The process of financial planning is a series of steps that must be carried out to achieve the goals of the client.
The Financial Planner will help the client set realistic goals and prepare a number of alternative strategies to achieve those goals. Each of the planning strategies for tax issues, whether investment, retirement, etc. will take into account all the others, in order to achieve optimal financial results.
The purpose of this step is to determine where the customer wants to go in relation to their financial situation and lifestyle. The Financial Planner determines, together with the client, his personal and financial goals, needs and priorities, before proceeding with any proposal and its implementation. Because each customer usually has many goals that they want to achieve, these goals must be prioritized, in order of importance. Depending on the nature of the target, the various difficulties or limiting factors that may exist must also be taken into account. Some difficulties such as finding, resource availability, or recording customer specifics, can be identified, to a large extent, at the data collection stage.
It includes the qualitative and quantitative data of the financial situation of the customer. A Professional Financial Planner will collect and analyze data on income, expenses, taxes, insurance coverage, retirement plan, will, trust, investments and other information related to the client’s general financial situation.
Data collection is usually achieved using a special questionnaire. The possible use of computers helps in the processing, but also in the existence of comparative data in the future review and revision of data.
The information gathered is analyzed in order to fully understand the overall situation of the customer. Once the Financial Planner has gathered all the necessary data, it will analyze them, in order to identify the strengths and weaknesses in the client’s financial situation, always in relation to the goals that have been set. Identifying existing or future problems that will affect the achievement of customer goals, is one of the most important steps of the methodology. At this stage of the process, the Financial Planner studies the various possible options, in products and strategies, and evaluates them, depending on the data of each customer. The Financial Planner then evaluates the alternatives, to present a complete proposal plan, regarding the needs of the client. The Financial Planner then selects the appropriate strategy in order to achieve the client’s goals, taking into account the existing financial environment and whether there are sufficient resources to achieve the client’s goals and what those resources are.
Based on the understanding of what the customer wants in the future and his current financial situation, a comprehensive financial study is created, which facilitates the achievement of the customer’s goals. The Financial Planner presents to the client the complete financial study, as well as its proposals. Together with the client, or with the help of other experts (if needed), they implement the financial strategy in practice. Following the plan, the proposals are implemented using the resources available for this purpose. This plan is often accompanied by a timetable for implementing these proposals
The role of the Financial Planner as the coordinator of the activities of the client and the other experts, is decisive. Once the client has made his decisions the Financial Planner will help him implement those decisions. Without the implementation of financial strategy, financial planning is a simple data capture.
The final step in the financial planning process is the periodic review and, if necessary, the redesign of the program. The implementation process is constantly monitored closely to ensure alignment with customer goals. Periodic reviews are performed to check for discrepancies or changes in the customer’s financial condition. If there are significant changes then the economic strategy and objectives are revised accordingly. If this happens, the Financial Planner must go back to the first steps of the process, issue a new financial study and redefine the objectives, depending on the new data. In some cases, the original design may need to be completely adjusted, as often endogenous personal factors create new data.