The Methodology of Financial Planning:

  1. Establishing the client-planner relationship.
  2. Gathering client data, determine client goals and expectations.
  3. Determine the client's financial status.
  4. Develop and present the financial plan.
  5. Implement the financial plan.
  6. Monitor the financial plan.

The six steps of the financial planning process are completed in sequential order because each step depends on the previous step. The elimination of any step may result in the loss of direction and, possibly, the loss of an inappropriate financial strategy.

Upon completion of the financial plan the financial planner must  monitor the plan on a continuous and ongoing basics

Modifications to the plan must be made as changes in situations and circumstances require.

Establish Financial Goals

1. Establish Financial Goals

Goal setting is critical to creating a successful financial plan, but few people actually set clearly defined goals. By leading the client through the goal setting exercise, the financial advisor not only helps establish reasonable, achievable goals, but also sets the tone for the entire financial planning process.

2. Gather Relevant Data

There are many client concerns that a financial advisor may need to address. Part of the information gathering process is defining the client’s current financial situation, setting a realistic plan on achieving the client’s desired future financial situation, and setting a time line on when the goal should be achieved.

Gather Relevant Data
Analyze the Data

3. Analyze the Data

Once the relevant information about the client has been gathered, organized, and checked for accuracy, consistency, and completeness, the financial advisor’s next task is to analyze the client's present financial condition.

4. Develop a Plan for Achieving Goals

After the information about the client has been analyzed and, if necessary, the goals to be achieved have been refined, the advisor’s next job is to devise a realistic financial plan bringing the client from his or her present financial position to the attainment of those goals.

Develop a Plan for Achieving Goals
Implement the Plan

5. Implement the Plan

The mere giving of financial advice, no matter how solid the foundation on which is it based, does not constitute financial planning. A financial plan is useful to the client only if it is put into action. Therefore, part of the advisor's responsibility is to see that plan implementation is carried out properly according to the schedule agreed upon with the client.

6. Monitor the Plan

The relationship between the financial advisor and the client should be an ongoing one. Therefore the sixth and final step in the financial planning process is to monitor the clients plan. Normally the advisor meets with the client at least once each year to review the plan, or more frequently if changing circumstances warrant it. The first part of this review process should involve measuring the performance of the implementation vehicles. Second, updates should be obtained concerning changes in client's personal and financial situation. Third, changes that have occurred in the economics, tax, or financial environment should be reviewed with the client.

Monitor the Plan