Financial Planning is a Process
Contrary to popular belief, a financial plan is more than a large document containing sensitive information on a particular client. Rather, it is a process. For this reason, Netvesco LLC ("Netvesco") employs the Certified Financial Planner™ Board's recommended process for financial planning development:
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We follow the seven-step financial planning process
1. Understand the clients’ financial circumstances
2. Identify and select their goals and expectations
3. Analyze current and potential courses of action
4. Develop the financial planning recommendations
5. Present the financial planning recommendations
6. Implement the financial planning recommendations
7. Monitor progress and update as needed
Seven Steps to Prudent Planning
The seven-step process helps to ensure that the CFP® professional acts prudently in documenting information. Also, it guides the planner to serve the client’s best interest.
1. Gather Information
First, we begin the financial planning process by collaborating with you to obtain quantitative and qualitative information. For example, qualitative information we seek may include subjective intelligence about your goals. In addition, we need to determine your risk tolerance and current course of action. Also, quantitative information we request may include objective data regarding your age, income, assets, and liabilities. By analyzing such information, we can better assess your personal and financial circumstances.
2. Select Goals
Second, we work with you to identify and select goals. To help identify potential goals, we note the impact of certain goals on others. Then, we apply reasonable estimates of life expectancy, inflation rates, tax rates, and investment returns. After discussing such material assumptions, we prioritize which goals are most important. Then, we select the ones that are most realistic.
3. Analyze Situation
Third, we analyze your current course of action to determine whether it has the potential to meet your goals. Then, we examine the advantages and disadvantages of alternative courses of action. Next, we weigh how well each alternative integrates with your current circumstances. Lastly, we resolve whether they have the potential to meet your goals.
4. Develop Recommendations
Fourth, we develop the financial planning recommendations. From the various courses of action, we select one or more alternatives which has the potential to meet your goals. For each recommendation, we consider: (a) the assumptions and estimates used; (b) the basis for making the recommendation; (c) the timing and priority of the recommendation; and (d) the dependence upon other recommendations.
5. Present Recommendations
Fifth, we meet with you to present the proposed plan. This meeting provides us with an opportunity to discuss the information we used to develop the recommendations. Also, it allows you a venue to voice any queries or concerns. All in all, the presentation offers you one of the best times to ask questions, submit feedback, and suggest any required changes.
6. Implement Recommendations
Sixth, we identify, analyze, and select actions, products, and services to implement the financial planning recommendations. Also, we define mutual implementation responsibilities and establish deadlines for each party. The key during this step is communication. As such, it is imperative that you inform us of any deviations you make from the actions, products, and services from that we recommended.
7. Monitor & Update Recommendations
Seventh, we monitor our work at regular intervals to examine progress. Also, we advise you when we need to make any necessary changes. In addition, we remind you to inform us of any relevant changes to your personal and financial circumstances. Finally, we must learn of any new developments or life changes which suggest that we should update our recommendations.1https://www.cfp.net/ethics/compliance-resources/2019/02/the-7-step-financial-process