Financial Planning Process Flashcards
Personal financial planning or financial planning
The process of determining whether and how clients can meet their goals through proper management of financial resources
Client
A person, persons, or entity who engages a practitioner and for whom Professional Services are rendered. A practitioner is engaged when an individual, based upon the relevant facts and circumstances, reasonably relies upon information or Services provided by that practitioner.
Where the services of the practitioner are provided to an entity ( corporation, trust, partnership, estate etc..) the client is the entity, acting through its legal authorized representative.
The financial planning process
A series of steps with each step following logically from the one that preceded it. The CFP board’s seven step financial planning process is used. The financial planning process is not limited to the steps.
Step 1. Understanding the client’s personal and financial circumstances.
And gathering information necessary for engagement.
A. Identify the client.
B. discuss financial planning needs and expectations of the client.
C. discuss the financial planning process with the client.
D. explain the scope of services offered by the cfp and his or her firm.
E. assess and communicate the cfp professionals ability to meet the client’s needs and expectations.
F. identify and resolve apparent and potential conflicts of interest.
G. discuss the client’s responsibilities and those of the cfp professional
H. Define and document the scope of the engagement with the client.
I. provide client disclosures
1. regulatory disclosures
2. compensation arrangements and material conflicts of interest.
Information necessary to fulfill the engagement
Qualitative and quantitative data
Identify the client’s values and attitudes.
1. explore personal and financial needs.
2. assess clients level of knowledge and experience.
3. assess risk exposures ie longevity, economic, liability, healthcare.
4. Assess the client’s risk tolerance
B. Gather Data
1. Summary of assets
2. Summary of liabilities
3. Summary of income and expenses
4. Estate planning documents
5. Education plans and resources
6. Retirement plan information
7. Employee benefits information
8. Government benefits like Social Security
9. Special circumstances legal documents and agreements family situations
10. Tax returns
11. Investment account statements
12. Insurance policies
13. Closely-held business documents shareholder agreements
14. Information regarding inheritances or other large sums
C. Recognize need for additional information
Step 2
Identify and select Goals
Identify goals mutually agreeable to the client and planner.
Prioritize goals
Quantify goals in terms of time horizon and dollars
Educate the client relative to unrealistic goals and expectations.
Quantitative information
Factual information
Social Security numbers Investments wills and trusts
