A Comprehensive Financial Plan
Financial planning is not just about what you want to do with your money, but what you want to do with your life. Sometimes it’s a very difficult balancing act between your current needs/desires and your future needs/desires. It’s about finding the right trade-offs that will work for you at every stage of your life. It includes investment planning, asset management and retirement planning of course, but it also includes personal risk management and insurance needs, estate planning, sound day-to-day, year-by-year money management, and sound income tax planning. Most importantly, it’s about how all of those pieces fit together to form the optimum financial plan to make your finances work best for you.
The Financial Planning Process
Financial planning consists of six fundamental components – Financial Management, Tax Planning, Asset Management, Risk Management, Retirement Planning and Estate Planning.
With financial planning, none of the above components are ever dealt with entirely in isolation– it is the integration and interdependencies among these components, as well as the need to analyze and synthesize information presented to formulate strategies, which distinguish financial planning from other forms of financial advice or financial intermediation.
Specific product recommendations or sales are not, in and of themselves, financial planning activities. While the process leading up to a specific product recommendation may well involve some financial planning activity, the actual product recommendation clearly falls outside the scope of financial planning.
The Six Step Process to Financial Planning
Establish the Engagement: Define the Terms of the Engagement
The client and MoneyValue Advisor will define and agree on the scope of the financial planning engagement (“engagement”). Details about each party’s responsibilities, the time frames of the engagement, compensation, and conflicts of interest should be set out in writing in a formal engagement letter or in a Letter of Understanding, signed by both parties.
Gather Client Data: Determine the Client's Goals, Needs and Priorities
MoneyValue Advisor will discuss the clients’ financial goals, needs and priorities with them before making and/or implementing any recommendations. The Advisor will then gather all quantitative and qualitative information relevant to the engagement. Sufficient information should be obtained from the client before making and/or implementing any recommendations.
Analyze the Client’s Financial Information: Analyze the Information with Respect to the Client's Goals, Needs and Priorities
MoneyValue Advisor will then analyze all information to determine the client's financial situation, and evaluate to what extent the client's goals, needs and priorities can be met under the current circumstances.
Develop and Present the Financial Plan: Identify and Evaluate the Financial Planning Strategies
MoneyValue Advisor will identify and evaluate financial planning strategies to achieve the client's stated goals, needs and priorities. Advisor will then develop recommendations to achieve the client's stated goals, needs and priorities, and should communicate these recommendations so that the client understands them.
Implementation of the Financial Plan: Agree on Implementation Action, Responsibilities and Time Frames
The client and MoneyValue Advisor should agree on implementation action, responsibilities and timeframes. The client and the Advisor professional will then act to implement the approved recommendations.
Review the Financial Plan: Agree on Responsibilities and Time Frames for the Review and Re-Evaluation of the Financial Plan
The client and MoneyValue Advisor should agree on a time frame for monitoring and evaluating the financial plan. The client and the Advisor will then review the financial plan to assess its progress, to determine if it is still appropriate and to confirm any revisions mutually considered necessary.
In life, almost anything can happen to anyone, at anytime, anywhere. You can’t plan for it, but having a comprehensive financial plan can give you the security of knowing that you will still be able to look after the people you care about.
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The Canadian Institute of Financial Planners (CIFPs)
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