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The Financial Planning Process

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The Financial Planning Process

Well, the first course didn’t waste any time explaining and defining the financial planning process. It came out swinging in the first chapter of the course textbook and never let up. I was grateful because too often, the textbooks spend more time rambling about expectations than getting to the context of the material.

As I mentioned in my first post about this journey, I am taking HS 300 Financial Planning: Process and Environment as the first course of eight. The course provides an overview of the financial planning process, including the role and responsibilities of a financial planner along with analytical tools to aid in financial decision-making.

What is the Financial Planning Process?

First, we need to define what is financial planning? The Financial Planning Association (FPA) defines financial planning as “the long-term process of wisely managing your finances so you can achieve your goals and dreams.” They are one of financial planning’s largest member and advocate groups, of which I am a member.

Similar to the FPA, the Securities and Exchange Commission (SEC) has its definition but they get more specific and include the various areas of expertise. They define financial planning as, “assessing every
aspect of your financial life—including saving, investments, insurance, taxes, retirement, and estate planning.” It doesn’t matter the definition and trust me, you can Google many, as long as the theme remains the same.  

Now that we know what financial planning is – what is the process? The financial planning process is the foundation on which the financial planning profession is built. It provides a framework around which financial planners develop comprehensive plans for their clients.

Simply put, the financial planning process is discovering the client’s financial goals and developing a plan to achieve them.

The Steps in the Financial Planning Process

If you Google “steps in the financial planning process” you will receive a mix of results stating six to ten steps. Historically it was six steps but since the 2015 CFP® board’s job task analysis survey, it has now become eight steps and they are considered domains. The eight domains capture the sophisticated nature of planning and accurately reflect the challenges in communicating recommendations to a client within the legal frameworks.

The eight domains are:

  1. Establishing and Defining the Client-Planner Relationship
  2. Gathering Information Necessary to Fulfill the Engagement
  3. Analyzing and Evaluating the Client’s Current Financial Status
  4. Developing the Recommendation(s)
  5. Communicating the Recommendation(s)
  6. Implementing the Recommendation(s)
  7. Monitoring the Recommendation(s)
  8. Practicing within Professional and Regulatory Standards

Here is a brief overview of each domain and what it provides during the financial planning process.

Step 1: Establishing and Defining the Client-Planner Relationship

During the first introduction or meeting, the financial planner must outline their responsibilities as the planner and provide to the client their responsibilities. This eliminates assumptions and clearly defines expectations.  The planner must disclose the length and scope of the relationship, to include compensation. By establishing the relationship, it helps guide the decision-making process and removes barriers.

Step 2: Gathering Information Necessary to Fulfill the Engagement

This can be the most uncomfortable part of the process for the clients. Why? Because they must expose their finances. Hence, the name of my blog Halfbare because as hard as it might be, we must peel back the financial layers. Only then, can we expose your true financial situation to build a plan that attains your goals. 

So, the financial planner gathers the client data which includes broad and specific goals or objectives. The planner will assess the client’s risk tolerance and collect documents. These documents include:

  • tax returns
  • wills
  • trusts
  • account statements
  • pay stubs
  • and more!

Step 3: Analyzing and Evaluating the Client’s Current Financial Status

Pull out the microscope because once the data has been gathered, it must be analyzed and synthesized within the context of meeting goals. This step of the planning process has significant variations among planners. But essentially, the data must be analyzed and just not limited to the client’s goals in mind. Why? Because when you start peeling back the layers, additional information and data can be found. Think Pandora’s box. 

Step 4: Developing the Recommendation(s)

This is the bread and butter of the financial planner’s job. They use their expertise, knowledge, and experience to develop recommendations. Planners must also develop alternatives that addresses the client’s goals and concerns because not all plans are agreed upon by clients. Also, presenting more than one recommendation to a client provides alternative courses of action, and may result in additional fact-finding and discovery. After making the recommendations, the client may provide or revise their goals (step two) which will require additional analysis (step three).

Step 5: Communicating the Recommendation(s)

Another topic that has been covered in this course is communication. In particular, ensuring the recommendations are communicated and understood by the client. This is vitally important to step five and can determine if the client will stay long term. If they feel their goals and objectives were not properly addressed, they might assume you weren’t listening. Or, if you’re unable to communicate clearly how the recommendations will address their issues, they could question your expertise.

In the best-case scenario, the client accepts the recommendations and both parties are cognizant of the actions taken. In the worst-case scenario, the planner will need to revisit previous steps in the planning process or completely start over.

Communications may be live, virtual, or over the phone. Virtual has become a popular choice, especially among younger generations. Multiple communication sessions will occur before the planning process moves to implementation. 

Step 6: Implementing the Recommendation(s)

Once the course of action has been agreed upon, the planner outlines how it will be implemented. This is where the planner and client roll up their sleeves and get to work.

Step 7: Monitoring the Recommendation(s)

Now that the plan has been implemented, it must be monitored. Why? Because the client’s goals or objectives might change. Life events might occur and so forth. The fantastic benefit of a financial planner is they don’t stop working. Planners who entered into a long term relationship with their clients have an obligation to follow-up and update the plan. Monitoring may occur on a time weighted-basis, such as monthly, quarterly or annually. Some clients prefer to have their planners on speed dial and accessible 24/7.

Step 8: Practicing within Professional and Regulatory Standards

The regulatory environment changes rapidly. Financial planners are among many other financial service professionals such as insurance agents and stockbrokers, where they must be cognizant and stay vigilant of regulatory demands and policies. 


I learned quickly that the financial planning process is designed with a purpose. The eight domains were elevated from six to better capture the sophisticated nature of planning and ensure a comprehensive financial plan. A process that addresses and helps clients achieve their financial goals. I am excited to keep learning about the roles and responsibilities of a financial planner.

Next up, the various calculations and analytical tools to aid in financial decision-making.

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