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| What is Financial Planning? Need for Financial Planning? Financial Planning Advice The Financial Planning Process Financial Planning Questionnaire |
| What is Financial Planning? Financial Planning is the process of meeting your Life goals through a ‘Big Picture’ approach to managing your finances. It involves the process of assessing your financial situation, determining your objectives and formulating a plan to achieve them. So it’s all about the money right? Absolutely Not… Financial Planning is much, much more fundamental than “just money.” Financial planning is primarily life planning. A good financial plan is based on your life goals and presents a process for achieving them. Financial planning isn’t about getting the most amount of money possible. It’s about changing your lifestyle and doing what you want to do — it’s about happiness. Sit back and fill up the ‘Life Book’ to figure out what you really want from this beautiful gift called ‘Life’. “Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires.” - Ayn Rand This means a well written financial plan is about anything that deals with material “stuff” that helps make up your lifestyle. The house you live in, the vehicle you drive, the food you eat, the vacations you take, the location you live at — these are what financial planning is “really” about. Financial planning isn’t about your bank account — it’s about what you’ll do to get where you want to get. “Starting out to make money is the greatest mistake in life. Do what you feel you have a flair for doing, and if you are good enough at it, the money will come.” - Greer Garson Financial planning is a lifestyle design. Top |
A Teenager outgrows from the shadow of his parents to begin his working life. During this phase of life, money starts pouring in and he feels proud to stand on his own legs. Very little investments are made for a rainy day and most expenses are unplanned and impulsive. But as life progresses his responsibilities increases many folds and inversely his finances get tighter. But what if his rainy day saving’s were managed professionally and planned investments were made with a view that his responsibilities would increase? Financial Planning would have helped the Teenager to face the future financial responsibilities as A Son, A Husband, A Father or even A Grandfather.
The objective of financial planning is to ensure that the right amount of money is available in the right hands at the right point in the future to achieve an individual's life goals. It also allows you to understand how each financial decision you make affects other areas of your finances.
Imagine the satisfaction when you know you’re making the most of your financial situation. That your investments are on track, your net worth is growing and that you’re even getting more from your everyday banking. Cash flows are positive and you are never going to face any major financial turmoil.
Imagine your peace-of-mind when you can look into the future and know your retirement years are secure. And that your loved ones are looked after, whatever might happen to you.
Financial planning can make these things happen for you. If you have goals for your future, financial planning will help you achieve them. If you don’t have goals, it will help you create them.Top
Today more than ever, people who are serious about protecting their financial security and developing their financial freedom are looking for better quality advice.
They want help to make sense of the ever expanding range of investment options and they want down to earth, professional guidance to identify new opportunities that will make the most of their money.
In any aspect of business and personal life where you employ a professional to provide advice, you need to be sure their standards and credentials are exemplary. If this is true of your legal, accounting and medical advisers, you should apply the same standards to your financial adviser.
A Certified Financial Planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas:
Investment PlanningInsurance PlanningRetirement PlanningChildren’s Future PlanningDebt Management PlanningIncome Tax PlanningEstate PlanningVacation PlanningCash flow PlanningSpecific Goal Planning The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.
Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual's current lifestyle so that the 'pain' in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.Top
The financial planning process consists of the following six steps:
1. Establishing and defining the client-planner relationship.
The financial planner should clearly explain or document the services to be provided to you and define both his and your responsibilities. The planner should explain fully how he will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.
2. Gathering client data, including goals.
The financial planner should ask for information about your financial situation. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need.
3. Analyzing and evaluating your financial status.
The financial planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
4. Developing and presenting financial planning recommendations and/or alternatives.
The financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.
5. Implementing the financial planning recommendations.
You and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your "coach," coordinating the whole process with you and other professionals such as agents, solicitors, chartered accountants, stockbrokers etc.
6. Monitoring the financial planning recommendations.
You and the planner should agree on who will monitor your progress towards your goals. If the planner is in charge of the process, he/she should report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.Top
As part of the financial planning process you will be guided through a financial planning questionnaire. This is a tool used to assess your financial position and personal goals. In essence this document is a fact finder and provides the basis when formulating the most appropriate financial planning strategy for your needs.
When your financial planner sits down and goes through this questionnaire it is important that you provide as much information as possible so your financial planning strategy reflects your unique needs as closely as possible.
The client questionnaire for financial planning is broadly broken up into the following sections:
Your current financial position and personal details
The financial planning objectives that you have
The income and expenses of you and or your family unit
What assets you have along with your liabilities and any existing insurance policies you have in place
Your risk profile as this will determine the advice provided within the financial planning strategy
An agreement for the financial planner to create a ‘Letter of Engagement’ for financial planning purposes
Bear in mind that depending on your needs that some of these sections within the client questionnaire will not need to be covered and your financial planner will be able to guide you through when discussing the questionnaire.Top
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