The financial planning process


The world over, financials planners use a six – steps process that helps them see the ‘big picture’ and determine where the person stands financially. Using these six steps, one can work out where he is now, what he may need in the future and what he must do to reach his goals. The process involves gathering relevant financial information, setting life goals, examining the current financial status and coming up with a strategy or plan for meeting the goals given the current situation and future plan. Establishing and defining the client-planner relationship. The financial planner and the client establish a relationship and scope of engagement is define. There is also an understanding between the client and planner about the services to be provided, responsibilities of the planner and the client, and the compensation to be received by the planner.

Data gathering and goal setting.

The financial planner gathers in formation about client’s financial situation. The client and the planner mutually define various personal and financial goal, understand the timeframe for getting results and discuss, if relevant, the client’s risk appetite. The financial planners gathers all the necessary documents before giving the advice.

Identification of financial problems.

The planner analysis the information to asses the current situation and determine what the client must do to meet his goals. He has to see what services the client is looking for, which could include analyzing the client’s assets, liabilities and cash flow, current insurance coverage, investment and tax strategies.

Developing and presenting financial planning recommendations and/or alternatives.

The planner that then offers recommendation that address the client’s goals, base on the information they provide. He explains the recommendation to the clients and helps them understand it so that the client can make informed decisions. In case there are any concern in the mind of the client, the planner revises the recommendation as appropriate.

Implementing the financial planning recommendation .

The planner, if mandated by the client, carries out the recommendation or serves as a ‘coach’, co-coordinating the whole process with the client and other professional such as attorneys, insurance companies, or stockbrokers.

Monitoring and recommendation.

The client and the planner agree on who will monitor the progress towards achievement of defined goals. If the planner is in charge of the process, it is the responsibility of the planner to report periodically to the client to review the situation and adjust the recommendation, if needed. So now you know what all financial planning entails. Some of you may fill that you can do your own financial planning. And of course you can. However it is important to know if you take the reins in your own hands

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