Financial Planning Process

The Financial Planning Process, as described by the CFP Board of Standards, consists of the following six steps:

1. Establishing and defining the client-planner relationship. 

The financial planner should clearly explain or document the services provided and define both his and your responsibilities. The planner should explain how they will be paid and by whom. You and the 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 planner should mutually define your personal and financial goals, understand your time frame for results, and discuss your feelings about risk. The financial planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating your financial status. 

The financial planner should 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 and cash flow, current insurance coverage, retirement plans, maximize Social Security benefits, investments, or tax strategies.

4. Developing and presenting financial planning recommendations and alternatives. 

The financial planner should offer financial planning recommendations that address your goals based on the information you provide. The planner should go over the recommendations with you to help you understand them to make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the financial planning recommendations. 

You and the planner should agree on how the recommendations will be carried out. The planner may carry out the requests or serve as your “coach,” coordinating the whole process with you and other professionals such as attorneys or accountants.

6. Monitoring the financial planning recommendations. 

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