Financial Planning Process

The financial planning process is an in-depth six step process designed to ensure a thorough and complete financial plan.
1. Initial meeting with the Client Before providing any financial planning service, the practitioner and the client decides on the activities required to proceed with the client engagement. This is accomplished by:i.Identifying the services to be providedii.Determining the responsibilities of both client and the practitioneriii.Establishing the duration of the meetingiv.Providing additional information 2. Gathering Client Data Determining a client’s personal and financial goals, needs, and priorities – In order to determine the client’s personal and financial goals, needs, and priorities, the practitioner has to explore the client’s:i.Expectationsii.Time Horizon With this information the practitioner tries to shape the client’s goals and also assist the client in recognizing the implication of unrealistic goals and objectives. Obtaining quantitative information and documents – The practitioner obtains sufficient information pertaining to the client’s:i.Financial resourcesii.Obligationsiii.Personal situations This information assists in determining quantitative information and is obtained directly from the client through meeting, questionnaire, client records provided and documents. 3. Analyzing and Evaluating the Clients Financial Status A practitioner considers both personal and economic assumptions of the client in order to determine the financial status. These assumptions include:i.Personal assumptions, such as: retirement age, life expectancy, income needs, risk factors, time horizon, special needs ii.Economic assumptions, such as inflation rates, tax rates, and investment returns 4. Developing and presenting the financial planning recommendations Identifying and evaluating data, the practitioner considers all relevant alternatives to achieve the client’s goals, needs, and priorities. This evaluation involves:i.Considering multiple assumptionsii.Conducting research of equity and debtiii.Consulting with other professionals Developing, the practitioner develops the recommendation based on selected alternatives and the current course of action. The recommendations are directly affected by:i.Personal and economic assumptionsii.Alternatives selected by the practitioneriii.Quantitative data provided by the client Presenting, the practitioner communicates the recommendation in a manner necessary to assist the client in making an informed decision. The practitioner communicates the factors critical to the client’s understanding of the recommendations which might include:i.Personal and economic assumptionsii.Advantages and disadvantagesiii.Risksiv.Time sensitivity 5. Implementing the Financial Planning Recommendations Agreeing on implementing responsibilities, the practitioner and the client mutually agree on the implementation of the responsibilities consistent with the scope of the agreement. The practitioner’s responsibilities include:i.Identifying activities necessary for implementationii.Referring to other professionalsiii.Sharing of information as authorizediv.Selecting and securing products The financial planning process is an in-depth six step process designed to ensure a thorough and complete financial plan.