Financial Planning Domains Flashcards
The financial planner should outline what are the responsibilities of the planner and what are the responsibilities of the client. The planner should disclose the length and scope of the relationship as well as the method and magnitude of planner compensation. Establishing the relationship helps guide the decision making process.
Domain 1 Establishing and defining the client-planner relationship
The financial planner should gather client data, including broad specific goals and objectives. Ask the client about risk tolerance measures. Documents such as tax returns, wills, trusts, account statements and pay stubs may need to be collected to truly establish constructive outcomes.
Domain 2 Gathering Information Necessary to Fulfill the Engagement
Data gathered in the second step must be analyzed and synthesized within the context of meeting goals. This step of the planning process accounts for significant variations among planners. Planners without expertise in a specific planning area may find a benefit in including a technical staff or teammates when analyzing and evaluating client goals.
Domain 3 Analyzing and Evaluating the Client’s Current Financial Status
The financial planner develops recommendations based on evaluation (step three) of data collected (step two). Planners present recommendations and alternatives that address client goals and concerns. Presenting more than one recommendation to a client provides alternative courses of action and may result in additional fact finding and discovery on the part of the planner. After making recommendations, the client may provide or revise their goals (step two) which will require additional analysis (step three)
Domain 4 Developing the recommendations
The financial planner ensures recommendations are communicated and understood by the client. The client gives acceptance of the recommendations, and the planner and client both are cognizant of the direct and indirect consequences of actions taken. When presenting recommendations to a client, planners often need to revisit previous steps in the planning process. Communications may be live, virtual, or over the phone, and multiple communication sessions are likely to occur before the planning process moves to implementation. Financial professionals should take particular care when working with vulnerable populations to ensure they understand the communications.
Domain 5 Communicating the Recommendations
After agreement is reached between the client and planner on a course of action, the planner outlines how implementation will occur. If implementation results in additional planner compensation the form and magnitude of compensation needs to be disclosed to the client. Depending on the business model of the planner, the client may implement his or her own recommendations or the planner may implement recommendations on behalf of the client. Any conflict of interest of the planner through the implementation of a product should be disclosed to the client.
Domain 6 Implementing the recommendations
This step of the planning process is limited by the first. The client and planner need to agree on monitoring responsibilities when establishing the relationship. Planners who entered into a long term relationship with their clients have an obligation of following up and updating the plan. Monitoring may occur on a time weighted basis, such as monthly or annually, or monitoring may occur on a strategic basis, such as when asset allocation become misaligned.
Domain 7 Monitoring the recommendations
Financial planners, insurance agents, stock brokers and other financial service professionals must be constantly vigilant of their dynamic regulatory environments. Today’s regulatory environment changes quickly; standards of care due to clients required exploration and are undergoing regulatory challenges.
Domain 8 Practicing within Professional and Regulatory Standards
