Financial planning is a six-step process that helps set a guideline for the adviser and client to follow. The financial process includes the initial interview, data gathering, data confirmation, plan presentation, plan revisions/modifications and implementation.
Collins spoke with Smart Business about how these steps facilitate the financial-planning process.
What should a person or business expect from the initial interview with a financial planner?
The client should not be caught off-guard by the financial consultant’s questions. This is the main reason why this first step in the planning process is so crucial. The financial consultant’s ultimate goal in the initial interview is to seek understanding through curiosity, sharing expectations and asking questions.
The financial consultant may even find it best to let the client take control of the conversation. The more information the financial consultant (receives), the easier it will be to construct a plan that fits the client’s needs. Once the client and the financial consultant understand each other’s expectations, the planning process can move on to the next step.
The next two steps in the financial planning process are data gathering and data confirmation. What data is needed?
Data gathering and data confirmation include information such as family statistics (marital status, number of children, grandparents), feelings (how past experiences may have been influential), plans (goals and expectations) and perceptions (attitudes toward certain investments, investment preferences), which may be gained in the initial interview. At this time, the financial professional also needs to review the client’s financial statements, tax returns, real estate holdings, business interests, etc. The review of these statements is also known as the review of the shoe box, in reference to the place where most clients keep such information.
Once the data has been gathered, it needs to be confirmed. A client may have a net worth statement prepared in order to insure accuracy of data. I also think it is important to communicate with all other advisers aiding the client to make sure all parties are working toward the same goal.
When does the client or business get a chance to participate in creating the plan?
The plan presentation and revision is when the client and the financial consultant meet to review the initial plan. During this presentation, a condensed version of the financial plan, or Investment Policy Statement (IPS), is created. The IPS is then carefully scrutinized to make sure it is congruent with previously set goals. I like to refer to the investment policy statement as the road map the financial consultant will follow to achieve the client’s dreams.
Revision of a plan is an ongoing process that occurs when the client experiences a life-changing event. A plan may also be revised if there is a shift in the client’s investment interests. New and improved products are constantly created in the marketplace, which may encourage a revision of a set financial plan. Regardless of any major changes in your life, the plan should be monitored at least annually, and in some cases on a quarterly basis.
How do you know when a plan is ready to be put into action?
It is ready to be put into action when all the parties agree on all revisions and modifications made to the financial plan. The financial plan is just paper in a binder unless the plan gets implemented and put to work.
The financial consultant’s job is to be the quarterback of the team of advisers. Working in unison with the other financial professionals helps the client to reach his or her financial goals and objectives.
How long might this process take?
The time it takes for the six-step financial process to be completed is dependent upon each client’s individual needs. The shortest amount of time in which a proper financial plan could be completed would be about one month.
After implementation there needs to be continual monitoring which plays an active role in the plan’s success. If you include the monitoring process in the planning process, the financial consultant’s job is never done.
How does a financial plan with an investment policy statement benefit a client?
An investment policy statement allows the client to reach set financial goals in a way that avoids hassle and frustration. Not only will the IPS lead you to accomplishing your goals, it also offers peace of mind knowing that all steps have been taken to achieve success.
Beau Collins, Chartered Wealth Advisor, is a licensed insurance agent and financial consultant for Hilliard Lyons. Reach him at (614) 210-6281 or BWCollins@hilliard.com.