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You may be confused about how to distinguish Financial Planning from other kinds of financial advice. To help you understand what to expect from the Financial Planning process, CFP practitioners follow certain standards - called Financial Planning Practice Standards - when providing Financial Planning advice. Practice Standards describe the process you should reasonably expect a Financial Planner to use during a Financial Planning engagement. These standards are based on a six-step Financial Planning process as prescribed by the Financial Planning Standards setting authorities around the world.

 

The Financial Planning process consists of the following basic six steps:

 

1. Establishing and defining the client-Planner relationship

The Financial Planner should clearly explain or document the services to be provided to you and define both his and your responsibilities. The Planner should explain fully how he will be paid and by whom. The Planner should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. You and the Planner should agree on how long the professional relationship should last and how decisions will be made.

 

2. Gathering client data, including goals.

The Financial Planner should ask for information about your financial situation. You and the Planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The Financial Planner should gather all the necessary documents before giving you the advice you need.

 

3. Analyzing and evaluating your financial status.

The Financial Planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you may have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

 

4. Developing and presenting Financial Planning recommendations and/or alternatives.

The Financial Planner should offer Financial Planning recommendations that address your goals, based on the information provided by you. The Planner should go over the recommendations with you to help you understand them so that you make informed decisions. The Planner should also listen to your concerns and revise the recommendations as appropriate.

 

5. Implementing the Financial Planning recommendations.

You and the Planner should agree on how the recommendations will be carried out. The Planner may carry out the recommendations or serve as your 'coach', coordinating the whole process with you and other professionals such as solicitors or stockbrokers.

 

6. Monitoring the Financial Planning recommendations.

You and the Planner should agree on who will monitor your progress towards your goals. If the Planner is in charge of the process, she should report to you personally to review your situation and adjust the recommendations, if needed, as your life changes.

 
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