Financial Planning (Fact Finder) (Sample Plan) (Engagement Letter)
What is Financial Planning?
Financial planning is a process that determines how you can best meet your life goals through the proper management of your financial affairs. Key to effective financial planning is the ability to take into account all relevant aspects of your financial situation, and to identify and analyze the interrelationships among sometimes conflicting objectives. It is this unique integration of knowledge and skills across a broad range of topics that distinguishes professional financial planning from other related financial advice.
Financial Planning Process
Financial planning consists of the following six distinct steps. When it's comprehensive financial planning guidance you want, these are the steps that should guide your planner. Be familiar with them. They'll help you get the most out of the process. And remember, it's this big-picture approach that sets financial planners apart from all other financial advisors who may have been trained to focus only on one aspect of your finances.
The Engagement Process (Engagement Letter)
- Explain the services we will provide and the process of planning and documentation.
- Clarify your responsibilities as a client.
- Clarify our responsibilities as your planner.
- DIscuss how and by whom we are compensated.
- Discuss the scope of the client/planner engagement.
- Agreement on how decisions will be made.
Gather data and determine your goals and expectations (Fact Finder)
- Obtain information about your financial resources and obligations through interviews and Fact Finding questionnaires.
- Gather all the necessary documents before giving you the advice you need.
- Define your personal and financial goals, needs and priorities.
- Investigate your values, preferences, financial outlook and desired results as they relate to your financial goals, needs and priorities.
Clarify your present financial status and identify any problem areas and opportunities
- Analyze your information to assess your current situation (cash flow, net worth, tax projections, etc.).
- Identify any problem areas or opportunities with respect to your capital needs, risk management, investments, taxation issues, retirement planning, employee benefits, estate planning and any special needs (i.e. adult dependent needs, education needs, etc.)
Develop and present the financial plan (Sample Plan)
- Develop and prepare a financial plan tailored to meet your goals and objectives, values, temperament and risk tolerance, while providing projections and recommendations.
- Present the plan to you and establish an appropriate review cycle.
- Work together to ensure that the plan meets your goals and objectives.
Implement your financial plan
- Assist you in implementing the recommendations discussed if you want. This may involve coordinating contacts with other professionals such as accountants and lawyers.
Monitor the financial plan
- Agree on who will monitor and evaluate whether your plan is helping you progress toward your goals.
- Contact you to review the progress of the plan periodically and make adjustments to the recommendations required to help you achieve your goals.
Future reviews should include:
- A discussion about changes in your personal circumstances and how they might affect your goals.
- A review and evaluation of the impact of changing tax laws and economic circumstances.
- A review of your life circumstances and an adjustment of the recommendations if needed as those circumstances change through life events such as birth, illness, marriage, retirement, etc.