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  About Financial Planning
 
  The Financial Planning Process
 
  The Financial Planning Process
 
  Terms Used to Describe Financial Planners and Financial Services Professionals
 
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About Financial Planning

Financial Planning is the process of determining how an individual can meet life goals through the proper management of his or her financial resources. Examples of life goals include a comfortable retirement, buying a home, saving for a child's education or starting a business.

A Financial Planner is someone who uses the Financial Planning process to help clients figure out how to meet their life goals. A Financial Planner can take a "big picture" view of a client's financial situation and make Financial Planning recommendations based on the client's needs in areas such as budgeting and saving, taxes, investments, insurance and retirement planning. Or, the planner may work with a client on a single financial issue but within the context of that client's overall situation.

A Financial Planner helps a client analyze either all or selected areas of his or her finances and develops a "plan" bringing together all of the client's financial goals, or provides advice on specific areas as needed. This big picture approach to a client's financial goals sets the planner apart from other Financial Advisers, who may have been trained to focus on a particular area of a client's financial life. The Financial Planning process as described on the following page distinguishes Financial Planning practitioners from other Financial Advisers.

The Financial Planning Process

The Financial Planning process includes the following six key steps:

        Establishing and defining the client-planner relationship.
        Establishing and Gathering client data, including goals.
        Establishing and Analyzing and evaluating the client's financial status.
        Developing and presenting Financial Planning recommendations and/or alternatives.
        Implementing the Financial Planning recommendations.
        Monitoring the Financial Planning recommendations.

Financial Planning is a process, not a product. While the practice of Financial Planning can be performed in conjunction with providing financial products, it can also be performed as a distinct and separate function from the practice of any other profession or occupation.

Expectation during the Financial Planning Process

The Financial Planning process includes the following steps:

1. Establishing and defining the client-planner relationship.

        Does the Planner explain or document the services to be provided?
        Are the Planner's and your responsibilities clearly defined?
        Are the compensation arrangements clear to you?
        Have you and the Planner agreed on how long the professional relationship should last?

2. Gathering client data, including goals.

        Does the Planner ask for relevant information or ask you to fill out a questionnaire about financial resources and obligations?
        Does the Planner help you to define and prioritize your personal and financial goals and assess your risk tolerance and time horizons?
        Does the Planner request applicable records and documents?

3. Analyzing and evaluating your financial status.

        Does the Planner analyze and evaluate the information gathered above to determine whether or not your goals can be met?

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

        Are the Financial Planning recommendations tailored to meet your specific goals and based on analysis and evaluation of the information provided to the Planner?
        Does the Planner communicate the recommendations to you in a way that you can make informed decisions?

5. Implementing the Financial Planning recommendations.

        Do you and the Planner agree on implementation activities and who should perform them?
        Will the Planner help implement his/her recommendations or coordinate or refer you to other professionals, such as attorneys or stockbrokers?

6. Monitoring the Financial Planning recommendations.

        Have you and the Planner agreed to have recommendations and your financial progress monitored periodically?
        If so, does the Planner review and evaluate changing circumstances and make new recommendations based on these changes, as appropriate?

Terms Used to Describe Financial Planners and Financial Services Professionals

The phrases "Financial Planning" or "Financial Planner" are sometimes used by individuals to promote the sale of financial products, or are confused with the sale of such products. Many Financial Planning practitioners may also be registered representatives who sell securities products, insurance agents who sell insurance products, or investment advisers who recommend certain financial products. As a result, the public is often confused about the distinction among

1. An individual solely offering Financial Planning services

2. Someone selling financial products and related services in conjunction with his or her Financial Planning practice and

3. A financial services representative who offers no Financial Planning services.

To assist you, we have compiled the following list of terms describing individuals who work in the Financial Planning and financial services professions.

Accountant

Accountants perform one or more of the following services involving the use of accounting or auditing skills: issuance of reports on corporate and individual financial statements, consulting, preparation of tax returns and the provision of tax-related advice. Many accountants have broadened their activities in recent years into computer systems analysis, management advisory services, corporate or individual tax planning or other areas of Financial Planning, such as investment planning.

CERTIFIED FINANCIAL PLANNER Certificant

CFP Certificants are individuals who have met the FPSB India's Education, Examination and Experience requirements, are committed to high Standards of Ethical conduct and who complete the FPSB India's biennial certification requirements to use the certification marks CFP, CERTIFIED FINANCIAL PLANNERCM and . A CFPCM Certificant is a financial professional authorized to use the CFP Certification marks that has identified himself or herself to the FPSB India as being actively engaged in providing Financial Planning services. All CFP Certificants have voluntarily submitted to the regulatory authority of the FPSB India.

Chartered Financial Analyst

Holders of the Chartered Financial Analyst (CFA®) designation are securities analysts, money managers and investment advisers who focus predominately on the analysis of investments and the securities of particular companies or industry groups. Individuals earn the CFA designation by completing the Association for Investment Management and Research's® (AIMR®) experience, education, examination and ethics requirements. All CFA charter holders have voluntarily submitted to the regulatory authority of AIMR.

Fee-Based Financial Adviser

An Adviser who is compensated both by fees paid by the client and commissions that are contingent on the purchase or sale of financial products.

Fee-Only Financial Adviser

An Adviser who is compensated solely by the client, with neither the adviser nor any related party receiving compensation that is contingent on the purchase or sale of financial products.

Financial Advisor (or Counselor or Consultant)

"Financial Advisor" is a generic term used broadly by consumers and financial services professionals to describe an individual engaged in providing financial advice, services or products to a client for compensation. The term "Financial Advisor" covers a broad spectrum of financial professionals including Financial Planners, registered representatives, money managers, investment advisors and individuals who sell, or advice people on, financial products.

Financial (Securities) Analyst

These professionals are usually employed by investment brokers, banks, mutual fund managers, venture capitalists or investment institutions to conduct investment research and analyze the value of securities and financial condition of a company, group of companies or industry sector. Based on their analysis of a given stock or market sector, analysts will make investment recommendations to buy, sell or hold a given stock.

Insurance Agent

Insurance agents are individuals licensed by IRDA to sell life and health and/or property and casualty insurance products. Many Financial Planners are licensed to sell or give advice on insurance products. Other Financial Planners might identify insurance needs for a client, but turn to a licensed insurance agent for recommendations about which existing insurance products best meet the client's needs. Insurance brokers sell products for two or more insurance companies; exclusive insurance agents represent only one.

Investment Advisor

Investment advisors may sell or recommend stocks, bonds, mutual funds, partnerships or other SEBI-registered investments for clients.

Portfolio Manager

The term "portfolio manager" is often used to describe the investment manager of a mutual fund or private institutional fund. The term "portfolio manager" is often used to describe the investment manager of a mutual fund or private institutional fund.

Real Estate Broker

A real estate broker arranges the purchase or sale of property for a buyer or seller in return for a commission. A real estate agent is an individual who works for a real estate broker. Real estate brokers may help consumers finance a real estate purchase through their contacts with banks, savings and loans, and mortgage bankers.

Stockbroker

A stockbroker, is affiliated with a stock exchange and recommends to clients which securities to buy and sell, and earns a commission on all trades as compensation. All stockbrokers, including any Financial Planners who execute buy or sell orders for mutual funds, stocks, bonds, commodities or other securities on behalf of clients for compensation, must be registered with SEBI and licensed by the appropriate stock exchange.

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