The 6 Steps of Personal Financial Planning and Working With a Financial Planner
1. Hiring a Financial Planner- If you are less knowledgeable about the whole financing concept, you may want to consider hiring a financial planner who could present you with available options. The planner outlines the plans on where to best put your money.
The planner has to state clearly and in detail the services he will extend. On the other hand, the client expresses his or her expectations from the planner. The matter of compensation will also be clearly discussed and agreed upon, including the length of time that the services will be rendered to the client.
Most of all, it should be clear to both the client and the planner, as to who makes the final decision on whether or not to proceed with the investment or divestment of the client's funds.
2. Gathering and Securing Information about the Client-Investor’s Financial Status and Goals - In the event that you decide to hire the services of a financial planner, it will be incumbent upon the latter to determine your actual financial status and the specific goals you want to achieve with your resources. Together, both you and your planner will work out personal and financial objectives to establish a time frame regarding the expected results.
If the need arises or requested, it is the financial planner's duty to express his own opinion regarding the risks involved based on his own expertise. Moreover, the planner is required to present documents to support whatever advice he gives you.
3. Analyzing and Evaluating Information about Client’s Financial Status and Options to Meet Goals-The financial planner thoroughly analyzes all relevant data about your financial status and formulates plans on how your goals can be achieved based on available resources.
On your part as the client, all data requested by the financial planner should be furnished; particularly those that are regarded as essential for analysis, formulations and recommended tax strategies. Data may include, but is not limited to, cash flow statements, current insurance policies, assets, liabilities and other investments if any.
4. Formulating and Developing Financial Planning Proposals or Best Options- The financial planner assumes the task of coming up with the best proposals or recommendations to optimize the realization of your financial goals. The planner has the responsibility of explaining the pros and cons of each proposal. The aim is to provide you with all the relevant information that would help you arrive at a sound decision. In case you're not comfortable with certain proposals, the financial planner should only be too willing to accommodate your request for revisions.
5. Putting into Action all the Proposed Financial Plans- Prior to the implementation of plans, there must be a clear cut agreement on who will facilitate or put into action the proposed financial plans. The norm here is that the client presents himself as the investor while the financial planner will only act as official financial adviser.
6. Keep an Eye and Observe How the Proposed Financial Plans are Coming Along- Make it clear to the financial planner that periodic written reports will be expected for your review. Check the documented copies of the investments to ascertain that the results were gained based on the financial planner's recommended proposals.
You should also check if there are other important and relevant data that were not reported or relayed by the financial planner in his or her earlier reports. Especially if these data could have prompted you to reconsider your options. These matters should be threshed out with the financial planner.