Financial Planning is a scientific process to ascertain needs, goals and aspirations of your clients and then recommend to them appropriate solutions from various financial product providers so that the client leads a disciplined, stress free and successful financial life.
Financial planner is like a doctor who first diagnoses the symptoms, looks into the patient's medical history and then prescribes the right medicine for treatment. The financial planner will first ask questions from his prospective client, then formulate a robust financial plan and execute it.
Financial planner's relationship with the client is not transactional. Instead, it is a lifelong relationship, sometimes, spanning across generations.
Here are the six essential steps for implementing the financial planning process in a correct manner.
1. Know Your Client
Financial planner must take all personal details of his prospective client like his profession/occupation, educational background, family background, details of dependent family members and personal contact details like email Ids, mobile phone number, land-line number, current address and permanent address. Likewise, financial planner should also introduce himself by sharing professional background, experience, contact details and terms of engagement.
2. Gather the data
After creating a rapport with the client, financial planner should ask for details of existing investments, ongoing insurance policies and the list of future financial goals including the time horizon and recommend funds required to achieve those goals comfortably. Financial planners may also use risk profiler to find out the risk appetite, as it will help them in recommending right set of solutions commensurate with client's risk taking ability.
3. Construct the plan
Financial planner should proceed to construct a detailed financial plan, which should include cash flow forecast and a snapshot of future scenarios. Generally, financial planners use time tested software to compile the plan. It is generally a document having graphs and descriptions.
4. Present the financial plan to the client
This is a crucial step in which financial planner should ensure that the financial plan created by him is clearly understood by the client. He should use simple language and avoid jargons to ensure that client is very confident as to how the financial plan will work for the accomplishment of his various upcoming goals. The plan should preferably be presented to both the spouses together so that both the husband and wife are involved in the process.
5. Execute the plan
Every financial plan will have several recommendations around investments in a few select mutual fund schemes or bonds and suitable life insurance and health insurance policies. Financial planners must execute the recommendations prudently and in the best interests of the client.
6. Constantly review the plan
After a plan has been implemented, it is imperative that the same is reviewed at regular intervals, which may be twice a year or quarterly. Clients' financial circumstances may keep on changing and hence it is important that financial plan is continuously monitored and changes made as and when required.
If the above-mentioned six steps approach is followed religiously, the relationship between financial planner and the client will be a long lasting one.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.