|
Financial Planning - A 6-step Process |
By:
Andrew Chan |
|
|
The financial planning process can be broken down into the following six steps:
1. Establishing and defining the relationship with the client
2. Gathering customer's data for evaluation
3. Analyzing and evaluating the client's financial situation
4. Developing and presenting financial planning recommendation
5. Executing the financial planning recommendations 6. Regular monitoring of the plan
The following is a more detailed insight of what happens during each step of the process.
1. Expressing and defining the scope of relationship with the customer
To go through this step, the financial planner will have to define the scope of the engagement with the client. Prior to providing any financial planning service, the financial planning practitioner and the client will have to mutually define the scope of the engagement.
This is really quite important. The process of mutually defining (and agreeing) the scope helps to spell out the type of activities that are necessary in order to carry on with the provision of the service.
This may include but not limited to
a. Identifying the services to be provided.
b. Disclosing the practitioner's material conflict of interest.
c. Disclosing the practitioner's form of compensation.
d. Determining the client and practitioner's responsibilities.
This first step is necessary to establish realistic understanding for both the client and the financial planning practitioner.
2. Gathering Customer Data
This step is essentially a fact finding process and entails the following areas:
a. Determining a client's personal and financial goals and priorities.
b. Obtaining quantitative information and documents from the client.
3. Analyzing and evaluating the client's financial situation
During this step, the financial planner takes the client's data to thoroughly analyze them. This is to gain an understanding of the client's financial situation and then evaluating how much of the client's financial goals and priorities can be met by the client's resources and current action.
4. Developing and presenting the financial planning recommendations and solutions
The financial planner will determine and evaluate all reasonable solutions available for the client. He will then have to develop suitable financial planning recommendations, taking into account step (3) above. Once he has developed these, he then presents it to the client. The client will then consider if he wants to implement them.
5. Carrying out the financial planning recommendations
This step will need the client's agreement on the type of recommendations or solutions to be implemented. The financial planning practitioner and the client will mutually agree on the type of services (if any at all) to be provided by the planner.
6. Regular follow-up of the plan
This step involves monitoring and reviewing the recommendations and the client's progress of the financial plan. It may also involve reviewing and discussing with the client on the changes (if any) in view of any changes in his personal environment as well other new situations e.g. changing tax laws.
Achieving financial success is really quite simple just by following this six-step process.
Checking out for tools and resources on financial planning? Go visit our site on simple financial planning for more information and tips. Grab your free gift whilst you are there! Click here for other unique 'financial planning' articles.
|
|
Article Source: http://www.statssheet.com/articles/article56029.html |
|
|
|
|
|
