Six Steps in the Financial Planning Process

The following steps make up the financial planning:

  1. Establishing and defining the client-planner relationship - The financial planner explains or documents the services to be provided and defines his or her responsibilities along with the responsibilities of the client. The planner explains how he or she will be paid and by whom. The planner and client should agree on how long the relationship will last and on how decisions will be made.
  2. Gathering client data and determining goals and expectations - The financial planner asks about the client's financial situation, personal and financial goals and attitude about risk. The planner gathers all necessary documents at this stage before giving advice.
  3. Analyzing and evaluating the client's financial status - The financial planner analyzes client information to assess his or her current situation and determine what must be done to achieve the client's goals. Depending on the services requested, this assessment could include analyzing the client's assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
  4. Developing and presenting the financial planning recommendations and/or alternatives - The financial planner offers financial planning recommendations that address the client's goals, based on the information the client provided. The planner reviews the recommendations with the client to allow the client to make informed decisions. The planner listens to client concerns and revises recommendations as appropriate.
  5. Implementing the financial planning recommendations - The financial planner and client agree on how recommendations will be carried out. The planner may carry out the recommendations for the client or serve as a "coach, " coordinating the process with the client and other professionals such as attorneys or stockbrokers.
  6. Monitoring the financial planning recommendations - The client and financial planner agree upon who will monitor the client's progress toward goals. If the planner is involved, he or she should report to the client periodically to review the situation and adjust recommendations as needed.

Exam Tips and Tricks
You should be well versed in the six steps of the financial planning process. Questions about where certain actions fit within the process are likely.



Ethics and Disciplinary Rules

Related Articles
  1. Personal Finance

    Financial Planner: Job Description & Average Salary

    Discover the general job duties and average salary of a financial planner, as well as the education, training and skills necessary for success.
  2. Financial Advisor

    Why You Never Hear From Your Financial Planner

    If your financial planner is calling you too often, something might be wrong.
  3. Retirement

    Helping Your Clients Face The Financial Reality Of Retirement

    Altering retirement plans is tough, but when the retiree is unprepared, it's very necessary.
  4. Personal Finance

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  5. Financial Advisor

    Comparing Financial Advisors & Financial Planners

    When scanning the financial advisor landscape, recognize that both financial advisor and financial planner are very broad categories.
  6. Financial Advisor

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  7. Personal Finance

    Financial Planner: Career Path & Qualifications

    Learn what education and certifications you need to become a financial planner, as well as the future prospects and earnings potential for financial planners.
  8. Financial Advisor

    How Client Behavior Impacts Retirement Planning

    While many clients know they should save for retirement, they don't. Here's how advisors can help modify their bad financial behavior.
  9. Financial Advisor

    Advisors Need to Talk Less, Ask and Listen More

    Financial advisors spend a lot of time giving their clients advice on how to invest their money. But what they often forget to do is listen.
  10. Financial Advisor

    How to Adjust Plans When Clients Keep Working

    Here's how financial advisors can update financial plans for clients who need (or want) to keep working when they've met retirement age.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center