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Understanding the Financial Planning Process

Previously, in Five Interview Questions to Ask a Financial Planner, I addressed some simple but important questions that should be answered prior to hiring a planner.  After you’ve successfully vetted and found a financial planner, you may be wondering what the financial planning process looks like?

Financial goals are unique, and thus a financial plan will mean different things to different people.  A plan may focus on saving for retirement, saving for education, debt repayment, cash flow and budgeting, etc.  Ultimately, the focus will depend on your unique goals.

The financial planning process, as defined by the Certified Financial Planner Board of Standards, Inc. (CFP Board), consists of seven steps.  A CERTIFIED FINANCIAL PLANNER™ professional will follow this roadmap, while integrating your unique personal and financial circumstances.  The seven steps, and what to expect with those seven steps, are:

  1. Understanding the Client’s Personal & Financial Circumstances: A financial planner will obtain not only quantitative information detailing your financial situation, but also (and equally important) qualitative information.  The qualitative information provides the context for the financial plan, and details important information such as your health, life circumstances, goals, needs, priorities, etc.

 

  1. Identify and Select Goals: Once your unique financial circumstances have been identified, the financial planner will work with you to identify and prioritize your financial goals.  Financial goals may be short-term or long-term, or likely, a combination of both.

 

  1. Analyze the Client’s Current Course of Action & Identify Alternative Courses of Action: After your information has been gathered and your goals identified, your planner will bring the information together to identify the probability of meeting your goals.  If goals cannot be met, or if changes need to be made, the financial planner will identify alternative options.

 

  1. Development of Financial Planning Recommendations: After your financial circumstances and goals have been analyzed, and appropriate courses of action identified, the financial planner will detail recommendations and next steps to be followed as you look to pursue your financial goals.

 

  1. Presentation of Financial Planning Recommendations: Once analysis is complete and recommendations are built, the financial planner will then present and share the recommendations with you.  The recommendations will detail actionable items that will help you pursue your goals.  The final presentation may be in printed form or digital, or a combination of both.

 

  1. Implementation of Financial Planning Recommendations: After the recommendations have been shared, the financial planner will collaborate with you to implement and complete the recommendations and next steps.  Goals may not be pursued right away, and often recommendations are steppingstones as you work towards your goals.

 

  1. Monitoring of Progress & Updates: Financial circumstances and goals are fluid, and constantly change over time.  The financial planner will work with you to identify who has responsibility for monitoring financial progress and updates going forward.

The above steps help ensure a consistent financial planning process amongst CERTIFIED FINANCIAL PLANNER™ professionals.  Although experience and style may differ, the process should remain the same.  The journey can take time, as evidenced by the multiple steps in the financial planning process, and often requires continued collaboration and teamwork to ensure goals are met.

Ultimately, a financial plan is a means to an end, and serves as a roadmap to reference and utilize while working towards your financial goals.

JAY A. NEARY, CFP®, IS A FINANCIAL CONSULTANT WITH SVA WEALTH MANAGEMENT.

 

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Monica Bryant
mb@triagecancer.org