Allow me to Explain the Financial Planning Procedure

I wish to use this article to explain the economic planning process. Many competent, well-educated adults readily admit they struggle with even basic financial concepts. This particular really isn’t surprising since many school curriculums don’t teach economic management principles. But this is where an expert financial planner comes into the picture. Financial planners work with people and help them coordinate and take care of the financial aspects of life.

Unfortunately, many people are reluctant to work with economic planner because they are unfamiliar with how the economic planning process works.

The monetary planning process explained

The process of economic planning can generally be separated into seven basic steps:

Step one – Preliminary Meeting & Assessment

During an initial interview, the economic planner and the prospective client get to know one another. This generally involves a first meeting during which the planner explains the type of services to be provided as well as the way in which he or she is paid for these solutions. In turn, the prospective client has an chance to determine whether the planner has the ability to offer the types of services that are needed. The particular planner should take this opportunity to get some general idea of the prospective customer’s current financial position and long-term targets. It is important for both parties that the partnership begins on a basis of shared trust and confidence.

If it is decided on proceed, the planner should supply the prospective client with an engagement letter that serves as a contract setting on the services to be provided, the costs for these services, and the client’s duties during the financial planning process..

2 – Gather Information & Set up Goals

To be effective, the financial planner must gather a substantial amount of information about the customer. The information gathered can be either quantitative (e. g., financial information about the client’s income, expenditures, and assets) or qualitative (e. g., non-financial information about the client’s risk threshold, expectations as to future standards of living, and health of the customer and family members). Both the immediate and long-term goals of the client must also be identified. Such goals might be to have “adequate income in retirement, ” or to “provide for the child’s education. ” Once objectives have been determined, it is essential to prioritize or rank them in order of importance. For more on financial planning Dayton take a look at our own web site.

Some of the key financial and legal documents that are usually secured throughout the data-gathering phase include:

Wills, trusts, and powers of attorney
Private financial statements
Retirement strategy statements, brokerage account statements, and mutual fund statements
Insurance policies (life, disability, health, and property plus casualty)
Divorce settlements
Federal plus state income tax returns
Buy-sell agreements
Step 3 – Analyze Information and Develop Plan
Here is where the advisor takes the information obtained, considers the particular client’s goals, and develops economic plan intended to help the client attain his or her goals. To assist in the process, the particular planner will often use computer programs to supplement his written analysis and recommendations.

At a minimum, a comprehensive evaluation generally includes a review of assets, liabilities, current and projected income, and insurance coverages, and investments. If authorized by the client, the planner can also seek the assistance of other professionals. (e. g. attorney or insurance agent).

Step 4 – Present Plan

This is where the financial planner meets using the client, explains the recommendations, and offers the client with a copy of the written plan. Once the client has an opportunity to review the plan, the plan may be revised based on client feedback. Key elements of a written financial plan are likely to range from the following:

Review of the client’s objectives
Analysis of the client’s current situation
Specific recommendations from the financial planner for helping the client get through where he is to where he wants to be (i. e. to help him achieve his goals).
An action plan made to implement the financial plan
Phase 5 – Implement Plan
This stage is probably the most important of all. When the client fails to follow through on the planner’s recommendations, the plan will be useless. Program implementation involves acting on the recommendations identified in step 4. This may involve a variety of tasks, including the purchase and sale of investments, modification of insurance coverages, adoption of legal instruments, and changes in spending and financial savings habits. It may also include working with various other professionals (e. g., check with the attorney to ensure the new will continues to be drafted).

Based on the nature of the partnership, some of the action items will be performed by the financial planner, while others will be the responsibility of the client. Most organizers will handle implementation duties for an additional fee.

Step 6 – Monitor Plan

Because circumstances alter, financial plans need to be monitored to make sure they remain relevant and helpful to the client. This step involves evaluating the potency of the plan in achieving the customer’s objectives. Unsatisfactory progress or efficiency requires that corrective action be used (e. g., a new investment combine must be selected).

Step 7 – Review Plan

Financial planning is an ongoing process. Because a client’s private circumstances will change, the financial program needs to be changed accordingly. Clients marry, (or divorced), have new kids, experience changes in health, alter jobs, etc . All of these changes may require updates to the financial plan so that the client stays on track to meet his goals.

Also, as the economy changes, assumptions underlying the original plan need to be re-evaluated to make sure they are still relevant in the current economic environment.