What is Financial Planning?

The Definition of Financial Planning


According to the International Certified Financial Planning Council, financial planning is defined as a process to provide a client with impartial assistance in analysing and organising personal financial affairs in order to achieve financial and lifestyle goals.


One thing is for sure: Financial planning is not a product you can see and touch. It is a process of thinking about the future and figuring out what you really want to do with your money and how you will do it.
 

Under the Certified Financial Planner (CFP) qualification, financial planning involves the following steps:

  • Establishing and defining the client-planner relationship

  • Gathering client data, including financial goals and objectives

  • Analyzing and evaluating the client's financial status

  • Developing and presenting financial planning recommendations and/or alternatives to achieve objectives

  • Implementing the financial planning recommendations

  • Monitoring the financial planning recommendations.

According to the Chartered Financial Consultant (ChFC) qualification, financial planning is a process, a methodology that is valid for both practitioners and self-planning individuals. Similarly, there are six steps to the financial planning process:

  • Establishing financial goals

  • Gathering relevant data

  • Analyzing the data

  • Developing a plan for achieving goals

  • Implementing the plan

  • Monitoring the plan

We can clearly see that this process of helping clients to achieve their financial goals can be applied to the full range of financial goals on a comprehensive basis. The process can also be applied on a narrower basis to only a few financial goals or even to a single financial goal.
 

It is important for us to remember that it is not the range of financial goals that is addressed that makes the practitioner a financial planner. Rather, it is the process that is used by the practitioner in addressing client concerns that makes him a financial planner.

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