1 The 7 Practice Standards of the Financial Planning Process Flashcards
Financial Planning Step 1
UNDERSTANDING THE CLIENT’S PERSONAL AND FINANCIAL CIRCUMSTANCES
1. Obtain qualitative & quantitative info: “Describe to the Client the qualitative and quantitative information concerning the Client’s personal and financial circumstances needed to fulfill the Scope of Engagement and collaborate with the Client to obtain the information.”
2. Analyze information to assess the Client’s personal and financial circumstances.
3. Address incomplete information. If unable to obtain information necessary to fulfill the Scope of Engagement, limit it to those services you are able to provide or terminate the Engagement.
Confirm info is accurate + address any inconsistencies with the Client.
Financial Planning Step 2
IDENTIFYING AND SELECTING GOALS
1) Identify potential goals.
* Discuss with the Client your assessment of the Client’s financial and personal circumstances.
* Develop reasonable assumptions and estimates.
* Discuss with the Client and apply reasonable assumptions and estimates.
2) Select and prioritize goals.
* Note the impact that selecting a particular goal may have on other goals.
* Discuss with the Client any goals the Client has selected that you think are unrealistic.
Consider discussing w/ Client how changes to assumptions/estimates may affect their goals.
Consider providing assumptions & estimates to Client in writing (life expectancy, inflation rates, tax rates, investment returns, etc).
Financial Planning Step 3
ANALYZING THE CLIENT’S CURRENT COURSE OF ACTION AND POTENTIAL ALTERNATIVE COURSE(S) OF ACTION
1) Analyze the current course of action.
* Analyze material advantages and disadvantages of the current course of action.
* Analyze whether the current course maximizes the potential for meeting the Client’s goals.
2) Analyze potential alternative courses of action.
* When appropriate, consider and analyze one or more potential alternative courses of action, including their material advantages and disadvantages, whether they help maximize the potential for meeting the Client’s goals, and how they integrate the relevant elements of the Client’s personal and financial circumstances.
Always consider whether the current course already goal-maxes.
Financial Planning Step 4
DEVELOPING THE FINANCIAL PLANNING RECOMMENDATION(S)
For each rec you must consider:
1. Assumptions & estimates used
2. Basis for making the rec, including (a) how it’s designed to help them goal max, (b) anticipated material effects, and (c) how it integrates the relevant elements
3. Timing & priority of the rec(s)
4. Whether the rec is independent or must be implemented with another
Document the basis for your recs.
Consider whether to modify previously selected goals.
Financial Planning Step 5
PRESENTING THE FINANCIAL PLANNING RECOMMENDATION(S)
Present:
1. The rec(s)
2. Assumptions & estimates used to develop the rec(s)
3. Basis for the rec(s), including (a) how it’s designed to help them goal max, (b) anticipated material effects, and (c) how it integrates the relevant elements.
4. Timing & priority of the rec(s)
5. Whether the rec(s) are independent or must be implemented with another
Consider modifying previously selected goals.
Document your rec(s).
Present in a format they understand.
Financial Planning Step 6
IMPLEMENTING THE FINANCIAL PLANNING RECOMMENDATION(S) (UNLESS SPECIFICALLY EXCLUDED FROM SCOPE OF ENGAGEMENT)
First, address implementation responsibilities.
Then for your responsibilities…
1. Identify, analyze, & select actions/products/services to implement the rec(s) (consider the advantages and disadvantages relative to reasonably available alternatives).
2. Rec the actions/products/services (discuss the basis, timing & priority, and any conflicts of interest).
3. Select & implement actions/products/services (discuss any selection that deviates from your rec [what does that mean?])
You’re reponsible for implementation unless specifically excluded from the Scope.
Consider providing Client with a written implementation plan.
Consider documenting actions/products/services that deviate from the rec(s).
Financial Planning Step 7
MONITORING PROGRESS AND UPDATING (UNLESS SPECIFICALLY EXCLUDED FROM SCOPE OF ENGAGEMENT)
**1. Establish monitoring & updating responsibilities. **(which A/P/S you aren’t monitoring; how/when you’ll monitor A/P/S; Client’s responsibility to inform you of changes; how/when you’ll update the recs)
2. Monitor the Client’s progress. (analyze at appropriate intervals and review with the Client
3. Obtain current qual & quant info.
4. Update goals, recs, or implementation decisions.
Consider documenting your implementation, monitoring, & updating efforts.
