e.g. Desired Future Lifestyle Age). Pension Drawdown Clicking on Show Drawdown Table will display details of the drawdown benefits for the selected scenario. Click on Hide Drawdown Table to close the Drawdown table and view details of other crystallisation events.. Figure 87 - The Personal Pension Item Benefits Tab - Drawdown Pension Pension GAD Rates The GAD rates are updated regularly, so do make sure that Online Updates have been turned on, to receive these updates. 66

67 Pension Disability Settings By default, contributions will stop in the event of disability but Waiver Of Premium details can be entered, if needed. Tip: Even if Waiver is not included it is still possible for the contributions to continue or even reduce in the event of disability. If Mark As Paid-Up is un-ticked then you can set the required ongoing percentage for each Payment History line with the Catastrophe Settings function. Figure 88 - The Pension Item Disability Benefits If pension contributions stop in the event of disablement then tick the Mark As Paid Up. If Waiver Of Premium is in place then leave Mark As Paid Up un-ticked and complete the benefit details. Pension Death Settings Tip: Remember to assign Death in Service beneficiaries in First and Second Death. If left blank, death benefits will go to the pensioner s estate. Choose the Death Benefits from Lump Sum, Annuity or Flexi-access Drawdown. With each option, select the required benefit details. These options include the Sustainable Income Calculator which will calculate how much could be taken to deplete the pension fund perfectly. Figure 89 - The Pension Item Death Benefits 67

68 Final Salary Pensions Final Salary Pensions (Defined Benefit Pensions) will not show on the Net Worth Statement as there is no fund value, but they can be found in the Pension Statement. Figure 90 - Checking Or Amending A Final Salary Scheme Pension If you have an illustration for a final salary scheme pension, you can enter the amounts directly into the Benefits tab, rather than using the calculated values, but if you do, then don t click the Calculate Accrual button or the system will overwrite your manual values with its own calculated values! To prevent your specified values from being overwritten check Remember to select the appropriate escalation rates for pre-1997 and post-2005 benefits, and to check the Early Retirement tab, if penalties would apply for retiring early. 68

69 Multiple Death in Service benefits can be entered. This should not be confused with the Death in Retirement benefits which are specified at the bottom of this screen. By editing the item, we can enter death benefits for Jane s Final Salary Scheme, which were not available to us in the Wizard. Figure 91 - Entering Death In Service Benefits 69

70 The Income Statement Any one-off receipts, such as the mortgage borrowing, can be removed from view by clicking on Figure 92 - The Detailed Income Statement As the Income statement displays values in today s terms, to see whether items increase or decrease in real terms, click on the Tax Year to activate the Dates Menu More Key Dates can be added though Settings. Alternatively, scroll forward individually or use the animation function be amended by double-clicking them.. Remember that items can 70

71 In our example for Peter Gray the dividend income from his business should have stopped at his 60 th birthday. To amend, double-click the line. Figure 93 - Future Income If you do spot any mistakes, double-click to go into the item to amend it. With the Peter Gray data, we want to amend the end dates on items to use the Key Date Desired Future Lifestyle. Tip: Try to make your descriptions clear and meaningful. The description field is displayed on your statements. To stop the dividend income at the required date, enter a finish date. Remember to use Key Dates, if appropriate. Figure 94 - Entering A Finish Date To Stop Income 71

72 Income Statement Income Tax Income Tax rates for non-uk residents can also be set up using the Tax Packages option in Settings. Figure 95 - The Income Statement Tax Calculation In the above example, the tax calculation shows a Base Rate Expansion because Peter s pension has been ticked for Show contributions net of basic rate tax relief. Consequently, the Allowances are not increased by the personal contributions, the Base Rate is expanded and the Expenditure statement shows net premiums, rather than gross. The Income Tax tab shows the amount of Income Tax and National Insurance payable and would include all appropriate UK Income Tax details, such as top slicing, where appropriate. Income Statement Net Spendable Income The Net Spendable Income Tab allows you to see the amount of income available for expenditure or investment. Tax and National Insurance is deducted to arrive at values for net spendable income per year, per month and per week. Figure 96 - Net Spendable Income 72

73 Because Peter & Jane borrowed 40,000 this year, this is included in the figures. If you don t want one off values to be included, click the Filter Out One-Offs option. Income Chart Remember charts are a welcome break for the client. Here we can see that a large percentage of Peter and Jane s income comes from their employments. To see a separate analysis for client and partner, tick the Separate by Owner tick-box Figure 97 - The Income Pie Chart The Income Chart above shows the 40,000 borrowed this year. If you don t want one-off values to be included, click the Filter Out One-Offs option. Each source of income can be selected or de-selected, as required, on the Lifelong Income Chart. Figure 98 - Income Lifelong Chart 73

74 The Expenditure Statement On the Expenditure statement, encourage the client to make changes if they feel the figures are incorrect. Double-click any line with an item description to amend that item. Hold down a mouse right-click on any section to see the values, or double left-click to highlight it. Charts and Tables can be customised here. Hide or include one-off items. Additional components can be displayed on the same screen. Figure 99 - Detailed Expenditure Here the option to overlay the lifelong income over the lifelong expenditure has been turned on. Check each line carefully to ensure the amounts are right and that nothing is missing. If you are unsure of an item s value enter a 1 value and this will show on the Detailed Statement tab, acting as a prompt to ask the client for the current value. The only entry that can t be double-clicked, is Income Tax & National Insurance as this is calculated. Double-clicking applies only to items. 74

75 Tip: Most clients will estimate values and use rounded values throughout. If a figure is not showing as a rounded value it may mean that the value is dated in the past and may need updating. Check all expected expenditure is listed. If something is missing, return to the Fact Find by selecting Fact Find from the Planning toolbar. Figure Checking Expenditure Expenditure Statement Summary Drag the Detailed slider to change the view from Detailed to Summary Figure Expenditure Summary The headings on the Summary are customisable through Settings and these headings are used throughout, so they will show in the Legend of the Pie Chart too. 75

76 The statement shows the 40,000 one-off refurbishment expense. If you don t want one-off values to be included, click the Filter Out One-Offs option. Expenditure Chart Figure Expenditure Pie Chart When we have filtered out one-off items of expenditure, this Chart clearly shows that Income Tax & National Insurance is the client s largest regular expense. Remember: The percentage value does NOT show the average tax rate! This information can be found in the Income Statement. Expenditure Statement Income and Expenditure The Income and Expenditure Tab gives details of inflows and outflows. In this example, Peter s cash inflows exceed his cash outflows. This surplus will be added to the Surplus Account and grow at the rate specified in Settings. Figure Income And Expenditure Tab The surplus must be agreed with the client. If necessary add more expenditure items. 76

77 Always check with the client whether the surplus/deficit value seems correct as this is crucial for the Cash Flow statement s calculations. If the client believes the surplus to be correct, try asking them what happened to last year s surplus! If you want to look at the inflows and outflows at a Key Date (e.g. the Desired Future Lifestyle Age ) select the Key Date from the Date Wheel (accessed by clicking on the Tax Year). The client s future position will be displayed alongside the current age, with the values shown in today s terms. When Outflows exceed Inflows, the text is shown in red. Figure Income & Expenditure Tab Choosing Future Position For Comparison When comparing the inflows and outflows for a future position, consider scrolling beyond the planned retirement age to see the regular inflows and outflows, rather than showing a cross-over year, where pension income starts and employment income stops. Expenditure Statement Lifelong Expenditure One-off expenses, like Lucy s wedding and the car purchases, are shown unless the Filter Out One-Offs is selected. Colours can be chosen through Settings / Statement Headings option or here on the Chart Settings. Each category of expenditure can be selected/de-selected on the lifelong chart. Figure Expenditure Lifelong Chart 77

78 Settings The Settings option allows you to change planning assumptions, such as the inflation rate and the growth rate on surplus cash, as well as to amend the statement settings and change/create Key Dates. Scenario Settings are individual to the client, but Statement Headings apply to all clients with the same Client Type code Scenario & Key Date Settings Scenarios can be renamed Double-click the appropriate cell to change a Scenario Title, or any of the assumptions Net Return and Overdraft Rate apply to the Surplus Account only. Figure The Settings Screen When you hover over an existing scenario, a Copy icon appears, allowing you to create an exact duplicate of that scenario To add new Key Dates, click on the Add icon Scenario Assumptions The Overdraft Rate is only used when the Surplus Account goes negative. It is used to negate growth on readily realisable assets that would be/would have been sold. To set a sensible rate for the Overdraft Rate, consider using a weighted average of growth rates of the readily realisable capital at the point when the Surplus Account goes negative. 78

79 Net Return applies when the Surplus Account is positive Overdraft Rate applies when the Surplus Account is negative Key Dates Click to add a new Key Date The new Key Date will need a description and a default date value 79

80 Figure The New Key Date In The Scenarios Table On the Scenarios screen, more Key Dates can be created. Existing Key Dates can also be renamed and the date values changed. When a Key Date is first created, the initial date value is set for all scenarios; but thereafter if a Key Date is changed the change will only apply to a specific scenario. 80

81 Understanding the Cash Flow screens The Cash Flow Statement is probably the most important statement and one which will be used most since you will be using it to illustrate various problems and solutions. To access the Cash Flow Statement, click on the icon from the Planning menu. The Cash-Flow statement starts from today and provides a year-on-year analysis of a client s Readily Realisable Capital. Only readily realisable assets are included. Whichever is the greater of the inflows and outflows is shown emboldened. The difference between inflows and outflows is deposited in, or withdrawn from, the Surplus Account. When the Surplus Account is positive it attracts growth at the level specified in Settings. When the Surplus account is negative, the debt is increased by the overdraft rate specified in Settings. Figure Year by Year Cash Flow Forecast The Surplus Account The surplus account behaves like a virtual investment. It is far more convenient to assume all inflows and outflows go to and from the surplus account than to record all transactions as payment history lines in a bank account item. How is Surplus Account value calculated? The difference between cash inflows and outflows plus any accumulated growth or charges is added to the surplus account. This amount is brought forward as an opening balance for the following year and additional inflows, outflows and growth are again applied. A Positive Surplus Account What does this mean? When the surplus account is positive, it is assumed that the client will achieve a return on the surplus funds available and will accumulate interest at the rate specified in Settings for Assumed Net Future Total Return. The system is unable to determine in this situation where the surplus should be invested, therefore, this assumption is a reasonable one to signify an expected increase in client s readily realisable assets. 81

82 A Negative Surplus Account What does this mean? When the Surplus Account becomes negative, interest is charged at the Assumed future Overdraft Rate as specified in Settings. A negative Surplus Account signifies that the client is spending more than they are bringing in and is therefore eating into the Readily Realisable Assets. The system cannot offer a solution to this situation by choosing for example, specific investments to sell. Instead the Readily Realisable capital at the end of the year is decreased by the negative amount of the Surplus Account to which the overdraft rate has been applied. The Surplus Account in this situation simply represents the value of the clients investments that would otherwise have been sold in order to maintain their assumed expenditure along with any associated interest or return. What growth and overdraft rates should be used? Assumed Net Future Total Return should be individual to the client. The client s attitude to risk and marginal rate of tax should both be considered given that a higher rate tax payer will receive less of the investment return in cash than a basic rate tax payer and a higher risk taker may receive better returns than a more conservative one. Assumed Future Overdraft Rate - if it is clear that the client will never actually go into overdraft, and other investments will have to be sold to finance the current lifestyle then the Assumed Future Overdraft Rate ought to reflect the rate of this lost income. The Cash Flow Statement If you would prefer to see the Cash Flow without the Surplus Account, there is an alternative view available If you prefer you can change the display of the Cash Flow Statement through Options, so that the Surplus Account column is replaced with Net Value Added to Capital and Growth In Year From the File menu, select Software Settings, then Statements and on the Cashflow option choose Show Growth in Year. Figure Alternative Cash Flow Statement Display; Cash Flow Showing Growth In Year, Rather Than Surplus Account To change the Cash Flow statement from showing the Surplus Account, from the File menu select Software Settings and then Cashflow: 82

83 From the File menu, select Software Settings. Figure 110 File Menu - Choose Software Settings This window allows you to configure various aspects of Truth software. Choose between Surplus Account and Growth In Year. Figure Options Menu - Choose How To Display The Cash Flow Statement 83

84 Finding Information from the Cash-Flow Statement Double click on any line in the Cash Flow Statement to reveal more details about the Capital or the Inflows and Outflows. Switch between viewing Capital or Inflows/Outflows Figure Further Analysis Of The Cash Flow Statement Cash-Flow Statement - The Inflows Outflows Chart Right click on any year on the chart to show the age and the total value (of either the inflows or the outflows) in that year. Figure The Inflows Outflows Chart 84

85 Tip: The appearance of this, or any other chart, can be customised by clicking on the Chart Settings. Double left click on any bar on the chart to see details of all inflows and outflows in that year. Tip: The values are stated in Today s Terms. Tip: The Capital Chart can be overlaid on top of the Inflows/Outflows Chart. Move your mouse over any other year to view that year s details instead. Figure Inflows And Outflows Chart Drill Down Cash Flow Statement - Assumptions Tab Switch between viewing just Inflows, just Outflows or a combination of Inflows and Outflows. Switch between Today s Terms or Actual Terms. Tip: To change the order, click on a column heading. Click it again to reverse the order. Here, the entries are in chronological order. This screen helps to verify the correct assumptions have been made. To change assumptions, double-click to open the required item. Figure The Assumptions Tab 85

86 The Assumptions tab will show the important information about all the underlying planning assumptions you have made when producing the lifelong Cash Flow; this includes the amount, the rate of escalation, when it runs from and when it runs to. Future values can be viewed in Actual Terms or Today s Terms and the list can be sorted into different orders by clicking the appropriate column heading. Cash Flow Statement - The Capital Chart The default colours of blue, pink and red can be changed through the Chart Settings. When the Capital Chart changes from positive to negative (or vice versa) the chart turns pink. Periods of positive Readily Realisable capital are coloured blue. Periods of negative Readily Realisable capital are coloured red. Figure The Capital Chart 86

87 The Cash Flow Tools The Cash Flow statement has various tools to calculate solutions or demonstrate possibilities: More Inflows Calculator Calculates how much more is needed to resolve shortfalls Growth Calculator Calculates the required increase, or decrease, in investment return Rate Stepper Allows investment growth to be increased or decreased in increments of 0.25% More Expenditure Calculator Calculates how much more expenditure could happen and still achieve a capital target Spend Less Calculator Calculates how much less the client would need to spend and still achieve a capital target Capacity For Loss Demonstrates the potential effect of a market fall Key Date Calculator Calculates when a Key Date should take place to achieve a capital target Fact Find Targeter Calculates what the value of an item needs to be Overlay Chart Compare one scenario to another by overlaying the capital charts 87

88 More Inflows Calculator If there are any periods of negative capital in the client s lifelong cash-flow, the software will calculate the amount required to remove the problem. This may be a lump sum or a regular income. Click on More Inflows to make the calculation. Tip: Choose the appropriate assumptions and click Calculate to calculate the value. When the calculation is complete click on Show to change the Capital Chart. Figure More Inflows Calculator The Results section displays the required additional inflows. Click Show to illustrate the possible outcome. You can change the value before keeping it. Choose to Keep or Remove the solution. Figure More Inflows Calculator Solution To illustrate the required additional inflows by an increase of the gross margin in the client s business, click on the Business Planning icon You will then be prompted to copy the calculated value to the business item 88

89 The business item will then open onto the Analysis tab. If the Sales/Turnover and Direct Costs fields have been completed, Truth will display the target inflows as an increase in Gross Profit and show that as a percentage increase in the Gross Margin. Figure 119 Business Item Analysis Tab Growth Calculator If there are periods of negative capital in the client s Cash Flow, the software will calculate the required growth to resolve the problem. If there is never a shortfall, then the client may be exposed to more risk than is necessary and the Growth Calculator can determine the required reduction in growth. Choose the items where more (or less) investment return is to be calculated and click the Calculate button. When the calculation is complete, click on Show to change the Capital Chart. Figure Growth Calculator 89

90 There are three options for the calculation: New Growth Rates will determine the same new growth rate required across all selected item types. Additional Growth Rate will calculate the additional growth each selected item type needs. Growth Rate Factor will scale the existing growth rates on all selected item types by the same ratio. A table will appear, showing the new growth rates compared to the original growth rates. Click Show to illustrate the effect of the updated growth rates and choose Keep to make the changes permanent. Figure 121 Updated Growth Rates Rate Stepper Select the item types where more (or less) investment return is needed and drag the slider to see the effect on the Cash Flow. Figure 122 Rate Stepper 90

91 Select the items where either an increase or a decrease in investment return is required and move the slider in increments of a quarter of one percent, up to a maximum of 2.5%. A table appears, showing the new Growth Rates. Drag the slider in 0.25% increments up or down, to see the effect on the Cash Flow. Figure 123 Updated Cash Flow Using The Rate Stepper Slider Click to return the Cash Flow assumptions to their original values. More Expenditure Calculator Choose the appropriate options, then click on Calculate to see how much more expenditure the client can afford. Figure 124 More Expenditure Calculator 91

92 The solution is shown in the Results section. Click Show to illustrate the effect on the Cash Flow. A new Miscellaneous Expenditure item is added. Choose either to Keep or Remove this item. Figure 125 More Expenditure Calculator Solution Market Crash Simulator Choose the relevant item types that you wish to demonstrate a market fall on (note that only equity based investments are selectable) then choose the date of the market fall, the percentage reduction and, if required, the recovery period in years. Figure 126 Market Crash Simulator To demonstrate a client s capacity for loss, the Market Crash Simulator shows what would happen if certain equity-based investments were subject to an immediate drop in value. The date of the fall, the percentage drop and whether a recovery period is to be assumed, are all options that will impact on the outcome. During the Recovery Period, the crashed investments will assume to achieve greater than normal growth to put them back to where they should have been as if there had been no crash, but the crash can still have a dramatic impact and can even be better than if no crash has been assumed, due to an 92

93 effect known as Pound Cost Averaging. This is dependent upon whether there are investments into, or withdrawals from, the investments over the crash period. Choose the relevant options, such as the date of the fall, the percentage drop and (if required) the length of recovery period. Figure 127 Market Crash Simulation Just Prior To Retirement Key Date Calculator Select the Key Date to be calculated then click the Calculate button and the software will determine when, to the day, the event needs to take place. This could be helpful for establishing when the client can afford to retire, for example. Figure 128 Key Date Calculator Rather than simply sliding a Key Date, which will move in whole year increments, the Key Date Calculator can determine when, to the day, an event needs to happen to avoid the Cash Flow realisable capital dropping below a prescribed value. In this example, we have calculated when Peter s Desired Future Lifestyle Age needs to be and as we have used this Key Date as his employment end date, it shows he can afford to retire when he is 61 years and 308 days old. 93

94 The Results show when the Key Date needs to be, to the day, to avoid the Cash Flow dropping below the required target capital value. Choose Keep to update the Key Date. Figure 129 Key Date Solution Fact Find Targeter For Truth to calculate the required value of an item, follow the instructions on the left. Firstly, select any item from either the Inflows or Outflows list on the Assumptions tab that displays the Target icon. Figure 130 Fact Find Targeter 94

95 Secondly, select when the target capital balance is to be achieved. Click on the Calendar icon to bring up the date wheel and select the required year. In this example, we will choose the Most Negative Year, the year when the Cash Flow balance is at its worst. Figure 131 Targeting A Capital Value For A Specific Year Truth will show the capital balance at the selected year and ask you to enter the required balance, in today s terms. Click Calculate to display the solution. Figure 132 Enter The Required Capital Value In Today s Terms 95

96 Choose to keep the amended value or remove it to try a different solution Figure 133 Targeting A Capital Value For A Specific Year 96

97 Overlay Chart To compare one Cash Flow scenario to another, you can overlay the Capital Charts. This is a helpful way of illustrating any differences between scenarios, such as your recommended course of action. Figure 134 Overlaying The Capital Chart From Another Scenario 97

98 The Scenarios and Catastrophe Situations The ability to examine a client s financial situation in different circumstances is achieved through the creation of different scenarios. Scenarios are usually tied into client objectives and show the results of possible courses of action that the client may choose to take. The software has within it two pre-set scenarios: Current Position and What If. Within each Scenario you can also look at five different Catastrophes ; No Catastrophe, Client Dies, Partner Dies, Client Disabled and Partner Disabled. The Current Position is the where you are now position and includes all items that exist today and any intended future items. The What If scenario is usually used to model the situation as it could be, if different assumptions are applied, different values are used or events take place on different dates. In addition to these default scenarios, there is potential to create eight further user-definable scenarios for each client. For however many of these you set up for any one client, you may examine the effect of no catastrophe occurring or the occurrence of any one of the four death or disablement catastrophes. You will see, therefore, that it is possible to look at up to fifty different sets of circumstances for any one client. There are three ways that a Cash Flow will vary in different scenarios: Planning Assumptions The assumptions under Settings can be different for each scenario (such as a higher growth rate): Figure Settings Window - What If Scenarios 98

99 Items Different Items create different Cash Flows and if an item is not included in a Scenario then this would impact on the Cash Flow. The Check Scenarios Option Click on the Check Scenarios option to change the Fact Find view. You can show only those items that are included in the selected Scenario, hide items that are in the Current Position, show any items that are not included in all Scenarios or show all items from all Scenarios Figure The Check Scenarios Option Select the Check Scenarios option to choose what items are viewable. Figure What If Scenario Item Tree If an item is not included in a particular scenario, no tick is displayed. While you are becoming familiar with Truth, it is sensible to restrict the number of scenarios you use to Current Position and What If? to avoid confusion until you feel more confident in operating the software. Key Dates Key Dates can have different dates set in each scenario. The same items can apply across all scenarios but have different date values for Key Dates. Key Dates offer the immediate updating of the Capital Chart and the Inflows/Outflows Chart on the Cash Flow statement. They are created and amended in the Settings Tool: 99

100 One Key Date is created by default in the system, called Desired Future Lifestyle Age which represents a future lifestyle change, such as retirement. To apply this Key Date to a client s Cash Flow, amend all appropriate items, such as the Date Employment Ends in their employment item, the Crystallisation Date in pension items and the Payment History End Date in pension items, for when the pension contributions will stop. If a client has a company car, remember to set the Date Of Disposal to use the Key Date as well as setting the Purchase Date for a private car in retirement. This is particularly useful when looking at retirement planning, for example, where the client may want to look at retiring earlier or wants to know at what age they could afford to retire without running out of money. Once the Key Dates have been set up, the dates when the events happen can be changed to show the impact on the Cash Flow by dragging the Key Date to the preferred age of the client. Changing Key Dates As well as dragging, Key Dates can be changed by double-clicking the description. Note that the position of the Key Dates on the Age axis is relevant to the tax year as the age that is labelled on the notches refers to the age of the client at the end of the tax year. Always remember to look to the age to the right. This example shows the 61 st birthday for a client born in June. If you want to specify a date you can also go to Settings Double-click on the Key Date against the scenario that you wish to change. 100

101 Using the software to solve future cash flow problems If future cash flow shortfalls have been identified, it is necessary to: a) increase cash inflows b) reduce cash outflows c) improve investment return Increasing Cash Inflows has numerous options, such as retiring later, earning more, increasing pension income in retirement, selling an asset for more (such as a business at retirement) or it could include the realisation of capital from some other source (other than liquid assets) such as by downsizing the main residence or selling additional properties. Improving investment return will generally require more risk being taken with the capital. Otherwise, if the investment return cannot be increased and the cash inflows cannot be increased then reducing expenditure is necessary. The obvious question with all of these options, is By how much? and the software will work this out. Use the Calculator options on the left-hand edge of the Cash Flow to determine the answer Tip: If you need to add items to your list of potential solutions, do so before you see the client, such as an additional pension plan where the employer pays the premium, create the item in the What If scenario, adding in one line of Payment History a premium of 1, starting immediately, until Desired Future Lifestyle Age with suitable benefits. You can then target on this item using the Factfind Targeter Tip: It may well be that a combination of several possible solutions will form the best plan. For example, if the program calculates that expenditure should be reduced but the value is unacceptable, this may not be a practical solution. However, it may prove possible to reduce expenditure by a smaller amount, so change the calculated figure and then calculate an additional option, such as, perhaps, what increase to gross income would bridge the gap. Experiment as much as possible with these tools there is no substitute for practice! If any of the products or items entered prove to be the right solution for the client, all that is required to make them fact within the client s plan is to include the item in all scenarios. 101

102 Potential What If Situations The following What-Ifs are assumed to be entered in the What If scenario. Changing the What If, rather than the Current Position, will allow the Overlay Chart option to highlight the impact of the recommendations. Initially the What If Scenario is an exact replica of the Current Position because all the items we have created are included in both the Current Position and What If scenarios. This procedure allows for the Current Position to remain untouched by the recommended course of action and its impact can be seen clearly. It is also worthy of note that a mix of these actions could provide the optimum solution and it would be possible to experiment with these in more than one scenario. For simplicity, however, the steps for option are documented separately. What If Situations - USING KEY DATES Overview If we want to look at the impact of retiring at a different age without changing the Current Position we can model the outcome in the What If scenario. The result of making the decision to retire later, for example, would have an impact on earned income, company benefits, pension income and possibly expenditure at the Desired Future Lifestyle Age. The Desired Lifestyle Age is a Key Date, and can be set to different dates in each scenario. This makes the What If Retire Earlier or Later situation an easy one to model. To do this, all of the items affected by a change in the Key Date must have this Key Date selected in any relevant date fields. More Key Dates can be added by going to Settings. The step by step approach should be:- a) In Settings click on the Key Dates tab. The Desired Future Lifestyle Age should already be entered. Add any new Key Dates by clicking on the Add New Date button. The Desired Future Lifestyle Age is a default Key Date. To add a Key Date, click on the Add New Date button Enter the name of the Key Date in the Description box and click OK. Figure Key Dates In Settings Tip. Later Life Age could be set up as a Key Date. Expenditure values that change at the Later Life Age can then be entered in the expenditure items. 102

103 When you create a Key Date, type a sensible description and specify a default date, then click OK to save. Figure 139 Creating A Key Date And Entering A Default Date b) Identify those items which will be affected by Key Dates. The Fact Find displays a complete list of client items and shows where a Key Date has been applied; therefore, it is a good way of checking and changing any of the client items. From the Fact Find, Key Dates are shown where they have been applied. Figure The Exclude Tool You can also check where Key Dates have been applied by viewing the Assumptions in the Cash Flow. From the Cash Flow statement, go to the Assumptions tab. The Key Dates are shown in the Start Date and End Date columns but you can highlight where the Key Dates have been applied by opening the Key Date Toolbox Click on the relevant Key Date and all occurrences will be highlighted in the Assumptions list. 103

104 Click, drag and drop a Key Date to the appropriate cell to apply the Key Date to the Start Date or End Date of that item. Figure The Key Dates Toolbox On The Cash Flow Assumptions Tab c) Apply the Key Dates to the relevant items. Double click on each item that requires a change, to open the item and allow you to make the amendment or, alternatively, in the Key Date Toolbox drag a Key Date from the list and drop it onto the appropriate cell to apply a Key Date to the Start Date or End Date on that item. The Employment Item Select the Key Date by clicking on the dropdown arrow against the date field. Here, we are selecting Desired Future Lifestyle Age for the Date Employment Ends field. Figure Entering A Key Date In The Employment Item 104

105 The Company Car Item On the Company Car item, select the Desired Future Lifestyle Age Key Date by clicking on the drop-down arrow against the Date of Disposal field. Figure Entering A Key Date In The Company Car Item The Retirement Car Item On the Retirement Car item, select the Desired Future Lifestyle Age Key Date by clicking on the drop-down arrow against the Date Purchased field. Figure Entering A Key Date In The Retirement Car Item 105

106 The Personal Pension Item Open the Personal Pension item, click on the Benefits tab and edit each benefit line in turn. Select the Key Date (in this example the Desired Future Lifestyle Age ) in each crystallisation event. You may wish to use a different date for the Income Start Date, but you can use the same Key Date to start the income when the pension is crystallised. Figure Entering A Key Date In The Pension Item With the Personal Pension item open, click on the Payment History tab then click on each contribution line, then click Amend, editing the entries in turn. The contribution details appear at the bottom of the screen. Select the Key Date (in this example the Desired Future Lifestyle Age ) in the End Date field. Click on Save to accept the changes. Figure Entering A Key Date In The Personal Pension Item (Payment History) 106

107 Expenditure Items Expenditure items that were created through the Data Entry Wizard will already have current expenditure entered up to the Key Date Future Desired Lifestyle Age. In this example, the Later Life Key Date has been created in Settings with a default age of 75. In the Eating Out expenditure item we have chosen that the expense will return to the original level of 300 per month at the Later Life Key Date. Figure Entering A Key Date In Expenditure Items d) When all of the relevant items have the required Key Date(s) entered in the correct date fields, open the Cash Flow statement and on either the Inflows/Outflows chart or the Capital Chart, you can change the Key Date to any date of your choice. This date can be different in each scenario. For example, if you want the Desired Future Lifestyle Age to remain at the client s age 60 in the Current Position but want to see the impact of the client working until age 65 and compare the two scenarios, you could move the Key Date in the What If scenario. To display the Cash Flow for a particular What If scenario / catastrophe, select the required options from the drop-down list boxes and then open the Cash Flow statement. Figure Capital Chart - What If Scenario Selection 107

108 Initially the What If Cash-Flow Capital Chart should appear identical to the Current Position s because the same Key Dates have been applied to both scenarios and the same date is used as a default across all scenarios. To change a Key Date, click and hold down your mouse on the Key Date then drag it to required age. In this example, we have changed the Desired Future Lifestyle Age to age 63. The preferred Key Date age is then updated in the appropriate items and the Capital Chart is instantly updated. Tip: Click here to overlay a different scenario and compare! Figure What If Client Retires Later - Changing A Key Date Please note that it is not necessary to use a different scenario to illustrate the effect of retiring later this can be done within the Current Position. However, if you wish to compare the two situations, by using the Overlay Chart option, for example, then two scenarios are required. 108

109 What If Sale of Business Overview The More Inflows Calculator will calculate the value of the lump sum required from the sale of an asset, (such as the sale of the client s business), to prevent the readily realisable capital from running out. This can be found by clicking on the tab on the left-hand side of the Cash Flow statement. Click on to expand the tab: Figure Cash Flow More Inflows Calculator Choose the amount that the capital value should not drop below Choose the recipient of the inflow Choose a tax free lump sum (as opposed to a regular income) Choose the date Finally, click and a tax free Miscellaneous Income Item will be created, which will apply only to the scenario and catastrophe option chosen. Please note that if the scenario is changed to the What If scenario prior to performing the calculation then the Current Position will show the situation without the additional inflow, whilst the What If scenario will show the solution. You can then use the Overlay Chart option to compare the two. 109

110 To change the Capital Chart to include the additional capital receipt, click on Figure 151 Calculated Lump Sum Click to update the Cash Flow statement: If you prefer to restore the Capital Chart, click on To keep the Additional Capital Lump Sum, click on Figure Capital Chart With The Calculated Additional Capital Lump Sum Shown Click on to keep the new item or click on to restore the Cash Flow to its original settings. 110

111 Tip: You can double click to open the item and change the description, rather than using the default description. Figure Cash Flow Assumptions With The Additional Capital Lump Sum For The Sale Of Business. Please note that, if you click Show and then Keep, you do have a final opportunity to remove the item and restore the Cash Flow to its original position when you close the Cash Flow statement: Figure Prompt To Reset When Closing The Cash Flow 111

112 What If Additional Regular Income Overview The Cash-flow function More Inflows Calculator will calculate the value of the additional Regular Income required so that the client s Cash Flow capital balance does not drop below a specified figure. This option can be found by clicking on the tab on the left-hand side of the Cash Flow statement. The calculation of the required regular income can be made for either the Client or Partner and taken as either an earned income, tax free income or dividend income. The regular income can start and finish when required and can be level or escalating. Figure Cash Flow More Inflows Calculator Choose the amount that the capital value should not drop below Choose the recipient of the inflow Choose the appropriate regular income option (taxable, tax-free or dividend income) Choose the rate of escalation Choose the date range (here we are choosing to calculate the required income to start immediately, continuing until retirement) 112

113 Finally, click and a Miscellaneous Income item will be created, which will apply only to the scenario and catastrophe option chosen. Please note that if the scenario is changed to the What If scenario prior to performing the calculation then the Current Position will show the situation without the additional inflow, whilst the What If scenario will show the solution. You can then use the Overlay Chart option to compare the two. To change the Capital Chart to include the additional regular income, click on Figure 156 Calculated Regular Income Click to update the Cash Flow statement: If you prefer to restore the Capital Chart, click To keep the additional regular income, click on Figure Capital Chart With The Calculated Additional Capital Lump Sum Shown Click to keep the new item or click to restore the Cash Flow to its original settings. 113

114 Tip: You can double click to open the item and change the description, rather than using the default description. Figure Cash Flow Assumptions With The Calculated Additional Regular Income Please note that, if you click Show and then Keep, you do have a final opportunity to remove the item and restore the Cash Flow to its original position when you close the Cash Flow statement: Figure Prompt To Reset When Closing The Cash Flow 114

115 Required Regular Income In Retirement: Select the type of income. In this example we are assuming additional pension income so Earned Income has been chosen. Select an escalation rate if required and enter the date the income is expected to start and stop (or choose Key Dates). Then click on Calculate. To start the income at retirement, we will use the Desired Future Lifestyle Age Key Date and continue it for as long as appropriate (e.g. to the Projection Upto Age). Click to see the required additional Pension income Required Regular Dividend Income Before Retirement: Select the type of income, (in this example we are assuming dividend income), select an escalation rate if required and enter the date the income is expected to start and stop (or choose Key Dates). Then click on Calculate. The Start Date for income that will start immediately, should be today s date. TIP: TODAY is used for hypothetical immediate events Click to see the required additional Dividend income 115

116 Figure Cash-Flow Capital Chart With Additional Regular Dividend Income Tip: You can change the calculated figure and show the impact of your chosen value instead. Choose to retain the additional income item or to restore the Cash Flow to its original settings. Tip: You can double click to open the item and change the description to something more suitable, if the default description of Additional Annual Dividend Income won t suffice. Figure Cash Flow Assumptions Tab Displaying Additional Regular Dividend Income 116

117 What If Continue Working As A Consultant (Self Employed) Overview The software is capable of performing calculations to answer such questions as how much more income is required? or how much more can be spent?. The process of calculating more income can be handled very easily through the More Inflows Calculator, as described previously, but you can also use the Fact Find Targeter option to calculate the solution. Consultancy Using The More Inflows Calculator Using the More Inflows Calculator, specify the Start Date as the normal retirement date (in this example, the Desired Future Lifestyle Age Key Date) and the End Date as the planned end date for when the consultancy work will end. Choose all other required options and click on Consultancy Using The Fact Find Targeter The Fact Find Targeter can calculate what the value of an item needs to be to achieve a target capital value at a chosen point in time. This can be done with existing items, or with new items specifically created for that purpose. In this exercise, we want to calculate how much Peter needs to earn if he were to become a self-employed consultant from when he stops working at his current firm, for a few years. As this is not an existing item, we will create a Self Employment item and populate it with the required default assumptions that will enable us to calculate the solution. In order that we can compare and contrast the Cash Flow with and without this Self Employment, we will only include the new item in the What If scenario. 117

118 Select the What If scenario, rather than Current Position, to create a contrast between the two scenarios. From the Available Fact Find, highlight Self Employments Then click to Add Figure 162 Adding A New Self Employment Item From the Fact Find screen, change the Scenario selection to the What If scenario. Select the Available Fact Find and expand the Employments section. Highlight the Self Employments category and add a new Self Employment item by clicking on Tip: {C} is a referencing field which will display the client s name on statements. Use {P} for the partner s name. Enter the start date and end date for the income in Date Joined Firm and Date Employment Ends. Enter the value of Taxable Earnings as 1. Here we have also assumed that earnings will escalate in line with inflation. Figure 163 Entering Default Details In The New Self Employment Item 118

119 In addition to entering sensible default values on the Details tab, make sure that appropriate values are entered on the What-if tab. If you click Apply or Save before you ve completed the What-if settings, default values will be entered for you and you will be prompted to check these settings. Tip: If you create an item in What If rather than Current Position, the item will not be included in Current Position by default. This will facilitate the comparison of scenarios. Figure 164 Default What If Settings On The New Self Employment Item Check the default settings carefully and change where appropriate. Save the item, open the Cash Flow statement and click on the Fact Find Targeter icon. Select the Consultancy item and follow the instructions: 119

120 The Recommended Consultancy item can be seen in the Assumptions list. Click on the item to use it for your targeting calculation. Figure Selecting A Target Item From The Assumptions List Having selected the Consultancy, you must tell the software what you want to achieve and when you want to achieve it. A likely choice would be to have zero capital at the worst point called The Most Negative Year. Click on the date function to open the Date Wheel: 120

121 Figure 166 Fact Find Targeting Ready To Calculate The Required Income Click and Truth will work out what income is required to achieve the target capital at the target date and to see the results. The Capital Chart shows the effect of the additional Consultancy income compared to the original situation Figure 167 Fact Find Targeting The Revised Capital Chart Is Overlaid On Top Of The Original The calculated value can then be kept or removed by clicking on either or 121

122 What If Additional Contributions Paid into Pension Overview The software is capable of performing calculations to answer such questions as how much more income is required? or by how much should the expenditure be reduced? If we want to make specific calculations based upon, for example, if the client is prepared to pay more into a pension fund, then the target criteria must be entered in an item in What If. If we enter the item with a payment history value of at least 1 then we are able to ask the software to calculate the value of this contribution. Select the relevant pension item required from the Available Fact Find list on the left. Then click on either Add option Figure Create A Pension Item For Targeting Contributions From the Fact Find, select the What If scenario and then find the required pension item type from the Available Fact Find list. Create the required pension item by clicking on either of the appropriate information. options and populate the item with It can be quicker to copy an existing item and amend it, but make sure to add sensible defaults throughout the new item, including a suitable description. 122

123 The description can include the reference fields {C} and {P} which will display the Client and Partner names on statements this is a useful way of avoiding spelling mistakes! If the proposed pension will be funded by the employer rather than by the pensioner, it is worth un-ticking the option that shows the contributions net of basic rate tax relief. Figure Create A Pension Item For Targeting Contributions The proposed pension item will need sensible default values. This includes a notional value of 1 for the proposed contribution so on Payment History, add a new contribution line: Click to Add a new contribution; complete the details with a notional ( 1) value. Note that the Start Date is best suited as the TODAY function because this is a hypothetical event that should start immediately. Figure 170 Add A Proposed Pension Contribution With A Notional Value By using the TODAY function for the proposed contribution s start date, the contribution will always start immediately. The TODAY function is intended only for hypothetical events, like this. 123

124 Do make sure that the growth rate is suitable. Tip: The growth rate is the gross growth rate and representative charges will be deducted from this when calculating projected fund values. Charges can be checked and changed in Settings. When targeting an additional recommended pension, the current fund value would be zero. If you copied an existing pension item, you will need to delete these details in the proposed new pension item. Figure 171 Choose A Growth Rate For The Recommended Pension For the proposed pension to pay an income, we need to specify the benefits that will be taken. Without the Benefit information, no income will be taken from the pension and the Cash Flow will not change. Enter how and when the benefits are going to be taken, by clicking onto (new). In this example, we are adding a Drawdown event with a 25% commencement lump sum at the Desired Future Lifestyle Age (currently 60). Because the fund value is unknown at this point, it is easier to specify that the drawdown will be the maximum drawdown allowed, based on the GAD values. Figure Enter How & When Pension Benefits Will Be Taken 124

125 If you create an item in the What If scenario, the software will automatically exclude it from the Current Position. Tip. Remember that the catastrophe settings for policies and investments are handled elsewhere and not on the What If tab. For our recommended pension, the catastrophe settings are handled on the Death Benefits and Disability tabs Figure The What-If Tab The Recommended Additional Pension item can be seen in the Cash Flow s Fact Find Targeter : As we wish to target on the pension contribution (i.e. an outflow), we have changed the view to show just the outflows to make it easier to find the proposed pension. If you click on the item it will be selected as the item that you wish to target Figure 174 Select The Item That You Wish To Target On Next, choose when the required capital balance is to be achieved. Click on 125

126 Click on the calendar option You can now choose when the capital balance is to be achieved. In this example, we will choose the Most Negative Year Next, choose the required capital balance at the selected date, in today s terms. To calculate the minimum pension contribution required, we will target for 0. Click on and the software will determine how much needs to be invested into the recommended pension. The value is stated in monthly terms if you selected a monthly frequency in Payment History. Figure Keep The Revised Value Or Remove It You can either or the calculated value. If you decide to remove it, the cash flow will return to its original position. 126

127 When you accept the new value, it appears in the Assumptions list as an annual value. Figure Assumptions Showing The Accepted Value If you then wish to compare the effect of making the additional pension contributions, use the Overlay Chart option from the Capital Chart: Figure 177 Comparing The Effect Of The Recommendations 127

128 What If - Downsizing A Property Overview If we want to look at the impact of a client downsizing a property without changing the Current Position we can use the Key Dates function The principal difference for the downsizing in a What If scenario is that in the Current Position the current property item will not be sold, so a Key Date set outside of the Projection Upto Age (e.g. age 101) would mean that the downsize would not take place, whereas in a What If scenario where the downsizing will take place, we will set the Key Date to be a different age. Because Key Dates can have different dates in different scenarios, the same items can apply to all scenarios, eliminating the need to exclude items. Because an alternative property is needed which will be bought in the future, a new property item is required. This can either be created or the current property item can be copied and amended. This can be achieved by using the Copy tool from the Fact Find. When copying a property item, give the duplicate a suitable description, such as Downsized Property, Future Home or Downsized Home. Making a copy of the original property will speed up the data entry for the future home as the details can then be edited by using the Downsize Calculator tool. The step by step approach should be:- Key Date - Create a Key Date within Settings Click to add a new Key Date Figure 178 From The Settings Screen Create A New Key Date Call the Key Date something appropriate and set a sensible default date for all scenarios. Remember to use the C key to use the date calculator. A good default is to set the Downsize to be age 101. This will appear off the Capital Chart, but can be dragged on to show the downsize event taking place. 128

129 In the Date field, use the Calendar function ( C ) to bring up the Date Calculator Land/Buildings Item - Because the current property will be sold, a new property will need to be bought. This can be added by creating a brand new item on the Fact Find, or you can create a copy of the existing property and then modify the copy. From the Fact Find highlight the property and choose Copy Select the Property item by single clicking, then click on Copy to create a duplicate item. Figure Creating A Copy Of The Property To Downsize By Using The Copy Option 129

130 Using the Copy button from the Fact Find toolbar will create a duplicate item with Copy added to the description. Figure Copy Of The Property Created Using The Copy Option From The Item Control Toolbar The original item must now be modified to set the Date of Sale. Select the Downsize Key Date for the current property s Date of Sale Figure Updating The Original Property Downsize Key Date It is very important that you apply the Key Dates to both the Date of Sale in the current property and the Purchase Date in the new property. Otherwise, if you forget to sell or buy either item, the Cash Flow will be wrong! Apart from adding a Key Date and applying it, other assumptions changes may be required, such as changing the description and the values in the new property. 130

131 Enter the Purchase Date. Use the Downsize Key Date Tip. Change the description to one more meaningful, as this will show on all statements Remember to enter the Purchase Price Figure Updating The Copied Property Remember, when creating a Key Date, set a sensible default value for each scenario. In this example, we have set the Key Date to be age 101 in the Current Position, so that the downsize won t take place, but in the What If scenario we will set it to an actual date so that the downsize will take place. When adding a Key Date to both the original property and the new property, make sure to use the Key Date in the appropriate fields. In the original property, we set the Date of Sale to use the Downsize Key Date. Note that if we edit the property items from within the Current Position, this shows as age 101. In the new property, in addition to using the Key Date for the Purchase Date, set the Purchase Price to be the same as the Current Value. The Downsize Calculator will reduce the Purchase Price, Current Value and all expenses by a chosen percentage, so setting the Purchase Price to be the same as the Current Value will ensure the new property will cost the client what it should. We can, of course, set the Purchase Price to be more than the current value, to allow for stamp duty and other moving costs. If the expenses are not going to reduce then manually enter the required Purchase Price and Current Value in today s terms. Otherwise, use the Downsize Calculator to scale down all values: Using The Downsize Calculator To help you plan for a client downsizing a property at some time in the future a downsize button has been added to the property item. The downsize Calculator is only to be used in the new property item, not the current property, because it is the new property that is scaled down. In the new property item, change the description to something appropriate. In the future property item, change the Purchase Date to an appropriate date (or Key Date). In the current property, use the same date (or Key Date) for the Date Of Sale. 131

132 In the future property, ensure that the Date of Sale is empty as this new Future Home item will (probably) be the client s home for the remainder of their Cash Flow projection. The best way to delete a Key Date from the Assumed Date of Sale field is to delete the description field and to then avoid the Age field. In the future property, enter the Purchase Price to be the same as the Current Value, or greater than the current value if moving costs are to be included. Now enter the percentage that the client will downsize by in the Downsize Calculator box Make sure the Purchase Price has been entered. Ensure the Date of Sale is empty. Enter the percentage reduction which should apply to the Current Value, Purchase Price and all expenses in this box, then click the Downsize button. The software will calculate the new values and adjust the expenses for you. Figure Enter The Percentage To Be Downsized When you have clicked on the downsize button you will see the following message:- To confirm the downsize percentage, click Yes. 132

133 Observe that the Purchase Price and Current Value fields have been adjusted reduced by the chosen percentage. Figure The Purchase Price And Current Value Fields Are Adjusted By The Downsize Finally, the expenses should be checked to make sure that they are reasonable. Clearly, some expenses should not be scaled down pro-rata or even changed at all. For example, the TV Licence and Satellite and Cable subscriptions are unlikely to change and should be reinstated to the original value. All of the property expenses are reduced by the downsize percentage so they must be checked. Here the original TV Licence and Satellite expenses have been returned to their original values. Figure Check The Future Home Expenses 133

134 The setup for downsizing the main residence is complete and the impact of which can be seen by looking at the cash-flow statement and dragging the Downsize Key Date: The Cash-Flow Statement Inflows/Outflows chart shows the purchase of the smaller home and the sale of the current home at the chosen date. Drag the Downsize Key Date to an appropriate point. Figure Cash Flow Inflows/Outflows Chart Post Downsize The blue lines on the above Inflows/Outflows Chart represent the inflows and the red lines represent the outflows. To find out the values on this chart, right-click any line. To view a breakdown of the inflows and outflows, double left-click either line in a year to see the inflows and outflows for that year, in today s terms: The sale of the current home is shown as a future inflow and in the same year the purchase of the future home is shown as an outflow. The values are shown in today s terms. Figure Double Left-Click The Downsize Year To View The Breakdown Of Inflows And Outflows 134

135 Figure 188 Key Dates In Settings Show Different Dates For Each Scenario Remember that the Key Dates have different values per scenario so if the Downsize Key Date in the Current Position is left at age 101 then we can compare the effect of downsizing vs not downsizing by overlaying the Capital Charts: Figure 189 Overlaid Capital Charts Showing The Effect Of Downsizing 135

136 What If Equity Release Overview If the client wishes to consider equity release as a potential solution to a shortfall we can show the results by creating a Mortgage/Loan item specifically for the purpose. The loan will be made at the appropriate time and will remain outstanding until the deemed age of death. If you want the software to calculate the amount of Equity Release required, enter 1 for the loan on the Payment History and remember to enter sensible suitable assumptions throughout, such as what the interest rate would be. In What If scenario, create a Mortgage/Loan item with a suitable description (e.g. Proposed Equity Release ). Select Interest Only as the loan type, enter the redemption date as the date for the client s deemed age of death (for Peter, this is at age 100) and the Interest Rate applicable to the Equity Release. Figure Create A Mortgage/Loan Item For Equity Release For the software to be able to calculate how much equity release is needed, we need to add a loan item of 1 to the Payment History with a start date for when the equity release will take place. As no payments will be made, only the loan (and no servicing payments) will be needed. 136

137 The amount of equity released must be entered in Payment History. In this example, we have assumed that Peter has released the equity value at his age 70. Figure Enter The Loan Value In Payment History Remember to check all of the important aspects of the data: the dates, values, persons and What If settings. If you forget to enter the What If settings, the software will set default values when you click OK to save the item. If you create an item in a What If scenario, the software will automatically exclude it from the Current Position. The software will expect you to check the What-If settings. The default assumption is that if Peter dies or Jane dies the mortgage/loan will be redeemed. Figure The What-If Tab Creating an item in a What If scenario will automatically exclude it from the Current Position, so ensure you are on the right scenario before adding an item. Open the What If scenario, No Catastrophe Cash Flow and choose the Fact Find Targeter 137

138 Select the Proposed Equity Release loan from the list of Inflows and specify the client s age 99 as the year to target the required capital sum. This is because the equity release needs to be repaid at age 100 so you cannot target for age 100 to achieve a zero balance, as you would normally expect to when targeting. Figure 193 Fact Find Targeter Select The Proposed Equity Release Use the Date function to choose the year before the projection end: Choose Peter s Age : choose Then choose age 99: 138

139 When calculating the required equity release, use an age one year before the projection age, (for Peter, this will be age 99), to target the required balance for the year before the loan amount will be redeemed. The calculated value is in Actual Terms. Figure Assumptions And Target Tab With Equity Release The Cashflow Statement tab will show the value of readily realisable assets at age 99 (prior to repayment of the equity release value plus interest at age 100). Figure Cash Flow Statement Readily Realisable Capital At Client s Age 99 And 100 The Cashflow Statement tab will show the value of readily realisable assets at age 99 being 1, as per our target calculation, prior to the repayment of the equity release value (plus interest) at age 100. Don t forget that if you want to overlay the Current Position chart to compare the two scenarios, use the Overlay option: 139

140 Select the Current Position scenario from the Overlay option to overlay one Capital Chart on top of the other. Figure The Revised Capital Chart With The Current Position Chart Overlaid On Top 140

141 What If Reduce Expenditure Overview On occasion, there will be a need to reduce expenditure to avoid the client running out of money. The Spend Less Calculator can determine how much the client needs to reduce their expenditure by. This tool asks for the date range for when the saving will be made and where this will be invested by ways of an investment return assumption: To find the required amount of reduced spending and additional saving needed to avoid the Cash Flow running out, use the Spend Less Calculator Figure 197 Cash Flow Spend Less Calculator Choose the appropriate options and click The revised Cash Flow Statement can now be displayed. The Expenditure items are also listed to facilitate the conversation as to where the required savings could be made. 141

142 Figure 198 Cash Flow Capital Chart With Calculated Reduction In Expenditure 142

143 What If Increase Return on Investment Overview There are a number of ways that we can illustrate the effect of increased growth/calculate the required growth. The most obvious choice is to use the Growth Calculator function, which can determine the required growth rate on selected item types as well as the Surplus Account. You can also use the Rate Stepper function. If we want to look at the impact of achieving a higher return on a client s investments without changing the Current Position we need to work in a What If scenario. To create a comparison scenario, we need to make copies of the investment items in question. The original investments in the Current Position will remain unchanged with the current investment return assumptions. The copied investment items, however, will be given an appropriate description in the What If scenario and new investment return assumptions can then be entered. In addition, we can also change the Assumed Net Future Total Return value in Settings to change the assumed rate of return achieved on the client s surplus income. Further in this section we will discuss the Growth Calculator function, which is accessed from the Cash Flow statement. The step by step approach to creating an alternative scenario illustration should be:- If the Current Position scenario is to remain intact, a copy of the Investments must be taken. The original investments will be excluded from the What If scenario and the copy investments excluded from the Current Position. This will allow for the revised investment return on the investments to be recorded in the copy item in the What If scenario ONLY. You can make a copy of the items by using the Copy tool Select the Investment item by single clicking, then click on Copy on the right-hand toolbar to make a duplicate. If the item to be copied has Payment History details, a further window appears, asking if the Payment History is to be copied. Figure Copying Items From The Fact Find After copying the item in the Fact Find, the original item should be excluded from the Current Position, whereas the duplicate should be excluded from the What If scenario. This can be set by turning on the Scenario View option 143

144 Untick the Scenario boxes appropriately so that the original item is included in the Current Position and the copied item is included in the What If scenario. Figure Original Item Excluded From What If Scenario And Copy Item Excluded From Current Position If there are more scenarios other than Current Position and What If? then select the exclusions appropriately so that there is one version of an item per scenario. The What If scenario will show the copied item and not the original, because of the exclusions. It is very important that the exclusions are set correctly. Having created an alternative version of the required item and having set the appropriate scenario exclusions, double-click the copy item to edit it and to set the new growth rate required. Tip: Change the item description of the copy investment then change the relevant information (In this example the growth rate assumptions). Click on Save to accept your changes. Figure Change The Unit Trust Details As Required To change the Net Return on the Client s Surplus Account and/or the Overdraft Rate, choose 144

145 The Net Return can be changed to show the client a different growth rate on the Surplus Account and the Overdraft Rate can be changed to allow for the new return assumed in proposed items, such as the copied Unit Trust example. Remember to click OK to save the changes. Figure Changing Settings In The What If Scenario Once the required Settings changes have been made then the new What If scenario Cash-flow Statement can be displayed:- Figure What If Cash-Flow Statement With Increased Return On Investments 145

146 Growth Calculator To calculate exactly how much selected item types need to grow by or how much investment growth needs to be achieved with the surplus income that will be invested into the Surplus Account, we need to use the Growth Calculator option on the Cash Flow statement. When you click on the Growth Calculator icon an extra area will appear with tick-box options to control which item types you wish to use in the calculation as well as options about what you want to calculate. Click on the Growth Calculator option. Select the required option for the growth calculation. Multi-select the item types you want the software to include in the calculation of the required growth rate. This can also include the Surplus Account. In this example, we will calculate the Additional Growth Rate required from the Unit Trusts, the Personal Pensions and the Surplus Account. Tip: Only item types that the client has are shown in black. Figure Expanded Growth Calculator Tab At the top, choose the required calculation figure (New Growth Rate, Additional Growth Rate or Growth Rate Factor) Click into the box to expand the list of options that are available for the growth calculation. On the left, select the items you wish to include in the calculation of the required growth by ticking the appropriate boxes then click To keep the new growth rate(s), click Show to apply the calculated rate to the selected item types. Figure Growth Calculator Results 146

147 Tip: You can restore the Cash Flow to its original growth values by clicking on the Remove button Figure Cash Flow Growth Calculator Showing The Results To restore the Cash Flow to its original settings, choose. Otherwise, choose to update the items and/or Surplus Account rates. There is still an opportunity to restore the growth values to their original settngs, when you close the Cash Flow statement: 147

148 Estate Planning The Estate statement shows the inheritance tax due on an individual s estate, according to their will details, taking into account any lifetime transfers made. From the Planning toolbar, click on the Estate statement Entering Will details Each individual may only have one Will in any one scenario and it is advisable to enter the will information towards the end of the data entry process, so that all of the required data regarding beneficiaries and assets is in place before attempting to distribute those assets via the Will. If no Will exists, then a warning message appears when opening the Estate statement: You will also be warned about the Inheritance Tax Calculations: It is important to add a Will item even if none exists, as the laws of intestacy can be interpreted through the Will item. A new Will can be created either from the Fact Find screen: 148

149 or within the Estate statement by clicking on the Will icon on the left of the Estate statement To create or edit a Will item, click on the options on the left. Figure Create/Amend A Will Item From The Estate Statement The first tab, Details, allows information about the Will to be entered. If the client or partner was widowed previously and the Nil Rate Band was not used on their spouse s death, you can specify the additional amount of Inheritance Tax Allowance that has been transferred over. You can also specify any Main Residence Nil Rate Band that has likewise been transferred from their former spouse. For couples, the Copy Will option mirrors the other person s will. Figure Will Details Tab The Power Of Attorney selection can be customised and can prove useful in the Financial Plan variable text selection to populate the text automatically, according to whether or not the client or partner has set up Power Of Attorney and, if so, what type. If the client or partner was previously widowed and the nil rate band from their former spouse was not utilised, the unused portion can be carried over to the surviving spouse. The amount of transferable inheritance tax allowance should be entered in the Additional Nil Rate Band field. Likewise, the Main Residence Nil Rate Band can be carried over. 149

150 Distributing The Estate In both the First Death and the Second Death the Will entry process is divided into two parts, Specific Bequests and Residuary Estate. To add a Specific Bequest (i.e. a cash amount or a particular asset), click Add next to the Specific Bequest table. To enter details for the Residuary Estate (remainder) click Add next to the Residuary Estate table. Figure 209: Entering Details On First Death It is important not to enter a value if trying to bequest an asset as a specific bequest the software knows the value of the assets. Just select the asset from the drop-down box. If the Will leaves a cash amount to someone, then use the Enter Value field. Bequests can be stipulated as being paid net of inheritance tax. In these situations, tick the Net of IHT option. Tip: The software already knows about the nil rate band! Don t try to enter the Nil Rate Band as an exempt bequest. When making bequests to spouses, the Exempt Transfer option should be automatically ticked if you have specified the Marital Status as Married. You must tell the software when a transfer is exempt from IHT e.g. a transfer between married or civil partners. Tick the Exempt Transfer box where this is the case (i.e. bequests should be marked as exempt if they are gifts to spouse, political party or if Business/Agricultural Relief would apply at 100% rate. For bequests to charities tick the To Charity tick-box. If 10% or more of the total estate is gifted to charity, the IHT rate is reduced from 40% to 36%. If the beneficiary for the bequest is not available then create a Special Relationship item. 150

151 Special Relationships Items Use this item type to enter individuals other than children that are part of the client s plan; for example, beneficiaries under the terms of the client s will. Click Add to add a Special Relationship item. Tip: The Known As field is what is shown on the planning statements, so make sure that the description is suitable. Figure Creating A Special Relationship Item When entering bequests to charities, make sure that the To Charity tickbox is ticked. Figure Entering Bequests To Charities Remember: Complete both First Death and Second Death tabs. The software will remind you if the Will entry is incomplete or the residuary bequests do not add up to 100%. 151

152 When entering Will items for single clients, there is only one tab for bequests. Figure 212 Will Item For Single Clients If the client is single then second death will not apply - the tab will not appear if there is no Partner item. Lifetime Transfers Lifetime Transfers affect the Estate Statement and details should be entered in the Lifetime Transfer items. Add as many items as necessary as the system will assume that the annual exemption is available to roll forward, as appropriate, unless it is told otherwise! The Lifetime Transfers Item Enter all gifts taking care to complete all fields as appropriate, such as whether the transfer is a Potentially Exempt Transfer (PET). The software will then be able to make the correct tax calculations based on the rolling seven year basis. Any Lifetime Transfers the Client or Partner have made should be entered in the Lifetime Transfer Item. Future transfers cannot be entered. Complete the IHT Relief other than Annual Exemption for other exempt gifts such as a 5000 wedding gift to a child. Tip: The system will apply annual exemptions automatically. Figure The Lifetime Transfer Data Entry Screen The Lifetime Transfers will be summarised in the Estate statement, in the Gifts tab. 152

153 Figure Summary Of Lifetime Transfers In The Gifts Tab Each tab of the Estate statement will display different analyses of the data, and under different orders of death. To see the reducing liability from the lifetime transfers, for example, visit the Taper Relief tab. Figure The Taper Relief Tab Showing The Reducing Value Of Lifetime Transfers Over Time The tab entitled Distribution will display the how bequests specified within the Will be distributed: 153

154 Figure Distribution Of Estate With Distribution Chart Remember that jointly held items will automatically pass to the joint owner on first death, so if a property is owned as tenants in common then ensure that it is entered as such, in order that the relevant person s estate contains the correct assets. Enter the percentage owned by the client and the partner. For the Main Residence Nil Rate Band to apply, make sure that Main Residence is ticked. Figure Land & Buildings Item Joint Tenants In Common When selecting Joint Tenants In Common in a property item, make sure that the ownership percentage is completed. 154

155 The Fact Find Questionnaire From the Report toolbar the Fact Finding section offers two fact find options Word documents, which can be blank or pre-populated, or Excel documents that can be imported. The Excel Factfind is importable and will create a new client. The Word function can be used with existing clients and can produce pre-populated or blank fact finds but they are not importable. Using Microsoft Word for Fact Finds Figure 218 Word Factfind Menu The Microsoft Word Fact Find can be either pre-populated, which will print the existing details into the fact find cells, (useful for sending to clients for them to check the data) or the fact find can be blank so the clients can write their responses in 155

156 Printing a Word fact find Select the Fact Find template and choose Populated or Blank option appropriately. Then select the sections to be included in the Fact Find: Figure Selecting Sections Of The Questionnaire Select the required components for the fact find by ticking (or un-ticking) the sections. Note that there are Tick All and Untick All options available. Once the required sections have been chosen, click on OK. Alternatively, there is also a fact find document available which matches the Data Entry Wizard, available as a Microsoft Word document. Please contact the Support team if you would like a copy of this or if you require any other fact finding assistance. Using Microsoft Excel for Fact Finds The Excel Fact Find function allows you to create spreadsheet fact finds that the clients can fill in and the data can be imported the import process will create a new client. Click on to open the Excel fact-find tool 156

157 Figure Excel Fact Find Home Screen Click on Create to create a fact find. Figure Excel Fact Find Create Screen 157

158 Autodesigner Wizard The first option under 'Create' is the "Autodesigner Wizard". The Autodesigner Wizard will help you to quickly create a branded and customised factfind spreadsheet. The Wizard will walk you through the process in a straightforward way. To get started, click "Next". To exit the wizard at any time, click the "Exit Wizard" button in the top-right corner. Figure Fact Find Designer Wizard Fact Find Branding The first stage in producing your customised Excel factfind is to set your corporate branding options. You can select the font to be used, and the colour of both the body text and headings. If you don't specify a font, Calibri will be used by default. The default colour for body text is black, and headings white. Two colours can be selected for branding. You can choose whether or not to have borders around fields where your clients need to enter data, and what colour this border will be. For example, you could highlight these fields in red to make it obvious where data is required. If you would like to include a logo at the top of the page, tick the option to insert a logo and click on to browse to the location of your logo. 158

159 The "Preview" window in the bottom-right corner will update to show how your branding will look on the completed document. When you are happy with your branding, click. Items The next step is to select which items you want to include, and how many. The "Client" item must be selected. Clicking on the '+' or '-' buttons at the top of the grid will add, or remove, one of each item type. When you are happy with your item selection, click. If you included a "Property" item in your selection, you will see additional options allowing you to specify up to four property-related expenses, in addition to those already included. Order Of Items Choose the order in which your selected items will appear on the completed factfind spreadsheet. You can manually drag items up and down the list, you can use the 'Move Controls' to move items up, down, to the top, or to the bottom or you can specify the absolute position of items. You also have the option to "Separate item types by worksheet". This will result in a single Excel spreadsheet, with different tabs for different categories of items. Once you have ticked this option, you can move items between categories if you wish. When you're happy with your ordering, click "Next". Column Layout Choose whether your factfind will be presented as a single column of fields for the client to produce, or two columns alongside each other: The "Preview" window displays how each option will appear in your completed factfind. When you have made your selection, click "Next" Advanced Options Based on your previous selections, the Autodesigner will set font sizes and other advanced layout options for you. You can amend those here, or simply keep the default options already displayed. Click "Next" when you are ready to continue. Final Steps The final screen in the wizard allows you either to save your factfind into your library of templates for future use, or to immediately produce a spreadsheet to send to a client. If you want to save your design as a template for future use then enter a name for your template and click Manager.. Your template will be available from the My Templates option on the Factfind If you don't need to come back to this design in future, and simply want to send a copy to your client now, choose the "Save, ready to send to client now" option, then click "Finish". This will create a new Microsoft Excel spreadsheet, and save this on your computer, ready to be sent to a client. 159

160 Factfind Designer If you would like more complete control over the appearance of your factfind, you can create a new factfind template from scratch using the Factfind Designer. The new template can be based upon an existing template. If you would like to base your new template on an existing design, select the existing factfind from the list here. Otherwise, choose "(none)" to create a new document from scratch. Enter a name for your new template, then click 'OK'. The Prestwood Toolbar Once you're in Excel, you will see a 'PRESTWOOD' tab on the toolbar at the top of the screen. The Prestwood toolbar allows you to show or hide the "Sidebar" (which shows the available fields to insert into your factfind). If you choose to automatically add a description, adding a field to a cell will add the description to the cell immediately to the left of it. For example, adding a field to cell B1 will add the description in A1. You can also see here the automatic border which has been drawn around the field inserted in cell B1. Editing Factfind Templates The Prestwood Sidebar allows you to insert, remove, or edit the fields in your factfind template. Select an item type from the list at the top, and a list of the available fields for that item type will appear. The names of fields that have already been inserted into your document will appear in grey. You can see here that the 'Forenames' field still needs to be added. Adding Fields To add a field, drag the field name from the Sidebar to the cell where you would like it to appear. Note: if you have the "automatically add description" and "automatically draw border" options selected in the toolbar, the field description will automatically be added in the cell immediately to the left. Deleting Fields To remove a field already added to your template, either: 160

161 On the spreadsheet select the cell containing the field and click "Delete Field" on the Prestwood Toolbar, or Right-click on the field name in the Prestwood Sidebar, and choose "Delete this field from the factfind". Other Sidebar options In addition to the features already discussed, the Prestwood Sidebar offers a host of other useful features. Finding a field If you've already inserted a field into your spreadsheet, but can't find it (perhaps you didn't choose to automatically add description labels to fields), right-clicking on a field name on the Prestwood Sidebar gives an option "Take me to this field", which will select the cell in your spreadsheet which contains the field. The cell will flash black and white. Working with multiple items of the same type If you already have an item in your template, but want to add another of the same type, the Sidebar allows you to do this. For example, if you've already added all of the required fields for a Bank Account item, and want to allow your clients to add a second Bank Account, click on the "Add New" button. To the right of this, you will see a drop-down list with a number displayed on it. Select number '2' in this list to add fields for the second Bank Account item. Uploading Fact Finds Fact Finds that have been sent to a client, completed and returned can be uploaded into the system using the Upload function. Figure Fact Find Upload Option 161

162 Producing Reports When producing reports, you have the choice to use Word as your default word processor or to use the internal word processor. To select Word as your default word processor, go to the File menu and select Software Settings: Figure 224 Software Settings Ticking Use Microsoft Word will select Microsoft Word for the word processing, rather than the built-in word processor. Figure 225 Options Window 162

163 Ticking Use Microsoft Word will select Microsoft Word for the word processing. Leave this option unticked if you do not have Microsoft Word installed, or are low on system resources, and the built-in word processor will be used instead. The Statements from the Planning toolbar all have a report tab where you can select the components that you wish to include in your report. Let s take the Net Worth Statement as an example:- Select the Statement components that you want to print by clicking in the tick-boxes. You can specify the print order by entering specific numbers, although the sequence defaults to the order of selection. Click on the Print button when your selections have been made. Figure Net Worth Statement - Report Tab Select the components to be printed and click The following Print Options window will appear:- Tip: Click here to configure the printing options. Archiving to Contact History saves a copy of the report straight to the client folder as a read-only document which can be retrieved at any time through Contact History. Choose where to send the chosen statement. If you have Word TM as your chosen word processor, choosing Microsoft Word will open a Word document on screen, where you can review, check and amend the document before printing or saving it, as required. Figure The Print Option Window 163

164 When you have selected the required options, click on. If you have chosen to print to Microsoft Word, the document will be opened on screen and you may edit as you would any other document. Remember, however, these changes are not fed back into the software and any permanent changes should be made in the client file. Click on the Settings button to display the Settings menu. Choose Edit Merge Field Data to amend the merge fields and to create custom fields or click on Open Theme Designer to customise the appearance of Statements Theme Designer You can alter the appearance of statements through Print Settings and Open Theme Designer Theme Designer can also be accessed via the Printing options in Software Settings: Figure 228 Printing Options In Software Settings 164

165 Themes can be created which control various aspects of how the reports should appear. A preview is shown on the right. Figure 229 Theme Designer Each Theme can be deleted edited or duplicated To create a theme, click Figure 230 Creating A New Theme 165

166 The precise colour of fonts and headings can be specified. If you know the RGB value of a particular colour, enter the values directly and choose Add to Custom Colours. Figure 231 Creating A New Theme With Fonts, Font Colours And Other Options Chosen The settings in the Theme also control the Chart settings Figure 232 Creating A New Theme With Fonts, Font Colours And Other Options Chosen When using Microsoft Word, these settings will affect the financial planning statements printed from Truth but will not affect text. To modify the text efficiently, choose the option Edit Prestwood.dot to change the Styles. Creating Merge Fields The software contains merge fields which can be added to your Header and Footer. These can be configured from Print Settings via the Edit Merge Field Data option: 166

167 Fields that appear in white boxes are flexible fields these allow you to create and add Merge Fields of your own choice, into your Headers & Footers. Figure Print Option Window - Creating Merge Fields Changing your Header and Footer To make changes to your Header and Footer go to the Report menu and choose Prepare Written Plan and then select Edit Header/Footer from the Current Plan menu Your Header and Footer should be displayed in the selected word processing document. You are now able to edit these according to your needs and add merge fields if you require. Adding merge fields to your Header and Footer Click into the header or footer where you wish to add a merge field. 167

168 When the destination for the merge field has been selected by clicking in the header or footer, locate the Select Field/Std Para button: The Select Field button can be found on the toolbar at the top of the document (not in the Header Footer toolbar) Clicking on the Select Field button will open the following window:- Choose the merge field you want to add and click on Insert. Figure Insert Merge Field Window You can now select the merge field you want to add. In this example, we are adding the field Address, so we select this field from the drop-down list and click on the Insert button. When you have completed all the necessary changes in your header and footer, simply save the document and close. The header and footer will now be used when printing reports from Truth. Changing Fonts and Margins Certain parts of the software use their own font settings. To control these, open the Printing options in Software Settings: 168

169 Figure 235 Specific Font Settings That Can Be Changed Via Software Settings Choose the appropriate option to change the required font settings and the following window will then open:- Figure Fonts/Margins Window When you have chosen to use Word as your default word processor, changes to fonts and margins need to be made in the Prestwood.dot template. From the Report toolbar, choose Prepare Written Plan and then select Edit Prestwood Template. 169

170 Changing Styles Clicking Edit Prestwood Template will open the template where you are able to change font and margin defaults and define your styles. When the software is installed, a number of Prestwood styles are automatically set up for you and these styles should be used in your documents. In the list of styles, you will see a number of styles whose name begins with Prestwood. Throughout the standard Prestwood templates, the pages of text use these styles. This means that if you want to change the appearance of your financial plans, you only have to change these styles and the text changes will automatically apply throughout. Do keep in mind, though, that when you create new text pages that it would be sensible to apply these styles to your text, in case you decide at a later date to alter the appearance of your text, globally. Standard Prestwood styles should be modified to alter the appearance of text when using the default Prestwood templates. A preview is shown on the righthand side, but right-click to select the Modify option to alter any aspects of the styles. Figure The Styles List In Word The way that you change Prestwood Styles will vary according to the version of Word you have installed for example you may need to go to Format / Styles and Formatting in Word 2003 or in later versions select Styles from the Home tab. The way that you modify will also vary according to the version of Word you have installed; Word 2002 SP3, for example, displays all of the styles on the right- 170

171 hand side of the screen and right clicking on the style you wish to change will give you the option to modify. You can change the font, font size, colour, pagination, line spacing and more, but even more advanced formatting can be specified by clicking on Format. Figure The Modify Style Window In Word When you have made your selections, click on OK to save. The new formatting should be displayed when the style is selected. 171