One of the most gratifying things about being a financial planner is when I have an opportunity to describe what a financial planner actually does to people who are misinformed by advertising and traditional media. The conventional view of financial planners for a lot of people is an insurance company salesman, a stockbroker, or something in between. That is to be expected given the national marketing from the traditional investment and insurance companies. Throw in CNBC’s all day coverage of what they feel the hot stock is or what the Federal Reserve will or will not do and you have a recipe for confusion and misinformation about the industry.

Over the past weekend I was at a get together with some friends that I have known for some time.  As they all know what I do for a living I usually get the standard investment focused questions like “What is up with the stock market?”, “What would you buy now?”, or my favorite “Should we sell everything and buy later?” Why do I get questions like that? Because they think that ALL I do is investments for people, timing the market, etc.   But this time one of my friends, Cindy, asked me a question that I had not heard before from anyone in the group of friends. She asked me about my process I use when I work with clients. After my initial shock wore off I asked her why she was curious. She said that she and her husband needed help and that she was looking into hiring a financial planner.

I was really happy that she asked the question and it allowed me to give her, as well as a few others who were listening in some information about the Financial Planning process I use as well as explain the fiduciary standard (a blog for another time). I let them know that I and other CFP® professionals will engage clients using the six steps in the financial planning process.

There are six steps in the financial planning process as defined by the CFP® Board.

  1. Establish the Relationship – The planner will explain their services defining what the responsibilities are for a client and what the responsibilities are for the planner. This is usually done just before the planner will gather data from a prospective client and inquire about the clients goals for their money are, but this could be done immediately after gathering data. It will often depend on how the initial conversation flows.
  1. Gathering Information – This is where a client will share with the planner what their current financial situation is and how they would prefer it to be. This is also the step where a planner will request any important documentation from clients that will aid in the development of the plan such as brokerage statements, bank records, insurance certificates, wills and trusts, etc.
  1. Analyze and Evaluate – From there a CFP® professional will then consider all aspects of your situation evaluating the information provided to them. Topics analyzed include assets, liabilities, and cash flow. They also include what a client’s current insurance, tax and investment situations are. This information allows the planner to paint a picture of a client’s situation. By painting this picture the planner may only then begin to…….
  1. Developing Recommendations for the plan – During this stage the CFP® professional will put the pieces together and explain to the client the reason they have for making the recommendations they are giving. The planner will also at this time listen to the clients concerns and objections to the recommendations, if any, and revise the recommendations if needed.
  1. Implementation of Recommendations – Next, the planner and client will agree on how the recommendations are to be implemented. Some recommendations are carried out by the planner, and some may be carried out by the client with the planner acting as a liaison with other professionals such as attorney’s, insurance representatives, etc . The planner could also act as a coach for the client helping them navigate such topics as obtaining a mortgage, buying a car, or opening a bank account.
  1. Monitoring and Benchmarking – As clients work toward their goals, they along with their CFP® professional will need to decide who will be monitoring progress to make sure the plan is staying on track. This can be done several ways. Some clients prefer to have one set of meeting with a planner and then carry out everything themselves. This works for clients who are engaged in their financial lives and are just looking for a little nudge in the right direction from a planner.

I informed Cindy know that I prefer to work with clients in a more all-inclusive manner where the clients work with me on a continuous basis during the year and year after year. A client’s finances should function within their life and their goals, not the other way around. By having an ongoing relationship with a client the financial plan then becomes a process and not a singular occurrence.

This will allow me as the planner to integrate all of the financial aspects of a client’s life which aids in the functionality of their finances. We do this by having regularly scheduled appointments with clients. In addition to regularly scheduled meetings with clients each year, clients are free to reach out to me whenever they have a question or need help.   By having both regularly scheduled meetings as well as unlimited access clients can feel comfortable knowing they will have help whenever a new life event occurs.

When working with a client we will revisit the planning process regularly by gathering new information from the client as life events happen. We will then analyze the new information, and along with the client, develop recommendations to meet their financial needs. It is a collaborative process with the client. This allows for clients to know they are vested in making their finances function in their life and allows me the opportunity to educate clients about their finances.

After the discussion I came away with a good feeling that I was able to shine a light on how the financial planning process works and the advantage of working with a Fee Only CFP® professional.