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6 Things to Expect From Your Financial Planner

You've decided to engage a financial planner—smart move. But, did you know that anyone can call himself a "financial planner?" So how can you determine who is most qualified to handle your situation and what should you expect in a financial planning engagement?

You can ask for a referral from a trusted adviser or reliable friend, but you should also look for valued credentials, specifically the CLU and ChFC or CPF designation. Chartered Life Underwriter® - The CLU® is widely considered to be the most respected insurance designation in the industry. The Chartered Financial Consultant® (ChFC®) This designation has a core curriculum that focus on various areas of personal financial planning. This is often taken by individuals seeking in-depth knowledge of both financial planning and insurance. A Certified Financial Planner® (CFP®) is similar to a ChFC® with less course hours and a test at the end of the course. These designations mean that the Financial Advisor has been trained to maximize the clients risk and look at the clients overall protection.

Your Financial Advisor

Data collection and establishment of financial goals. This step must be completed before any recommendations are made or implemented.

  • Obtain information from you through an interview or questionnaire about financial resources and obligations

  • Determine your financial goals, needs, and priorities

  • Assess your values, attitudes, and expectations

  • Determine your time horizon with respect to goals

  • Assess your risk tolerance

  • Collect applicable records and documents

Process and evaluate your financial status, including wills and trusts. In this step, the planner will evaluate your current financial status and analyze potential scenarios and outcomes. Each analysis should produce detailed reports that identify the strengths and weaknesses of your goals and objectives. Some examples include:

  • Amount of debt (long term and short term)

  • Amount of annual savings and retirement plans

  • Size of emergency fund

  • Standard of living (budgeting)

Your Financial Advisor
Your Financial Planner

While a CLU®,  CfHC® and CFP® have the education and training to offer a broad range of financial and insurance advice, it's important to look for other personal qualities as well, such as independence, transparency, the ability to listen, and overall relationship compatibility.

You should expect a financial planning engagement to include the following six steps:

Establish and define the client-financial planner relationship. This step must be completed before any financial planning service is provided and requires that you and the planner agree on the scope of the engagement. The planner should work with you to:

  • Explain services provided, the process of financial planning, and the required documentation

  • Describe how the financial advisor will be compensated

  • Identify the responsibilities of the planner and the client in the relationship (discretionary vs. non-discretionary)

  • Decide on the length of the engagement

  • Discuss any other matters needed to define or limit the engagement's scope

Your Financial Advisor

Present financial planning recommendations and alternatives. This would include current position, projections, and recommendations. During this step, the planner develops a financial plan tailored to meet your goals and objectives that aligns with your values, temperament, and risk tolerance. The plan should cover:

  • Cash flow, net worth, and asset allocation reports

  • Capital needs at retirement, disability, death, and other relevant situations

  • Estate and income tax reports

  • Investment and asset allocation reports (to include risk)

Implement financial planning recommendations. In this step, the planner would assist you in implementing the recommendations and would work closely with other professionals to bring the financial plan to completion.

Monitor the financial planning recommendations. During this step, the planner would periodically review and evaluate the financial planning recommendations in light of changes, such as:

  • Income and estate tax laws

  • Economic and personal circumstances

  • Investment and retirement objectives

  • Health or unemployment

Every successful relationship is built on trust, value, and communication — all of which are paramount when selecting a financial planner. To search for a CFP professional in your area.

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