Personal financial planning focuses on the individual. In
order to best serve their individual client's needs, the professional
financial planning practitioner employs The Total Financial
Planning Process comprising these six distinct steps:
- The financial planner clarifies the client's present
situation by collecting and assessing all relevant financial
data such as lists of assets and liabilities, tax returns,
records of securities transactions, insurance policies,
will, pension plans, etc.
- The financial planner helps the client identify both financial
and personal goals and objectives as well as clarify that
person's financial and personal values and attitudes. These
may include providing for children's education, supporting
elderly parents or relieving immediate financial pressures
which would help maintain the client's current lifestyle
and provide for retirement. These considerations are important
in determining the client's best financial planning strategy.
- The financial planner identifies financial problems that
create barriers to achieving financial independence. Problem
areas can include too little or too much insurance coverage,
or a high tax burden. The client's cash flow may be inadequate,
or the current investments may not be winning the battle
with changing economic times. These possible problem areas
must be identified before solutions can be found.
- The financial planner provides written recommendations
and alternative solutions. The length of the recommendations
will vary with the complexity of the client's individual
situation, but they should always be structured to meet
the client's needs without undue emphasis on purchasing
certain investment products.
- A financial plan is only helpful if the recommendations
are put into action. Implementing the right strategy will
help the client reach the desired goals and objectives.
The financial planner should assist the client in either
actually executing the recommendations, or in coordinating
their execution with other knowledgeable professionals.
- The financial planner provides periodic review and revision
of the client's plan to assure that the goals are achieved.
A client's financial situation should be re-assessed at
least once a year to account for changes in that person's
life and current economic conditions.
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