The Financial Planning Process

The Financial Planning Process

1. Value Proposition: Getting Started

In this first step, your CFP^® professional or QAFP^® professional will explain the scope of their services and the value of taking part in the financial planning process. They will discuss how they can support you and what financial planning involves, from creating a plan to helping you put it into action and keeping it up to date as your life changes.

2. Terms of Engagement: Making an Agreement

You and your planner agree on how you'll work together. You'll discuss:

• What services you need
• Will they help you with a need in one specific area, or are they drafting a comprehensive financial plan that considers your whole financial picture?
• Will they help put the plan into action and continue to monitor and modify your plan for you, or will they create a roadmap for you to follow and monitor on your own?
• What fees are involved and how does your planner get paid?

While not mandatory, developing a Terms of Engagement document is considered to be a valuable step. It can help everyone understand their role in the financial planning process, including helping you better understand what to expect from your financial plan and your financial planner.

3. Discovery: Learning About You

Here, your CFP professional or QAFP professional asks questions and gathers information to fully understand your situation. You’ll discuss short and long-term goals—what do you want to achieve and where do you want to be in the next few months or years?

As part of the discovery process, your planner will collect information about your current financial situation, such as your income, expenses, assets, and debts. You’ll discuss your beliefs and attitudes towards money, life, and what is important to you.

Your CFP professional or QAFP professional learns about what you want to achieve. They explain how they can help you reach your goals and plan for the short and long-term. This step can help both the planner and client understand if they're a good fit to work together, and ensures the planner knows what’s needed to create the right plan for you.

4. Analysis: Assessing your Situation

Now it’s time to carefully look at your options. Your planner will look at different ways to help you reach your goals and figure out which strategies might work best for your situation. This could mean discussing whether to rent or buy a home, move jobs, mitigate the impacts of a life change such as a relationship ending or a change in health, or consider other life decisions to help you achieve your goals.

5. Recommendations: Creating and Presenting Your Financial Plan

Based on the analysis, your CFP professional or QAFP professional will suggest specific actions to help you meet your goals. These recommendations are personalized to your unique situation and include guidance on timing and how different strategies work together. Your planner will also explain the pros and cons of each option, so you can make informed decisions with confidence.

What is a Financial Plan?

6. Implementation: Taking Action

This is when you put the plan into motion! Remember, without taking action, even the best plan won’t help you reach your goals.

Now, depending on the terms of your engagement, your CFP professional or QAFP professional may help you take these steps or you may do them on your own. This might involve working with other professionals as well, like lawyers or accountants.

7. Monitoring: Checking Progress

Your plan may need adjustments over time. If ongoing monitoring is part of your agreement, your CFP professional or QAFP professional will review your financial plan with you and update it regularly as your life changes to keep it on track. Monitoring and review may include updating the scope of your relationship with your planner, noting any new or revised assumptions and recommendations, and identifying and putting specific steps into action.