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Financial Planning The art of presenting a financial plan

The art of presenting a financial plan

A primer on how to articulate the financial plan to your clients.
Nilesh Soman Dec 16, 2016

You create a plan keeping in mind the client’s best interests. This plan is based on the information gleaned by you in your meetings with them. However, they may not be able to understand the nuances of this plan and may question you if they don’t achieve their goals. Thus, articulating the plan to clients as unambiguously as possible is essential to avoid any potential conflicts.  It is in this context that presenting the plan in writing is a must.

A written plan allows the client to:

  • Go through the plan at his leisure
  • Read the plan as many as possible to understand it thoroughly
  • Raise any doubts that may raise
  • Co-relate the different strategies discussed in the plan

A written plan helps the financial planner because it allows her to explain in detail the rationale behind her recommendations. It also allows the planner to clearly state the assumptions on the basis of which the plan was created, thereby avoiding misunderstanding or misrepresentation.

Elements, structure and components of a financial plan

Part/Component

Details/contents

Financial plan summary

Brief overview of the key recommendations and potential outcomes of the plan

Current personal financial statement

Statement of net worth, statement of income & expenditure and cash flows statement

Financial objectives

Financial goals and objectives of the client along with their respective priorities

Assumptions

Assumption made by the financial planner in making the plan. These are generally related to inflation, rate of interest, increase in income, tax rates etc.

Financial plan strategy

The strategy on which the financial plan has been based. This is based on the client’s risk profile and investment preferences

Recommendations

Specific and detailed recommendations in different areas like cash flow management, emergency reserve creation, insurance, retirement planning, estate planning , tax planning recommendation should be accompanied by the rationale for the same

Projections

The projections derived from the recommended strategy. These are based on assumptions presented above

Fees and commissions

Charges of the financial planner. Fees should be broken into different heads such as preparing the plan, implementing the plan, monitoring and periodic review of the plan

Summary of recommendation

Summary of detailed recommendations

Action plan

Action points derived from the recommendations

Authority to proceed

Authority letter addressed to the financial planner giving him the right to proceed with the implementation of the plan

Disclosures

Full disclosure of any commissions that the planner stands to earn if the plan is implemented. Risks of following the recommended investment strategy and any other areas of potential conflicts of interest

Disclaimers

Disclaimer that attempts to restrict liability of the financial planner for events that are outside her control

Supporting Documentation

Financial calculations and analysis to support the recommendations

 

Familiarizing the client with the plan will involve the following process:

  1. A detailed discussion of the plan in a face-to-face meeting       
  2. Explaining cost associated with the preparation, implementation and monitoring of the plan
  3. Ensuring clients understanding
  4. Making changes, if desired
  5. Obtaining client’s agreement to the recommendations
  6. Obtaining letter of authority
  7. Implementing the plan

 

Presenting your plan in detail and articulating how you will go about achieving it will go a long way in strengthening your relationship with clients.

 

Nilesh Soman is Founder, Gurukul Institute of Capital Market, Pune

 

The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.   

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