Professional Financial Planner – Process of Financial Planning

To assess your ability to:

  1. Explain the process of financial planning.
  2. Communicate with clients the importance of using their own financial data for more accurate financial planning.
  3. Stress confidentiality protection with clients.


The financial planning process is meant to determine whether and how an individual can meet life goals through the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas. Here are six steps to the financial planning process:

  1. Establishing and defining the client-planner relationship
  2. Gathering client data, including goals
  3. Analyzing and evaluating the client’s current financial status
  4. Developing and presenting recommendations and/or alternatives
  5. Implementing the recommendations
  6. Monitoring the recommendations

As a professional financial planner, it is not only important to follow the steps, but also critical to explain to your clients the entire process and the rationale behind each step. For example, clients are required to provide personal financial data for planning purpose. You may have a client who questioned why you require his last year’s tax returns or his 401(k) statement. What makes perfect sense to a professional financial planner may not make any sense to a consumer who has no knowledge in financial planning. Therefore, it is the financial planner’s responsibility to explain to the client the importance of providing accurate data information for conducting a high quality plan. It’s also the planner’s job to ensure client that the confidentiality of their personal information is protected.

Action Items:

  1. It is important to establish a good first impression with your prospective client. This exercise is to prepare you for your first meeting with your client:
    1. About 2-3 pages long.
    2. Write about the 6 financial planning processes.
  2. Review the Practice Standard published by CFP Board.  These standards correspond with each step in the financial planning process.  For more information, please go to the CFP Board’s website, Standards of Professional Conduct section.
  1. Establishing and defining the relationship with a client
100-1 Defining the Scope of the Engagement
  1. Gathering client data
200-1 Determining a Client’s Personal and Financial Goals, Needs and Priorities
200-2 Obtaining Quantitative Information and Documents
  1. Analyzing and evaluating the client’s financial status
300-1 Analyzing and Evaluating the Client’s Information
  1. Developing and presenting financial planning recommendations
400-1 Identifying and Evaluating Financial Planning Alternative(s)
400-2 Developing the Financial Planning Recommendation(s)
400-3 Presenting the Financial Planning Recommendation(s)
  1. Implementing the financial planning recommendations
500-1 Agreeing on Implementation Responsibilities
500-2 Selecting Products and Services for Implementation
  1. Monitoring
600-1 Defining Monitoring Responsibilities
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