The Financial Planning Process 

The Financial Planning Process consists of the following six steps:

1. Establishing and defining the client/financial planner relationship.

The financial planner should clearly explain or document the services to be provided to you and define both his and your responsibilities.  The financial planner should fully explain how he will be paid and by whom.  You and the financial planner should agree on how long the professional relationship should last and how decisions will be made.

2. Gathering client data, including goals 

The financial planner should ask for information about your financial situation.  You and the financial planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about financial risk.  The financial planner should gather all the necessary documents before giving you the advice you need.

3. Analysing and evaluating your financial status.

The financial planner should analyse 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 analysing your assets, liabilities and cash flow, current insurance coverage, investments and tax strategies.

4.Developing and presenting financial planning recommendations and/or alternatives.

The financial planner should offer financial planning recommendations that address your goals, based on the information you provide.  The financial planner should go over the recommendations with you to help you understand them so that you can make informed decisions.  The financial planner should also list your concerns and revise the recommendations as appropriate.  These recommendations should be presented to you in a clear, concise and understandable manner in a written document known as a ‘Statement of Advice’ (SoA).

5. Implementing the financial planning recommendations.

You and the financial planner should agree on how the recommendations will be carried out.  The financial planner can carry out the recommendations or act as “coach”, coordinating the whole process with you and other professionals such as attorneys or stockbrokers.  In the interest of “objectivity” or because of a lack of proper licensing, some advisers offer no help in this important area.  We believe good advice is most valuable when it is actually implemented.

6. Monitoring the financial planning recommendations.

You and the financial planner should agree on who will monitor the progress towards your goals.  If the financial planner is in charge of this process, he should report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.

Common Mistakes Consumers Make When Approaching Financial Planning:

1.                  Don’t set measurable financial goals

2.                  Make a financial decision without understanding its effect on other financial issues

3.                  Confuse financial planning with investing

4.                  Neglect to re-evaluate their financial plan periodically

5.                  Think that financial planning is only for the wealthy

6.                  Think that financial planning is for when they get older 

7.                  Think that financial planning is the same as retirement planning

8.                  Wait until they have a money crisis before beginning financial planning

9.                  Expect unrealistic returns on investments

10.              Think that using a financial planner means losing control

11.              Believe that financial planning is primarily tax planning