The Financial Planning Process: 5 Essential Steps}

June 21, 2021 By Admin

The Financial Planning Process: 5 Essential Steps


Hank BrockThe financial planning process involves five basic steps. After the initial meeting with your financial planner, the five steps to the financial planning process include: data gathering, plan preparation, plan presentation, plan implementation, and on-going monitoring.

1. Financial Planning Process: Data gathering.

The data gathering session often takes place in your home. It is a whirlwind of information, and may take the planner anywhere from 2 hours to all day to finish. The planner will want to inspect all of your documents. This includes tax returns, income statements, pensions, wills, trusts, insurance policies, investments, brokerage accounts, bank statements, retirement plans, and other tangible pieces of information.

But there’s also subjective information, such as: What are your lifestyle goals? How do you want to distribute your estate? At what age do you want to retire? How much income do you want during retirement? Then there are the assumptions that need to be figured into the whole process. What’s going to happen to interest rates? Where is the economy headed? How much inflation will occur? Your planner will want your feelings on these things to see if expectations are realistic.

Lastly, your planner will look at your personal attitudes towards risk, taxes, and the importance of simplicity in your financial affairs. The goal of the data gather is for your planner to have a good understanding of where you are now and where you want to be in the future.


2. Financial Planning Process: Plan preparation.

Preparing your plan typically takes three to four weeks, as the planner does an analysis — the diagnostic work. The planner knows where you are, and where you want to be. Now they need to figure out the most efficient way to get you there.

Your planner’s recommendations may be varied and come in the form of partnerships, trusts, corporations, etc… The pros and cons of each scenario will be examined and then prepared into a written report. This report will include major strategic recommendations, as well as minor tactical suggestions. Once complete, all of the parts will fit together to create a comprehensive financial plan.

3. Financial Planning Process: Plan presentation.

After all the recommendations are in writing, your planner will present them to you. During the first interview, they’ll present the plan to you and review the major areas. Then you’ll take the plan home. Read it. Study it. Go over it with your spouse. Jot down any questions you may have about it.

When you get back together with your planner, you’ll go over the plan in detail. They’ll answer your questions. Clarify details. As you agree on each recommendation, your planner will prioritize them into an “Implementation Check List.” It’s simply a “To Do” list for you and your planner.

4. Financial Planning Process: Plan implementation.

The first three steps will likely be completed in about a month’s time.

The next step, step four, generally takes much longer – typically around five or six months. During this period, your planner will discuss topics such as tax planning, retirement planning, estate planning, and insurance issues. Other experts, such as attorneys, may be brought in to work on specific aspects of your plan.

In the end, your plan might have as many as 25 recommendations. A few recommendations will be major, broad, strategic recommendations, each worth thousands of dollars to you. The remainder will be fine-tuning recommendations — crossing the T’s, dotting the I’s, and making sure your financial affairs are really in order.

5. Financial Planning Process: On-going monitoring and maintenance.

In the final step of the financial planning process, your planner should be retained to help provide periodic updates and on-going advice. You should do a couple of tax planning meetings each year, review your portfolio, update insurance, etc… You’ll often find little questions that you’ll want to run past your advisor. Because your planner knows your unique situation, you will be alerted to changes in conditions that directly affect your plan.

Hank Brock is president of

Brock and Associates, LLC

, a financial and business planning firm. Visit us for more information on

the Financial Planning Process

and other planning topics.

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