Broker Check

Financial Planning Process

In simple terms, financial planning is the integrated, coordinated ongoing management of an individual’s financial concerns. A financial plan is a roadmap that should be used as a guide throughout your life, not a binder that collects dust on your bookshelf or hidden away in some drawer.

The financial planning process consists of six clearly identifiable steps:

  1. Step 1: Establishing and Defining the Client-Planner Relationship
    Before a financial plan can be initiated, we need to form a common ground with the financial planning clients. Together, we need to determine the work to be done and what terms, conditions, and limitations there might be. This is a mutual process.

  2. Step 2: Gathering Client Data, including Goals
    Before any plan can be analyzed, we must gather client data and goals. Each detail of the financial planning process is guided by the clients’ goals. In this step, we gather data such as:

    Quantitative Data

    • Assets and liabilities
    • Cash inflows and outflows
    • Copies of wills and trusts
    • Details on current investments
    • Employee benefit and pension plan information
    • Expenses
    • General family profile
    • Information about any client-owned businesses
    • Insurance policy information
    • Lifetime gifting programs
    • Names, addresses, and telephone numbers of financial advisors
    • Retirement benefits available
    • Tax returns for the last three years

    Qualitative Data

    • Anticipated changes in current or future lifestyle
    • Expectations about employment
    • Goals and objectives (dreams and desires)
    • Health status of client and family members (heredity issues as well)
    • Interests and hobbies
    • Other planning assumptions
    • Risk tolerance level

    The data gathering stage is extremely important because without good data, informed and accurate decisions cannot be made.

  3. Step 3: Analyzing and Evaluating the Client’s Financial Status
    In this stage, the financial planner reviews all of the data and relevant documents. The planner uses his knowledge, experience, and the expertise of other professionals in the areas of tax, estate planning, and insurance to develop strategies, recommendations, and others to help the client meet his or her goals.

  4. Step 4: Developing and Presenting Financial Planning Recommendations/Alternatives
    We meet with clients to go over the financial plan to discuss the various recommendations, options, and alternatives before a plan is finalized. In areas where we do not have expertise, we consult with other professionals. For example, we would use a qualified attorney for estate planning or a qualified CPA for complex tax advice.

  5. Step 5: Implementing the Financial Planning Recommendations
    The client and the financial planner implement the plan. Without implementation, financial plans have no value.

  6. Step 6: Monitoring the Financial Planning Recommendations
    Without monitoring, it would be difficult or impossible to determine if the clients’ goals were being met or if progress toward those goals were being made. The financial plan is not meant to be looked at once and then put away; it is a guide, map, or manual to be used.