Six Steps of the Financial Planning Process

Share on facebook
Share on google
Share on twitter
Share on linkedin

By Taresh Bhatia


A lot of my clients ask me about the process of financial planning. Some of my clients are not even aware that, I am a Certified Financial Planner (CFPCM) and have to follow specific procedures. These processes are now part of my system and help in effective implementation of the financial planning process. Laid out by the Financial Planning Standard Board of India (FPSB), it gives clear guidelines on the steps involved. These guidelines are like a doctor has a Standard Operating Procedure (SOP). If you would like to know about these steps and how they help you in your financial planning, this blog is for you.

Why are the steps so important?

What is the need to explain so much about this process?

Isn’t following this process a choice for a planner?

Why does the prospective client have to know so much?

Well, all these are important and relevant questions. Let’s look at the top reasons:

  • These steps are part of the standards followed world over by the best professional financial planners.
  • It involves a careful and intricate study of a client’s financial life. It cannot be done unless there is prior understanding by the client also.
  • It gives freedom to the planner to observe and make interlinks.
  • It would educate and inform the client about the processes and systems
  • It provides options and scenario creation like “what if” for possible solutions.
  • It is a systematic method and not any random set of steps.
  • It brings clarity and transparency in advance of the financial planning process.
  • It clears expectations and assumptions at the onset.

Now, let’s take a look at the actual steps involved.

The Financial Planning Process 

(Credits to FPSB, as I have taken some of the points from their website)

1. Setting up and defining the client-planner relationship: The financial planner should clearly explain or document the services to be provided to you and fix both his and your responsibilities. The planner should explain fully how he will be paid and by whom.  The planner should also disclose any restrictions on his ability to give unbiased advice and discover any conflicts of interests.  You and the planner should agree on how long the professional relationship should last and how decisions will be attained. Take up all the goals and tasks that your financial planner would undertake, in writing. The planner should also make an agreement, and both should sign on it.

2. Establishing and gathering client data, including goals: Your financial planner should ask for information about your financial state of affairs. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk.  The financial planner should gather all the necessary documents before handing you the advice you need.You may call this as a process. Like a doctor, he first makes a diagnosis, then prescribes. Financial planners have questionnaires and an online test to understand your situations in detail. These are procedures, and most professional planners have systems and such processes in place. This brings you confidence and saves you time and energy too. He would ask first about:

      • Income of the family
      • Expenses of all kinds of the entire family
      • Where do you keep money and invest?
      • Your loans and all liabilities
      • Your future needs
      • Your financial goals (for every member)
      • The family aspirations, desires and dreams
      • Where are the current investments lying and what are they worth?

The planner would also help you understand the basics of personal finances, and take you through a risk appetite test to evaluate your risk-taking ability regarding financial market understanding and investment risks of various kinds.

3. Examining and evaluating your financial status: The financial planner should analyse your information to assess your current situation and outline what you must do to meet your goals.  Depending on what services you may have asked for, this could include analysing your assets, financial obligations and cash flow, current insurance coverage, investments or tax strategies.

4. Preparing and presenting financial planning recommendations and/or alternatives: The financial planner should offer recommendations that address your goals, based on the data provided by you.  The planner should go over the recommendations with you to help you see them so that you make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the financial planning recommendations: You and the 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 whole process with you and other professionals such as solicitors or stockbrokers. This would help you in implementation and execution of your plans.

6. Monitoring the financial planning recommendations: You and the planner should agree on who will track your progress towards your goals. If the planner is in charge of the process, he should report to you personally to review your situation and adjust the recommendations, if needed, as your life changes.

Now that you know about the steps, so go ahead and plan your financial future!

Source:; October 2017 | All views, thoughts and opinions expressed belong solely to the author. 

More Like This...

About Author

Taresh Bhatia

Taresh Bhatia

Taresh Bhatia is a Certified Financial Planner with over 30 years of industry experience. Taresh has helped over 1000 families plan and organise their financial life to move positively towards their financial goals. His firm Advantage Financial Planners provides financial advisory services from its office in Gurgaon, India. The firm specializes in investment planning, retirement planning, tax planning, personal financial planning and wealth management. View Profile

Recent Posts


Explore Fortnightly Tips & Guides from The Comfort of Your Mailbox!