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What Is the Process of Financial Planning

Financial planning is a process through which an individual or couple settles goals, estimates any future financial requirements, makes great plans, and evaluates all resources and assets to obtain any financial goals they may have. Also, it includes different factors, for example, cash flow management regularly, selection, and management of investment and insurance needs. You can find fee-only financial planners that may suit you better with your current circumstances, always research the best possible outcome for you.

Furthermore, various elements are included in financial planning. These include items, for example, investing, tax planning, estate planning, risk management, and allocation of assets. Now let’s talk about the process of financial planning.

Step 1: Introductory Meeting & Evaluation

During an initial interview, the financial planner and the prospective client get to know each other. This includes a first meeting while the planner describes the variety of services to be provided and how he/she paid for these services. In turn, the proposed customer has a chance to determine whether the planner can offer the types of services that are required. The planner should take this chance to get a general idea of the prospective client’s current financial position and long-term goals. It is necessary for both parties that the relationship starts on a basis of mutual trust and confidence.

Step 2: Collect Information and Set Goals

To be an effective financial planner, you must collect a much amount of information about the customer. The collected information can be either qualitative or quantitative. Further, the qualitative information includes non-financial information about the client and family members and quantitative like financial information about the client’s risk tolerance, expectations as to future standards of living, and health of the client and family members. Both the short-term as well as long-term goals of the client must also be identified.

Some goals may be to have “adequate income in retirement,” or to provide for a child’s education. When goals have been determined, it is important to prioritize or rank them in order of importance.

A few of the key financial and legal documents that are usually secured during the data-gathering phase include:

  • Budgets
  • Buy-sell agreements
  • personal financial statements
  • Wills trusts, and power of attorney
  • Divorce settlements

Step 3: Check Information and Develop a Plan

Now the financial planner examines the information, analyzes the client’s goals, and makes a financial plan intended to support the client reach their goals. To help in the process, the planner will usually utilize computer programs to improve his written analysis and recommendations.

At a minimum, a complete analysis usually incorporates a review of current and projected income, assets, investment, liabilities, and insurance coverage. In this case, if authorized by the client, the planner may also seek the assistance of other professionals.

Step 4: Execute A Plan

If the client is unable to follow through on the planner’s recommendations, the plan will be useless. This may involve a lot of tasks, including the sale and purchase of investment changes in spending and saving habits, modification of insurance coverage, and adoption of legal instruments.

Step 5: Review Plan

Financial planning is a continuing process. Because a client’s conditions will change, the financial plan needs to be changed accordingly. Clients get married, have new children, experience changes in health, change jobs, and much more. All of these changes may need an update to the financial plans so that the client stays on track to meet his goals.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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