Financial Planning is a highly personalized service. It in no way is the marketing of a “product”. Preparation and the implementation of a Financial Plan is a long term plan and not a one off exercise.
The preparation of the Financial Plan is a multi dimensional process. It requires the planner to collect as much information as possible about the current resources, assets, liabilities of the client.
One of the first steps is to
1. Establish the client –planner relationship: The role of the Financial Planner is not to suggest get rich quick schemes. Rather it is to evaluate and study the clients needs, gather and analyse data and prepare a financial plan for now and for the future. A Financial Planner preparing a plan helps in
• Organizing cash flows
• Improving cash flows
• Lower income tax – our bane
• Plan retirement
• Improve investment performance
• Lower investment risk
• Risk reduction
• Minimize estate settlement costs
The planner seeks to answer the following questions:
• What is the most immediate concern of the client?
• What is the client’s current financial situation?
• What are the client’s immediate and long term needs?
• What is the gap between the client’s needs and the current financial situation?
• What services can you apply to the clients needs?
• How would the client benefit from the service portfolio?
• What is the estimated time frame to complete the plan and accomplish goals?
• Is the role likely to be of an advisor, motivator, teacher or director?
2. Analyze and evaluate the client’s current financial status: The financial planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
3. Develop and present financial planning recommendations and/or alternatives : The financial planner offers financial planning recommendations that address your goals, based on the information provided. The planner goes over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate. The strategies are developed in the following areas:
• Cash Flow Management
• Insurance Planning
• Investment Planning
• Retirement Planning
• Income Tax Planning
• Estate Planning
Developing alternatives is crucial for making good decisions. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories:
a. Continue the same course of action.
b. Expand the current situation.
c. Change the current situation.
d. Take a new course of action.
Not all of these categories will apply to every decision situation; however, they do represent possible courses of action.
Creativity in decision making is vital to effective choices. Considering all of the possible alternatives will help you make more effective and satisfying decisions.
4. Evaluate Alternatives
a. The alternatives need to evaluated for all possible courses of action, taking into consideration your life situation, personal values, and current economic conditions.
b. Decision making will be an ongoing part of your personal and financial situation. Thus, you will need to consider the lost opportunities that will result from your decisions.
Evaluating Risk
a. Uncertainty is a part of every decision..
b. In many financial decisions, identifying and evaluating risk is difficult. The best way to consider risk is to gather information based on experience and the experiences of others and to use financial planning.
5. Implement the financial planning recommendations.
You and the financial planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your coach, coordinating the process with you and other professionals such as attorneys, accountants or stockbrokers.
6. Monitor and review the financial planning recommendations.
You and the financial planner should agree on who will monitor your progress towards your goals. If the planner is in charge of the process, he or she will report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes. Financial planning is a dynamic process that does not end when you take a particular action. You need to regularly assess your financial decisions. Changing personal, social, and economic factors may require more frequent assessments. When life events affect your financial needs, this financial planning process will provide a vehicle for adapting to those changes. Regularly reviewing this decision-making process will help you make priority adjustments that will bring your financial goals and activities in line with your current life situation
Monday, June 21, 2010
Wednesday, June 2, 2010
The Benefits
A Big Part of Financial Freedom Is Having Your Heart And Mind Free From Worry About the What –Ifs Of Life.
Can u imagine a life without planning? – Many do to their regret in the sunset years.
Why do we need a Financial Plan?
All of us have a dream for the future – some of us want a luxury car, some want a bigger home, those among us married dream for their kids too. – For their education, marriage, dream holidays. These are some of the dreams and then there are the daily nitty gritty’s.
However most of these decisions are made in a slapdash manner. There is normally lack of direction, the result being the goal not being achieved or delay in achieving the goal most importantly there is a complete lack of interest towards planning for retirement, or a casual attitude towards it.
Today an average person lives for at least 15 -20 years post retirement. How do you maintain the lifestyle you are accustomed to if there is no planning for income generation?
Financial Planning is one of the things that not many people think about; but the day to day concerns take over.
But Remember: A goal without a plan is just a WISH
While we cannot predict the future, you can certainly be better prepared for it.
A written plan is designed to make sure that you are financially prepared to deal with whatever happens in your life. And this is not just dealing with the unexpected events, but basic things like buying a car or taking a loan, funding your children’s education or marriage, or taking care of your loved ones.
You don’t have to be wealthy to have a financial plan. Neither do you have to be very old and approaching retirement. In fact the earlier the better.
It does not matter how much you earn or what your age is. All of us have something to plan for.
In fact, our financial situation influences almost every aspect of your lives….from the type of house we live in, to the type of car we drive, to how many vacations we can take.
That’s why it becomes all the more imperative to plan from an early age.
Some of the benefits of Financial Planning are:
1. It helps in knowing the net worth (All your assets less the Liabilities)
2. One has an idea of the cash flows – All the sources of Income and Outflows that is the expenses)
3. Plans for Goals you want to achieve
4. Helps to monitor investments
5. Helps in increasing savings
6. Helps in reducing taxes
7. Most importantly it helps in planning for retirement
8. Helps in providing for dependents in case of unfortunate incidents
9. Helps in creation of wealth
10. Helps in protection of wealth
11. Protects the family financially in the event of a death
12. Helps in distribution of assets to heirs
Can u imagine a life without planning? – Many do to their regret in the sunset years.
Why do we need a Financial Plan?
All of us have a dream for the future – some of us want a luxury car, some want a bigger home, those among us married dream for their kids too. – For their education, marriage, dream holidays. These are some of the dreams and then there are the daily nitty gritty’s.
However most of these decisions are made in a slapdash manner. There is normally lack of direction, the result being the goal not being achieved or delay in achieving the goal most importantly there is a complete lack of interest towards planning for retirement, or a casual attitude towards it.
Today an average person lives for at least 15 -20 years post retirement. How do you maintain the lifestyle you are accustomed to if there is no planning for income generation?
Financial Planning is one of the things that not many people think about; but the day to day concerns take over.
But Remember: A goal without a plan is just a WISH
While we cannot predict the future, you can certainly be better prepared for it.
A written plan is designed to make sure that you are financially prepared to deal with whatever happens in your life. And this is not just dealing with the unexpected events, but basic things like buying a car or taking a loan, funding your children’s education or marriage, or taking care of your loved ones.
You don’t have to be wealthy to have a financial plan. Neither do you have to be very old and approaching retirement. In fact the earlier the better.
It does not matter how much you earn or what your age is. All of us have something to plan for.
In fact, our financial situation influences almost every aspect of your lives….from the type of house we live in, to the type of car we drive, to how many vacations we can take.
That’s why it becomes all the more imperative to plan from an early age.
Some of the benefits of Financial Planning are:
1. It helps in knowing the net worth (All your assets less the Liabilities)
2. One has an idea of the cash flows – All the sources of Income and Outflows that is the expenses)
3. Plans for Goals you want to achieve
4. Helps to monitor investments
5. Helps in increasing savings
6. Helps in reducing taxes
7. Most importantly it helps in planning for retirement
8. Helps in providing for dependents in case of unfortunate incidents
9. Helps in creation of wealth
10. Helps in protection of wealth
11. Protects the family financially in the event of a death
12. Helps in distribution of assets to heirs
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