Steps of the financial planning methodology

The process of financial planning is a series of steps to be undertaken to achieve the objectives of the client.

The Financial Planner will help the client to set realistic goals and prepare a series of alternative strategies for achieving these goals. Each strategy from to tax planning to investment planning will operate within the overall framework and will consider all other strategies in order to achieve the best overall results.

This step aims to identify where the client wants to go to the customer in relation to his economic status and lifestyle. The Financial Planner in collaboration with the client will determine personal and financial goals, needs and priorities, before proceeding to any suggestions and their implementations.

Because each customer usually has several objectives that he wishes to achieve, these goals should be prioritized in order of importance. Depending on the nature of the target various constraints or limitations that may exist must be taken into account. Some difficulties such as the identification of the available resources, or the recording of the customer’s peculiarities, may be largely identified in the process of data collection.

It includes qualitative and quantitative elements of the economic situation of the client. A professional Financial Planner will collect and analyze data on income, expenses, taxes, insurance coverage, retirement plan, wills trusts, investments and other information related to the overall economic situation of the client.

Data collection is usually done by using a special questionnaire. The possible use of computer programs help in processing and storage of the client’s data.

The information gathered is analyzed in order to fully understand the overall situation of the client.

When the Financial Planner has collected all necessary data, he will analyze them to identify the strengths and weaknesses of the financial situation of the client, always in relation to the preset objectives. The identification of existing and future problems that will affect the achievement of the client’s objectives is one of the most important aspects of the methodology. At this stage of the process the Financial Planner is considering various possible options regarding products and strategies, and evaluates according the customer’s data.

Then the Financial Planner makes an assessment of alternatives to present a comprehensive plan of proposals on the customer’s needs. Next, the Financial Planner selects the appropriate strategy to achieve the objectives of the client, taking into account the existing economic environment and whether there are sufficient resources to achieve the objectives of the client.

Based on the understanding of what the customer wants in the future and the current economic situation, a comprehensive economic study is created to help achieve the client’s objectives.

The Financial Planner presents to the customer a comprehensive financial strategy along with his proposals. The Planner together with the client (with the help of other specialists if needed) is putting in practice the financial strategy. Following the plan, the proposals are implemented by using the resources allocated for this purpose. Often this plan is accompanied by a timetable for the implementation of these proposals.

The role of Financial Planner as a coordinator of the activities of the client and of other experts is crucial. Once the client has reached his decisions the Financial Planner will help him to implement these decisions. Without implementation the financial strategy is completely useless.

The last stage in the financial planning process is periodically to review and if necessary, redesign the program.

Like a particular medical treatment does not guarantee the future health of an individual, in the same way a specific financial strategy does not exactly predicts the future economic situation of a client.

The application process is continuously being closely monitored to ensure alignment with the objectives of the client. Periodic revisions are made to check the discrepancies or changes in the state of the client. If there are any significant changes since then the financial strategy and objectives are revised accordingly. If this happens, the Financial Planner should refer to the first step of the process and design a new financial strategy and to redefine its objectives, according to the new data. In some cases the need to be adjusted completely from the original design is possible..