Financial Planning Process

Question 1

Describe the seven steps to the financial planning process

Answer 1

1. Understanding the client’s personal and financial circumstances
2. Identifying and selecting goals
3. Analyzing the client’s current course of action and potential alternative course(s) of action
4. Developing the financial planning recommendations
5. Presenting the financial planning recommendations
6. Implementing the financial planning recommendations
7. Monitoring progress and updating

Question 2

When must a CFP comply with the Practice Standards?

Answer 2

• When the CFP agrees to provide or provides:
  
  • Financial planning OR
  • Financial advice that REQUIRES integration of relevant elements of the Client’s personal and/or financial circumstances in order to act in the Client’s best interests (financial advice that requires financial planning) OR
• When the client has a REASONABLE basis to believe that the CFP will provide or has provided financial planning

Question 3

Understanding the Client’s personal and financial circumstances

Answer 3

• Obtaining qualitative and quantitaive info
• Address incomplete information necessary to fulfill scope of engagement
  
  • Must limit or terminate if you can’t get the info needed

Question 4

Identify and select goals

Answer 4

• Must discuss and apply resonable assumptions and estimates that include life expectancy, inflation rates, tax rates, investment returns, etc.

Question 5

Analyzing Client’s Current course of action and potential alternative courses of action

Answer 5

• Analyze current course of action and advantages and disadvantages and whether it maximizes potential for meeting client goals
• Analyze potential alternative courses of action including adv an disadv. and maximzing potential for reaching goals

Question 6

Developiong financial planning recommendations

Answer 6

• Must consider:
  
  • Assumptioms and estimates used to develop recommendations
  • The basis for making the reommednation
  • Timing and priority of recommendation
  • Whether the recommendation is independent or must be implemented with another recommednation

Question 7

Presenting the finanical planning recommendations

Answer 7

• Must present selected recommendations to client

Question 8

Implementing financial planning recommendations

Answer 8

• Address implementation responsbilities
• Identify, analyze and select actions, products and services
• Remember that whomever has the responibility of implenetatoin must recommend and select actions, products, and services