Financial Planning Process

Question 1

What is the purpose of the Financial Planning Process?

Answer 1

• provide sound, coordinated financial advice to individuals and their families.
• a coordinated approach to the multiple facets of the daily and lifetime financial needs of clients who are too busy to learn what they need to know.
• client benefits from having one person who can work with various professionals required to develop a comprehensive financial plan

Question 2

Steps in the Financial Planning Process

Answer 2

1) Establish the client-planner relationship
2) Gather data and determine goals and expectations
3) Analyze and evaluating financial status while processing raw data into meaningful financial statements
4) Develop and present the financial plan (recommendations and solutions)
5) Implement the financial plan
6) Monitor the financial plan

“EGADIM”

Question 3

Establishing Client-Planner Relationship

Answer 3

• sets the expectations of the parties and lays the groundwork for developing trust required for successful financial planning.
• Identify the services to be provided
• disclose compensation arrangements
• determine each parties responsibilities
• establish the duration of the engagement
• provide any additional information necessary to define or limit the scope

Question 4

Gathering Client Data and Determining Goals and Expectations

Answer 4

• This is the most important step
• adequate data and a clear understanding of the client’s goals are the “road map” for the financial plan
• obtain comprehensive quantitative and qualitative information
• accuracy of information provided is imperative

Question 5

Analyze and Evaluating Current Financial Status

Answer 5

-organize the data that was collected into financial statements which helps to provide a clear picture of where the client currently is.

Question 6

Developing and Presenting the Financial Plan

Answer 6

• the creation and explanation of recommendations and solutions to problems that spring from the analysis of the data and the client’s goals.
• be careful not to present too many options to the client.
• the planner must evaluate all alternatives and choose the one that best meets the clients long-term objectives.
• be sure to list the plan in order of importance, since most plans will include many different facets.

Question 7

Implement the Financial Plan

Answer 7

• this is the action step where the practitioner works with the client to start the process of making the changes that need to be made for the plan to work.
• Identify activities necessary for implementation
• determine the division of activities between each party
• Refer and coordinate other professionals if necessary
• share the information you gathered as authorized
• choose the products and services to be used