Whether you use a broker or financial planner for your personal financial needs, it’s important to take control of the process. Just like when one invests one’s own money into stocks, so one should monitor and evaluate long-term personal financial planning goals.
There are only six steps to good financial planning:
Establish and define a professional relationship
Your Financial Planner will define their responsibilities and the type of service that they will provide. Together, you should agree on the duration of your professional relationship and how you make decisions. You must make the decisions based on your own thorough research, along with the advice of your Financial Planner. Always know what the relevant commissions are. Loyalty is very important.
Gather information and set objectives
In this step, your personal and financial goals are defined. Your Financial Planner will gather all the necessary information and documents before giving you advice and will also discuss your time frame for results. Be realistic and honest, as it’s your financial future that’s being mapped out.
Conduct a financial needs analysis
Your Financial Planner analyzes your current situation to determine what you must do to meet your goals. This includes analyzing your assets, liabilities and cash flow, your current insurance cover and your investments and/or tax strategies.
Prepare report and present to you
Your Financial Planner will offer you recommendations that address your goals, based on the information you provided. Make sure you read all the information the Planner provides, and make a decision based on doing your own homework.
Implement financial plan as agreed
When agreeing on how the recommendations will be carried out, your Financial Planner will serve as your ‘coach,’ coordinating the process with you and professionals such as attorneys. Stick to the approach and don’t try to change it based on the vagaries of the market or slightly higher CD rates at a different institution.
Monitor the financial plan
Your Financial Planner is responsible for monitoring your progress towards your goals, and providing you with periodic reports to review your financial circumstances. Ensure all reporting is transparent and accurate, and that you receive statements from the institutions you invested in, and not just the broker. This will allow you to rule out many “Madoff-style” frauds.
10 principles to good financial planning
- Understand the effect your financial decisions have on other financial issues
- Re-evaluate your financial plan periodically
- Start now - don't assume that financial planning begins when you get older
- Start with what you have - do not assume that financial planning is only for the wealthy
- Look at the total picture - financial planning involves more than just retirement planning or tax planning
- Don't confuse financial planning with investing
- Do not wait until a financial crisis to start planning
- Take control - you are in charge of the financial planning process
