Financial planning consists of the following
six distinct steps. When it's comprehensive financial planning
guidance you want, these are the steps that should guide your
planner. Be familiar with them. They'll help you get the most
out of the process. And remember, it's this big-picture approach
that sets financial planners apart from all other financial
advisors who may have been trained to focus only on one aspect
of your finances.
1. Establish the client—planner engagement
Your planner should:
Explain issues and concepts
related to the overall financial planning process that are
appropriate to you.
Explain the services he
or she will provide and the process of planning and documentation.
Clarify your responsibilities
as a client.
Clarify his or her responsibilities
as your planner. This should include a discussion about
how and by whom he or she will be compensated.
You and your planner should:
Discuss the scope of the
client/planner engagement.
Agree on how decisions will
be made.
2. Gather client data and determine your
goals and expectations
Your planner should:
Obtain information about
your financial resources and obligations through interviews
or questionnaires.
Gather all the necessary
documents before giving you the advice you need.
You and your planner should:
Define your personal and financial goals, needs and priorities.
Investigate
your values, preferences, financial outlook and desired
results as they relate to your financial goals, needs and
priorities.
3. Clarify your present financial status
and identify any problem areas and opportunities
Your planner should:
Analyze your information
to assess your current situation (cash flow, net worth,
tax projections, etc.).
Identify any problem areas
or opportunities with respect to your:
Capital needs
Risk management needs and coverage
Investments
Taxation
Retirement planning
Employee benefits
Estate planning
Special needs (i.e. adult dependent
needs, education needs, etc.)
4. Develop and present the financial plan
Your planner should:
Develop and prepare a financial
plan tailored to meet your goals and objectives, values,
temperament and risk tolerance, while providing projections
and recommendations.
Present the plan to you
and establish an appropriate review cycle.
You and your planner should:
Work together to ensure
that the plan meets your goals and objectives.
5. Implement your financial plan
Your planner should:
Assist you in implementing
the recommendations discussed if you want. This may involve
coordinating contacts with other professionals such as investment
funds sales representatives, accountants, insurance agents
and lawyers.
6. Monitor the financial plan
You and your planner should:
Agree on who will monitor
and evaluate whether your plan is helping you progess toward
your goals.
If your planner is in charge of the process,
your planner should:
Contact you to review the
progress of the plan periodically and make adjustments to
the recommendations required to help you achieve
your goals.
This review should include:
A discussion about changes
in your personal circumstances and how they might affect
your goals.
A review and evaluation
of the impact of changing tax laws and economic circumstances.
A review of your life circumstances
and an adjustment of the recommendations if needed as those
circumstances change through life events such as birth,
illness, marriage, retirement, etc.
CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planners Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.
are certification marks