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Financial Planning

The Financial

          Planning     

               Process

What Is Financial Planning?

Financial Planning Is a Process

Financial planning can be defined conceptually as a process that accomplishes both of the following:

· ascertaining the client’s financial goals
· providing a plan for achieving the client’s goals

the financial planning process has six steps:

(1) establish financial goals,

(2) gather relevant data,

(3) analyze the data,

(4) develop a plan for achieving goals,

(5) implement the plan, and

(6) monitor the plan.

 

 

 

 

 

 

 




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How Is Financial Planning Conducted?

Single-Purpose Approach

Some advisors take the position that the simple selling of a single financial product or service to a client in order to solve a single financial problem constitutes financial planning. Clearly, these advisors would be incorrect if the financial planning process was not used to determine whether the problem their product solves is, in fact, the specific client’s financial problem and if so, whether it is the most appropriate product or service for solving that client’s problem. In this case, the advisor would be involved in product sales, not financial planning.
However, if an advisor sells a client a product to implement the recommendation of a plan developed according to the financial planning process and approved by the client, the service provided by the advisor constitutes financial planning.

 

Multiple-Purpose Approach

Client financial needs and financial products and services are often seen as falling into one of three basic categories:

1) Insurance planning,

2) Tax planning, and

3) Investment planning.

Rather than taking a single-purpose approach of just solving a single financial problem with a single financial product or service, many financial advisors take a multiplepurpose approach by dealing with at least a large part of one of these categories, and perhaps some aspects of a second category.

Comprehensive Approach

Still other advisors take a comprehensive approach to providing financial planning services, Comprehensive financial planning considers all aspects of a client’s financial position, which includes all the client’s financial needs and objectives, and utilizes several integrated and coordinated planning strategies for fulfilling those needs and objectives.

The two key characteristics of comprehensive financial planning are

· that it encompasses all the personal and financial situations of clients to the extent that these can be uncovered, clarified, and
  addressed through information gathering and counseling
· that it integrates into its methodology all the techniques and expertise utilized in more narrowly focused approaches to
  solving client financial problems.

MOSTLY WHAT PEOPLE PLAN FOR

A survey conducted by the CFP Board of Standards identified the following areas of specialization which, in turn, give an indication of the types of services provided by advisors to clients:

  • · investment planning/advice—90 percent  
  • · pension/retirement planning—87 percent  
  • · comprehensive planning—73 percent
  • · estate planning—73 percent 
  • · portfolio management—67 percent        
  • · income tax planning—60 percent
  • · insurance planning—59 percent 
  • · education planning—55 percent             
  • · elder/long-term care planning—46 percent
  • So, financial planning is a regulated and disciplened continous process which needs to be monitored professionally. Thus its advised to hire a professional planner for the same so that you never miss your life cycle goals.

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