Most people have no idea what financial planning really is. One of the reasons for this is because just about anyone can call themselves a financial planner. But few in the financial services industry have put in the time, energy and enormous hard work it takes to be a professional financial planner.
So what is financial planning — really?
According to the CFP Board, a non-profit organization acting in the public interest by fostering professional standards in personal financial planning through its setting and enforcement of the education, examination, experience, ethics and other requirements for CFP®certification, the Standards of Professional Conduct (Standards) define financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas.”
There are six steps to the financial planning process:
- Establishing and defining the client-planner relationship
- Gathering client data including goals
- Analyzing and evaluating the client’s current financial status
- Developing and presenting recommendations and/or alternatives
- Implementing the recommendations
- Monitoring the recommendations
“Financial planning subject areas” denotes the basic subject fields covered in the financial planning process which typically include, but are not limited to:
- Financial statement preparation and analysis (including cash flow analysis/planning and budgeting)
- Insurance planning and risk management
- Employee benefits planning
- Investment planning
- Income tax planning
- Retirement planning
- Estate planning
Whew! That’s a mouthful. But now you know what financial planning is.
So what is great financial planning?
Great financial planning is all of the above put into place AFTER getting to know your client’s dreams, values, aspirations, beliefs and goals.
Great financial planning spends more time on the person than on the numbers.
But if you think professional financial planning is done by only a few, great financial planning is done by even fewer.
Great financial planners are great listeners, have empathy, and care more about their client than their client’s money.
I always recommend that you interview three different planners before choosing one. Why? Because you want to choose someone you think is going to be a great financial planner and be a good fit for you. You want this relationship to last a long time.
So here’s a quick tip to avoid choosing a not-so-great financial planner: if they begin the discussion about them, keep looking. If they begin the discussion about your money, run for the hills.
If they begin the conversation wanting to know about you, pay attention. You may just have found yourself one of the great financial planners out there.
Great financial planners want you to live your best possible life and are trained to help you use your financial resources to get you there.
Disclaimer: There is no formal designation “Great Financial Planner” so you will have to ask some questions. Are they a fiduciary? Are they a fee-only planner? — meaning they get paid fees, they don’t get paid on commission. Are they a Certified Financial Planner® or a CPA/PFS? (the accounting world’s financial planner designation). Do they practice financial life planning?
If you don’t get the answer “yes” to these questions, keep searching.