The CFP® board has outlined a seven-step financial planning process to help guide CFP certificates through the planning process with their clients and prospects. In this series of four blogs, I am going to show you how Advisor360°'s platform helps facilitate this process by providing efficiency and an enhanced client experience.
Last week, we discussed understanding your client’s personal and financial goals. Today, I will be covering the goals and planning processes of steps two, three, and four of the seven-step financial planning process.
Step 2: Identifying and selecting goals
The second step is identifying and selecting goals for the client. Now that you have gathered all this data, the next step in your workflow is to set up a meeting to identify financial goals with the client. Consider things like:
- Where do they want to retire?
- Are they paying for their children's education?
- Do they have any health concerns?
- Are there any vacations they want to plan for?
- Do they want to buy a home?
You would want to schedule that meeting and schedule a reminder to be sent to the client into your workflow.
Step 3: Analyzing the client’s current courses of action and potential alternative course of action
The third step is analyzing your client’s current courses of action and potential alternative course of action. To do this, you would want to use our new Financial Planning tab under the Goals capability. This tab offers the ability to take the life circ*mstances that we have gathered in the previous step and bring them into our Goals tool. This financial planning engine runs an analysis to see if they're on track or if they need to readjust their plans or expectations. The engine will allow the user to add and/or edit cash flows and goals to find the best solution that both fits the client’s needs right now and their projected future needs and wants.
Step 4: Developing the financial planning recommendation
The fourth step is developing a financial planning recommendation. Here we can leverage our Goals integration with our Model Management tool to help better illustrate an asset allocation rebalance.
The Goals tool allows users to model standard asset allocation templates and integrates with our Model Management capability to bring in models made by the advisor, their firm, and third-party strategies. This enables the user to model their specific recommendation and illustrates to the client how this recommendation will impact their plan.
Now that we have successfully selected, analyzed, and developed goals for your client, the next steps are to present and implement these goals. These are steps five and six and will be covered in next week’s blog.
See all seven steps in the financial planning process.
Patrick Noonan is Product Manager for Wealth Management and Insurance. Backed by his years of experience as a Certified Financial Planner (CFP®), Patrick defines and oversees product features that improve broker-dealer, advisor, and investor performance and efficiencies in the banking, investment, and insurance industries.
FAQs
After a CFP® professional gains an understanding of the Client's personal and financial circ*mstances, the second step in the Financial Planning process is to help the Client with identifying and selecting goals.
What are the 7 key components of financial planning? ›
A good financial plan contains seven key components:
- Budgeting and taxes.
- Managing liquidity, or ready access to cash.
- Financing large purchases.
- Managing your risk.
- Investing your money.
- Planning for retirement and the transfer of your wealth.
- Communication and record keeping.
The Financial Planning Process
- Step 1: Set Goals. While this seems pretty basic, this step often gets overlooked. ...
- Step 2: Gather facts. ...
- Step 3: Identify challenges and opportunities. ...
- Step 4: Develop your plan. ...
- Step 5: Implement your plan. ...
- Step 6: Follow up and review yearly.
After a CFP® professional gains an understanding of the Client's personal and financial circ*mstances, the second step in the Financial Planning process is to help the Client with identifying and selecting goals.
What is step 4 in financial planning? ›
Step 4. Develop a Comprehensive Financial Plan. Proceeding forward, the subsequent step in the financial planning process entails crafting a comprehensive financial plan. This plan should encompass a wide spectrum of both short-term and long-term goals and objectives.
What are the 7 disciplines of financial planning? ›
It is crucial to help you manage your cash flow, increase savings, and make good investments. This way, you can achieve financial freedom and grow your business. Seven key components make up a good financial plan. They include budgeting, debt management, insurance, investment, emergency funds, and estate planning.
What are the 7 personal financial planning areas? ›
There are 7 major areas of financial planning which include insurance planning, investment planning, retirement planning, tax planning, estate planning, cash flow, debt, & budgeting, and education planning.
What is the order of the financial planning process? ›
There are six steps in the financial planning process: understanding your financial circ*mstances, identifying goals, analyzing your current course of action, developing a financial plan, and monitoring progress and updating. This is a great question to ask if you're considering working with a financial planner.
What are the 4 steps of process planning? ›
1] Recognizing Need for Action · 2] Setting Objectives · 3] Developing Premises · 4] Identifying Alternatives · 5] Examining Alternate Course of Action · 6] . Planning Process comprises of: Setting Objectives, Developing Premises, Identifying alternative courses of action, Selecting an alternative, .
What are the four 4 process of financial management? ›
The Financial Management Cycle includes four phases that are essential for the overall evaluation of the financial management of any firm. The four phases are Planning, Budgeting, Managing Operations, and Annual Reporting.
You can too!
- Save $1,000 for Your Starter Emergency Fund.
- Pay Off All Debt (Except the House) Using the Debt Snowball.
- Save 3–6 Months of Expenses in a Fully Funded Emergency Fund.
- Invest 15% of Your Household Income in Retirement.
- Save for Your Children's College Fund.
- Pay Off Your Home Early.
- Build Wealth and Give.
The First Three Steps of the Financial Planning Process
- Understand the client's personal and financial circ*mstances.
- Identify and select goals.
- Analyze the client's current course of action.
What's in our 4-step guide to building a solid financial plan
- Step 1: Understand your cash flow.
- Step 2: Set future goals and save and invest to reach them.
- Step 3: Safeguard today and tomorrow.
- Step 4: Manage your debt.
- See a hypothetical family's financial plan.
7 Steps of Financial Planning
- Establish Goals.
- Assess Risk.
- Analyze Cash Flow.
- Protect Your Assets.
- Evaluate Your Investment Strategy.
- Consider Estate Planning.
- Implement and Monitor Your Decisions.
- AWM&T: Your Choice for Financial Fitness.
Financial Planning for Individuals & Families
For individuals and families, we focus on asset/liability matching, tax-efficiency, and cost-effective planning throughout the four key phases of financial management: accumulation, distribution, preservation, and legacy. Plan to budget, determine investments, set goals.
What is the step 3 of the financial planning process? ›
Step 3: Analyzing the client's current courses of action and potential alternative course of action. The third step is analyzing your client's current courses of action and potential alternative course of action.
What are the 7 key components of financial planning according to Dave Ramsey? ›
One core element of Ramsey's teachings is his "Baby Steps" process for building wealth, which lays out a seven-step sequence for everyone to follow: 1) build a $1,000 starter emergency fund; 2) pay off all (non-mortgage debt); 3) save a 3- to 6-month emergency fund; 4) save 15% of income for retirement; 5) save for ...
What are the 5 key areas of financial planning? ›
In this blog, we explore the five key components of a financial plan and how they work together.
- Investments. Investments are a vital part of a well-rounded financial plan. ...
- Insurance. Protecting your assets—including yourself—is as important as growing your finances. ...
- Retirement Strategy. ...
- Trust and Estate Planning. ...
- Taxes.
Financial Planning Process
- 1) Identify your Financial Situation. ...
- 2) Determine Financial Goals. ...
- 3) Identify Alternatives for Investment. ...
- 4) Evaluate Alternatives. ...
- 5) Put Together a Financial Plan and Implement. ...
- 6) Review, Re-evaluate and Monitor The Plan.
Watch to learn about six personal finance topics that can have a big impact on your life: budgeting, saving, debt, taxes, insurance, and retirement.
