According to an online survey by the CFP® Board of Standards, which surveyed more than 1,000 Americans 18 years of age or older, about 70 percent said they would prefer to work with a financial advisor who provides comprehensive financial planning services, compared with 30 percent who said they want to work with someone who specializes in a single area, such as retirement. In fact, an overwhelming 91 percent of those surveyed said they expect the advice they receive from a financial advisor to take into account their total financial situation.
“As Americans’ finances become more and more complex, they are turning to advisors who can partner with them, look at their total financial picture, put all the pieces together, and provide a comprehensive financial plan,” CFP Board CEO Kevin Keller said.
As a financial advisor, if you aren’t offering comprehensive financial planning as part of your service, you may want to rethink this strategy. Comprehensive financial planning is more than active management of investments. It is more than creation of a retirement plan and it goes well beyond regular check-ups of a portfolio. Comprehensive financial planning is the act of planning for and prudently addressing life events. It addresses everything from buying a new car or home, to planning for a child’s education, preparing for eventual retirement, or creating a plan for your client’s estate. It goes well beyond these basic life events, but it also addresses potential events which can drastically alter your clients’ long-term financial security.
To fully engage in offering comprehensive financial planning, financial advisors should integrate the six steps to the financial planning process as defined by the Standards of Professional Conduct (Standards):
Establishing and defining the client-planner relationship: Clearly explain and document the services to be provided and define both your and the client’s responsibilities. Along with compensation, you’ll discuss how long the professional relationship will last and how to make decisions.
Gathering client data, including goals: Talk about the client’s current financial situation and gather any necessary documents. Mutually define personal and financial goals, including timeframes for results, and discuss, if relevant, the client’s risk tolerance.
Analyzing and evaluating the client’s current financial status: Analyze all financial information to assess the current situation and determine what must be done to meet client’s goals. Depending on what services have been requested, this could include analyzing assets, liabilities and cash flow, current insurance coverage, investments, or tax strategies.
Developing and presenting recommendations and/or alternatives: Offer financial planning recommendations which address the client’s goals, based on the information provided. Be sure to fully explain all your recommendations, so the client understands them and can make informed decisions. Listen to concerns and revise the recommendations, as appropriate.
Implementing the recommendations: Jointly decide how the recommendations will be carried out. You may be asked to carry out the recommendations or serve as a coach, coordinating the process with other professionals, like attorneys or stockbrokers.
Monitoring the recommendations: Check in from time to time, reviewing the situation and making any necessary adjustments.
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