MURKY OUTLOOK Finance planning: 6 steps
PROCESS: THE APPROACH RECOMMENDED FOR PLANNER AND CLIENT
If you’ve never consulted a financial advisor, it’s difficult to know what to expect.
The Financial Planning Standards Board (FPSB) has developed a six-step process that is widely used by financial advisors and brokers when meeting clients.
The FPSB develops educational programmes for financial planners and is also the owner of the Certified Financial Planner (CFP) programme.
Wouter Fourie, director at Ascor Independent Wealth Managers, sets out the process in brief:
1. Establish, define relationship with client
In the first consultation, the client is generally provided with information about the company, its competencies and the financial planning process.
The financial planner determines whether the firm is in a position to meet the client’s needs.
Where it’s clear that a client won’t be willing to engage within the advisor’s ethical framework, or has unrealistic return expectations, the advisor may terminate the relationship early on.
The scope of the engagement is then defined. A client mandate sets out what the client expects.
The client indicates whether a single or product analysis or a comprehensive financial planning exercise is required.
2. Collect client’s information
The advisor collects client information, including identifying the client’s personal and financial objectives, needs and priorities and collects quantitative and qualitative information.
During the collection of qualitative information the advisor asks “softer” questions around life planning and probes the client’s experience with money, how it affects his/her choices, whether the client has a budget and how he/she perceives risk and financial independence.
These discussions allow the advisor to get a better sense of a client’s priorities.
3. Analyse and assess client’s financial status
This happens after a first and possibly even second consultation.
In analysing and assessing the client’s financial status, the advisor analyses the information previously collected. The client’s objectives, needs and priorities are assessed and the advisor provides a written quotation for services offered.
Once the quotation is approved, parties proceed to the next step.
4. Develop and present financial planning recommendations to the client
Planning strategies are identified and evaluated. Planning recommendations are presented.
5. Implement financial planning recommendations
The client is provided with a written plan of action and the parties agree on the implementation and responsibilities.
The advisor gets the client’s consent to proceed with implementation and assists the client with the necessary paperwork.
The advisor lodges applications to relevant product providers and keeps the client updated with the application’s progress.
Clients may decide to implement the plan themselves, or contract the advisor to implement, in which case the advisor keeps the client up to date about the progress.
6. Review client’s situation
The advisor and client agree on responsibilities and terms of review of the financial situation.
A review should be done at least annually.
Situations that warrant a review include several.
Among these are a change in the client’s marital status, a new child, loss or change in job, inheritance, death, change in responsibilities, change in goals or financial objectives, and health changes.