What are the steps in the financial planning process? If a person wants to work with a financial planner, what can they expect? What are their responsibilities and the financial planner's responsibilities?
Most Certified Financial Planners* (CFP) use the six step process defined by the CFP Board. Those steps are:
1. Establishing and Defining the Client-Planner Relationship.
This step is usually accomplished with a 30-minute initial consultation. Most planners do not charge for this meeting.
2. Gathering Client Data, Including Goals.
Once the client and planner decide to work together, information is needed from the client. This step can also be conducted during the first meeting.
3. Analyzing and Evaluating the Client's Financial Status.
This step is conducted by the financial planner and can take up to a month to accomplish.
4. Developing and Presenting Financial Planning Recommendations and/or Alternatives.
This step is done in conjunction with step 3. The word "alternatives" means that oftentimes a client's goals are unachievable under current circumstances. Therefore, it is necessary to have an alternative plan of action. This step also requires a client meeting.
5. Implementing the Financial Planning Recommendations.
Once the plan has been accepted by the client, the planner makes out an action items list and both the client and the planner work together during the implementation step. Some clients may prefer to implement on their own.
6. Monitoring the Financial Planning Recommendations.
Notice that these are steps in the Financial Planning Process. A financial plan is a process and not a product. Changes must be made over the years to make sure the plan meets the client's needs. It is recommended that the financial plan be examined at least yearly.
Those are the six steps according to the CFP Board. Not all planners use the six steps, either because they combine various steps or they have additional steps.
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Until next time...
*I am not yet a Certified Financial Planner. I am in the process of preparing to obtain my CFP designation.
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