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Financial
Planner
A
personal financial planner is a professional who assists people with
various personal financial issues. They help consumers with proper
planning, including: education, retirement, investment, risk management,
insurance, taxes, estate and business succession planning. The
professional utilizes the financial planning process to create a detailed
strategy for wealth retention and creation.
Basics
of Personal Finance
Basics
of Business Finance
Basics
of State Finance
Experimental
Finance
Financial
Economics
Financial
Planner
Foreign
Exchange Market
Risk-free
interest rate
Yield
Curve
The goals of financial planning are to:
" Provide financial direction and meaning to
decisions;
" Understand the impact of financial decisions;
and
" Prepare for life changes for lasting financial security.
The financial plan is a step-by-step guide that isn't based on a particular financial product or service. Financial planning is generally defined as the process of determining an individual's financial goals and priorities and using them with consideration to resources, risk profile and current lifestyle to detail a balanced, realistic plan to meet the goals.
The goals of an individual are strategic cornerstones to the financial plan. The goals are used to map a course of action. They are the final outcome which is sought throughout the creation of the plan. The goals are carefully analyzed using the individual's current and future resources. Any constraints and obstacles are recognized. If the resources of the individual are insufficient to meet the goal, the goal is readjusted to a realistic level.
Planning for the future requires self-discipline. It requires postponing instant gratification today in return for a secure future. The effective plan will have goals that are motivating to the individual. Otherwise, the self-constraint may be difficult to maintain. The plan considers the importance of each goal, prioritizes them and breaks them down into actions that can be easily taken. Financial plans that do not consider the practical points of goals usually fail.
What Does Financial Planning Cover?
Financial planning should cover all aspects of a client's financial needs. It deals with any area that could be impacted by the finances of the consumer. The goal is to achieve the financial goals and objectives. Most financial planners include the following areas:
" Retirement planning - ensuring financial independence upon retirement.
" Risk management - including insurance planning. Used to protect the cash flow through sound risk management and insurance techniques.
" Investment planning - planning and managing capital and growth to generate future capital for reinvestment and spending.
" Tax planning - working to reduce tax liabilities.
" Estate planning - planning for the conservation and distribution of assets.
" Cash flow and liability management - the budgeting and debt management that maintains and enhances the life of the client.
The Six Steps of Financial Planning
There are generally six steps involved in a financial plan. They are:
1. Setting of financial goals
In this step, the client identifies where he or she wants to go in life. What does the client want to get out of his or her money?
2. Information gathering
The client provides the qualitative and quantitive information that will help the planner understand the complete financial picture. This could include both financial and non-financial information. For example, family planning, job security and even how close parents are to retirement could be topics discussed.
3. Information analysis
The information is used to form a complete picture of the client's situation. Debt is considered against income. Calculations are made and the determination of resources is carried out. What does the money say?
4. Creation of the final plan
The client's goals and priorities are used to draw up a roadmap for financial management. The goal of the plan is to realize the goals of the client using the current financial status as a starting point.
5. Implementation of the plan
Using the financial plan, the client begins to manage his or her money accordingly.
6. Monitoring, revising and adjusting
The implementation of the plan is closely monitored to make sure that it is working towards the client's goals. Goals can change over time, as do financial situations. Revisions and adjustments are made in order to keep the plan functional and on task.
The financial planner works with the client in regards
to all aspects of finance. The vast majority of planners use the six steps
listed above. Some financial planners do work in specialized areas, such
as insurance or retirement. There are also fee-only planners who charge
based on a fee, not a commission.
Financial Planner Licensing and Regulation
Most countries do not regulate financial planners. This has allowed for the indiscriminate usage of the title. Many financial product intermediaries, such as insurance agents, will use the title to appear professional, even though they are not trained in financial planning. The field has seen abuse and scandal as a result of the lack of regulation.
Financial professionals and practitioners around the world are concerned with the lack of regulation. Many trade organizations provide self-regulations and seek to organize the industry. Many have high-level training programs and certify their members. Many countries are seeing laws and guidelines introduced on a national level in order to keep the profession in check and orderly.
In the United States, financial planners must be first registered as investment advisors. The employee of a firm must pass the series 65 or 66 Registered Investment Advisor Exam. Private advisors and companies can apply to the state and the SEC for a Registered Investment Advisor License.
Many bank, brokerage and insurance company employees are
exempt from any licensing if providing a complementary financial planning
service in relation to existing products and services. Financial providers
must also be cautious in providing estate planning or tax advice - these
fields are highly regulated by the bar associations and CPA's.