Today I am writing about the processes that must be followed in Financial Planning. These six steps form the basis of what the Financial Planning Institute expects from its members in terms of the Financial Planning Process. Even the Financial Services Board expects complete records to be kept of this process so that intermediaries comply with the Act on Financial Advice and Intermediary Services.
The first step is to define what the client expects and then to reach an agreement in terms of what is being offered and what the cost implications for the client are. We must remember that success is dependent on complete co-operation with the client.
Once agreement is reached, the second step is to obtain information from the client and also to identify the client in terms of FICA requirements. The client’s goals are discussed here and an agreement on these is reached. I have a list of documents that I require from a client at this stage. Without these we cannot do any planning, and it is unfortunate that many clients do not come to the party. The completeness of the information supplied by the client will determine the strength of the recommendations provided.
During the third step the client’s information is analysed in order to provide as much assistance to the client as possible in terms of their financial and personal goals.
In the fourth step the Financial Plan is prepared. Recommendations and solutions are presented to the client and discussed.
In the fifth step a decision is made with the client as to which of the recommendations to implement so that the Plan is put in place to reach the client’s goals.
The sixth and most important step is to monitor the progress of the plan. Financial Planning is not a once-off process. In point form:
1. Annual tax returns and financial statements (personal, business(es) and trust(s))
2. Annual review of Wills and Trust Deeds
3. Annual review of Business Agreements (Buy and Sell Agreements, Key Person Insurance, Business Credit Insurance, etc.)
4. Quarterly progress reports in terms of your investments, the review of your investment strategy, and the management thereof
5. Annual review of your Estate Planning, Financial Provision for your family on death, disability, dreads disease, etc.
Successful people all have a Financial Plan, and they do not hesitate to amend it with changing circumstances.
I would like to leave you with the following thought:
“Small people talk about other people
Average people talk about things
Great people talk about ideas”
No idea is worthless and unimportant; it is what you do with that idea that counts. Please consult your Financial Planner so that you can start the planning process or review your existing plans.