The Financial Planning Process

The financial planning process can be overwhelming at first, feeling like a daunting task that will take months and months to complete.  However, the actual process of financial/retirement planning is relatively straightforward and, if followed by both the Planner and the Client, can greatly expedite the process and provide a clear path to financial success in a timely manner.

The first step is to establish the planning relationship with a qualified planner who holds the CERTIFIED FINANCIAL PLANNING™ designation.  During the first few meetings with the planner, he or she will outline what to expect and the services provided.  You should discuss specifics and establish communication means, compensation expectations and any forms you need to complete.  Both you and the planner should be upfront and honest about the expectations for the relationship for the future.  The planner should stress to you that all information is confidential and will only be shared with other members of your advisory team (given your permission to do so).

Next, you and your planner will dig deeper and start looking at details of your finances.  As the client, it is very important to be candid and provide full and open disclosure as the omission of information could cause inaccuracies in the plan and incorrect assumptions for both parties.  Your planner will need access to all things financial – tax returns, investment statements, insurance policies, account statements, pay stubs, etc.  Your planner will also want to discuss your financial worries and ethical/moral/value system.  All will play a role in outlining the plan to ensure that the advising given by the planner is truly in-line with your financial goals and personal beliefs.  Just remember, some questions may be difficult to answer, such as “What is more important to me at this stage in my life, my retirement or my child’s education?”  Or, “If I died today, will my family have sufficient funds to cover my loss and maintain their standard of living?”  It will be important to be honest with yourself first.

The third step is the responsibility of the planner, who will analyze all of the information he or she has gathered, taking into consideration your discussions of your value system, morals, ethics, etc.  Your planner will then use these areas of strength and risk to design a personalized financial plan that can help you reach the financial goals outlined in step two.  Your planner will use planning software, time value of money calculations and various assumptions that will be explained to you during the planning engagement (for example, the assumption of life expectancy to be age 90).  If certain goals are potentially unattainable, you and the planner will work together to find a solution for such.

Moving along, the next step is for the planner to provide a comprehensive report that outlines your current financial situation and subsequent recommendations for meeting your financial goals.  From tax strategies and asset allocation guidance to insurance recommendations and Social Security analysis, the report will be tailored to our specific needs.  Of course, an important part of the relationship will be for the planner to consult with your other advisory team members to ensure you are receiving the most comprehensive recommendations possible.  It will be paramount for the planner to fully explain your plan in a clear and concise manner.  Further, an assignment of “homework” for each party will be likely to ensure that each party knows what parts of the plan is his or her responsibility.

Step five is the actual implementation of the financial plan.  Even the most thoroughly crafted plan will fail if you and your planner do not take the necessary steps to implement it completely.  Note that compensation for the planner may change based upon the planner’s roles and responsibilities outlined in this step.  Also, the decision will be made as to what help will be needed from other members of your advisory team.  This coordination will ensure everyone is on the same page and provide the highest likelihood of goal completion and success.

The final step is monitoring the plan.  Financial planning is a process, not a product and, as your financial situation (loss of a job, career change), life situation (divorce, birth of a child), etc. change, so will the plan.  Thus, the importance of revisiting your plan annually to ensure that you are still on-track for financial success and any financial or life changes that have occurred have been factored into the plan.  You and your planner should decide as to whose responsibility it would be to proactively maintain the monitoring of your plan.  However, a “second-to-none” planner who provides service that is truly the best should be the one that is responsible for such.  After all, you are the client!

This article was written in conjunction with Advicent Solutions, an entity unrelated to Sterling Financial Group, Ltd.  The information contained in this article is not intended to be tax, investment or legal advice and it may not be relied upon for the purpose of avoiding any tax penalties.  Sterling Financial Group, Ltd. does not provide tax or legal advice.  You are encouraged to consult with your tax advisor or attorney regarding specific tax issues.  ©Advicent Solutions.  All rights reserved.

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