Financial Planning Process
From Planipedia
The Financial Planning Process is the process of delivering financial planning services to individuals through six primary steps as identified by the Certified Financial Planner Board of Standards.[1]
1. Establishing and defining the client-planner relationship.
2. Gathering client data, including goals.
3. Analyzing and evaluating financial status.
4. Developing and presenting financial planning recommendations and/or alternatives.
5. Implementing the financial planning recommendations.
6. Monitoring the financial planning recommendations.
Establishing and defining the client-planner relationship
A financial planner should clearly explain or document the services to be provided (i.e. the scope of the engagement) to the client and identify the responsibilities of both the planner and the client. A planner should explain fully how s/he will be compensated for services provided and by whom. A planner and the client should agree on the duration of the financial planning engagement and identify any other issues that may affect or limit the services to be provided.
Gathering client data, including goals
A financial planner should gather both quantitative and qualitative information relative to a client's financial situation. Quantitative data includes assets and liabilities, cash flow, copies of personal documents (e.g. tax returns, insurance declarations, legal documents), and allied professional information (e.g. attorneys, insurance agents, CPAs).
Qualitative data includes a client's personal goals, interests, values, attitudes, risk tolerance level, and overall health condition.
Analyzing and evaluating financial status
A financial planner should analyze information gathered to assess a client's current financial situation and determine potential outcomes and problems relative to client goals. The extent of the potential outcomes will be limited by the scope of the engagement but will generally include an analysis of assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
Developing and presenting financial planning recommendations and/or alternatives
A financial planner should offer financial planning recommendations that address the client's specific goals and objectives based on the information collected in the data gathering step. When appropriate, a planner may also offer alternatives to the primary recommendations in order to assist the client with making an informed decision. A planner should also listen to a client's concerns and revise the recommendations as appropriate.
Implementing the financial planning recommendations
A planner may implement the recommendations presented to the client after both parties agree on how the recommendations will be executed. A planner may carry out the recommendations or coordinate implementation with other professionals in order to complete the plan as it is presented.
Monitoring the financial planning recommendations
A planner and the client should agree on who will monitor progress towards stated goals. The planner should periodically review the financial plan and adjust the recommendations, if needed, based on changes in the client's life, economic conditions, investment objectives, and legislation.
Notes
- ↑ "Financial Planning Process", cfp.net
External links
- Certified Financial Planner Certified Financial Planner Board of Standards
