As individuals begin their process of financial planning, they may find it useful to understand the general roadmap a financial advisor follows in developing a financial plan, implementing that plan, and monitoring it as time goes on. While different financial advisors will take somewhat different approaches to meet their clients’ needs, generally, the financial planning process is composed of six steps that can help clients easily understand where they are on their financial planning journey and where they are headed.

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Establish a Relationship and Understand Priorities

The initial step most financial advisors take is to meet with the prospective client, understand their priorities, concerns, and goals, and develop a working relationship. At this stage, the advisor is likely looking for information regarding what the prospective client’s finances look like generally, what their risk tolerance is, what their current retirement plan is, and much more that will help create a basic picture of the financial situation.

On a different level, this step is also where the advisor and client can begin to establish a rapport and hopefully develop a solid working relationship that will enable deeper and more effective planning to better serve the clients’ needs.

Collect Information to Begin Planning

After the initial intake, the next step involves accruing information to be used in formulating initial goals and recommendations. Advisors tend to ask questions like:

  • Whether the client is seeking advice for the next five years, ten years, or well into retirement
  • Whether they would prefer a more conservative investment strategy or are comfortable with more risk in their portfolio
  • What their current financial situation is in depth
  • Whether they have children or dependents
  • Whether they are saving for anticipated large future expenses such as college educations or purchasing a new home, etc.

If the client is seeking a specific service like estate planning or investment planning, this data collection step will likely be where the advisor will start to tailor their work to the client’s specific needs and concerns.

Understand and Review the Data

Once the initial information-gathering steps are completed, an advisor will look at the client’s current finances and begin to identify potential concerns as well as areas of strength. For instance, an advisor may find that a client’s current contributions to their 401(k) are not enough to meet their stated retirement goals by a certain date, while also finding that the client’s college savings accounts are growing at a rate faster than anticipated. With this kind of information in hand, an advisor can begin to make concrete recommendations.

Create Recommendations

At this stage, an advisor can start to make recommendations for their client to help them bridge the gap between their current situation and where they would like to be. These recommendations will likely be based on certain assumptions that the advisor will identify for the client while also offering alternative courses of action. Normally, clients will be encouraged to ask questions and provide feedback at this point in the process to ensure that the recommendations offered are understood, any potential concerns the client has are effectively communicated, and everyone is generally in agreement about what the plan should look like.

Plan Implementation

Now, the advisor and client will begin to implement their financial plan. The implementation process may take significant time and preparation and may require significant personal discipline on the part of the client. Ultimately, the goal of this stage is to set the plan in place and begin putting recommendations into action that will be monitored in the future.

Monitor and Update the Plan

The final step in the process is often the most difficult and most important. After putting the financial plan into motion, advisors and clients work together to monitor the situation to detect if any potential changes need to be made to ensure the plan is best suited for the client’s needs. This means keeping track of progress towards financial goals, identifying any potential issues that may require revising the plan, and implementing those revisions.

Monitoring is generally considered important in enabling clients to tweak their plans if they find they are not on track to meet their goals because of a variety of issues. The sort of issues that arise at this stage can be anything from significant life events like a marriage, divorce, or new child, to external events like market fluctuations, interest rate changes, and changes in law.

Speak with a Financial Advisor Today

Whether you’re trying to save for retirement, your child’s education, a big purchase like a home, or simply for a rainy day, financial planning is critical. The experienced financial planners at The Templeton Group can help you to build a strategy to work toward your goals.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.