The Financial Planning Process in Detail
1. Establishing and defining the client-planner relationship
Your financial planner will clearly explain or document the services to be provided to you and define both his/her and your responsibilities. Your planner will explain fully how he/she will be paid and by whom. You and your planner will agree on how long the professional relationship should last and on how decisions will be made.
2. Gathering client data, including goals
Your financial planner will ask for information about your financial situation. You and your planner will mutually define your personal and financial goals, understand your time frame for results, and discuss, if relevant, how you feel about risk. Your financial planner will gather all the necessary documents before giving you the advice you need.
3. Analyzing and evaluating your financial status
Your financial planner will analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities, cash flow, current insurance coverage, investments, or tax strategies.
4. Developing and presenting financial planning recommendations or alternatives
Your financial planner will offer financial planning recommendations that address your goals, based on the information you provide. Your planner will go over the recommendations with you to help you understand them so that you can make informed decisions. Your planner will also listen to your concerns and revise the recommendations as appropriate.
5. Implementing the financing planning recommendations
Your and your planner will agree on how the recommendations will be carried out. Your planner may carry out the recommendations or serve as your "coach," coordinating the whole process with you and other professionals such as attorneys or stockbrokers.
6. Monitoring the financial planning recommendations
You and your planner should agree on who will monitor your progress toward your goals. If your planner is in charge of the process, he/she will report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.
*Source "What You Should Know About Financial Planning," Copyright © 1998-2006, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission.