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Demystifying the Financial Planning Process

by Rachna Bijlani, CFP®

January 30, 2020

This article aims to shine light on the financial planning process, the areas covered by a comprehensive financial plan and its value proposition. The CFP Board describes Financial Planning as a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances. Simply put, you and your Financial Planner will work together as a team whose objective is to help you achieve your financial goals. Although every Financial Planner has their individual working style and process, here’s a general idea of what the comprehensive financial planning process might look like to a client:


Introductory Meeting

At this meeting, your Financial Planner will try to grasp an overview of your current situation by asking you questions about your personal and financial circumstances. Examples of information collected may include your age, dependents, income, expenses, savings, assets, liabilities, taxes, employee benefits, insurance, estate plans, education and retirement accounts, your health, life expectancy, family circumstances, values, attitude towards money, your expectations, earning potential, risk tolerance, financial needs and priorities, and anything else that might be relevant in understanding your current financial situation and your financial goals. This preliminary assessment will help the planner decide if they are in a position to assist you and to also define the scope of engagement. The planner should then go over the financial planning process, discuss fees and terms of service and answer any questions that you might have. This meeting typically lasts from 30 minutes to an hour and most financial planners do not charge a fee for this meeting. If both parties agree to proceed, the next step is to sign a Financial Planning Agreement, which is a legal contract between a professional organization and a client that defines their business relationship. Financial planning fees can range between $1500 - $5000, but can vary depending on your location, the organization, your Financial Planner’s credentials, the complexity of your plan and other factors.


Data Collection Meeting  

At this meeting, the Financial Planner will help you establish and prioritize defined and realistic goals by applying reasonable assumptions and estimates and also discuss how your values fit into those goals. These might include Education goals, Retirement goals, Employment goals, Savings goals, Charitable goals, Tax Optimization goals, Investment goals, Debt Management, Buying a vacation home or a private jet,  and others, depending on your individual financial situation. The Financial Planner should also have given you a list of financial documents to bring to this meeting. This might include copies of your paystubs, employee benefit booklet, income, gift and trust tax returns, estate planning documents, insurance portfolio, current statements on all bank accounts and investment accounts including IRAs, current 401Ks and 529 plans, mortgage and other loan statements, credit card statements, and more. The Planner will review these documents, seek clarification if required, and notify you of any missing or additional information they might need from you. This meeting should typically last between 1-2 hours, depending on the type and amount of data being collected and the extent of clarification needed from the client. It is important that your Financial Planner is cognizant of the current external environmental data such as economic, legal, political, sociological, technological and taxation environment that might affect your financial plan. This includes data on interest rates, housing market, job market, investment market, inflation expectations, business cycle, local cost of living, current and expected tax rates, expected rate of increase in education and medical care and knowledge of any legislation that might impact certain industry sectors.


Behind the Scenes 

Equipped with data collected from you and the external environmental data, the Financial Planner now starts analyzing and evaluating your current financial situation to formulate specific financial planning recommendations. Here’s a glimpse of what the actual analysis conducted by the Planner might entail:


Assessment of Current Financial Situation- The planner starts by organizing your data and preparing financial statements such as balance sheet and income statement. This data is then utilized to compute financial ratios such Liquidity Ratios (Emergency Funds Ratio, Current Ratio), Debt Ratios (Housing Ratio, Debt Ratio, Debt to Total Assets Ratio, Net Worth to Total Assets Ratio), Ratios for Financial Security Goals (Savings Rate, Investment Assets to Gross Pay) and Performance Ratios (Return on Investments, Return on Assets, Return on Net Worth), which can be compared to benchmark numbers. The Planner views these ratios as a part of the whole financial mosaic to get a clear understanding of the client’s financial situation.  The next step is to link these ratios to the client’s financial goals.


Retirement Planning- Major factors that affect retirement planning are the client’s remaining work life expectancy, retirement life expectancy, savings amount and rate, annual income needed during retirement, sources of retirement income, inflation expectations, investment returns and other qualitative factors. The Financial Planner will examine each factor and the interrelationship of these factors to draw a retirement plan for your specific case with the objective of providing sufficient income at retirement to ensure that a comfortable pre-retirement lifestyle is maintained throughout the retirement period.


Education Planning- The Financial Planner is aware of the current tuition rates, expected increase in tuition, other costs associated with college, types of financial aid, tax advantaged plans and income tax deductions and tax credits available for education funding. Coalescing the above factors and applying time value of money techniques will enable the planner to determine the lump sum or the annual savings required to fund college education. The Financial Planner will also advise you on the optimum investment vehicle for education funding considering your income, expenses, taxes, impact on your other goals and gift and estate tax consequences.


Investment Planning- The investment planning process involves clearly understanding your financial goals, time horizons, liquidity needs and tax situation, assessing your ability and willingness to accept investment risk, and then devising an investment strategy based on the above factors which are linked to your unique and personal financial situation. The external economic, social, legal, political and tax environment will also impact the design of your investment strategy. The Financial Planner will assess your current investment portfolio to check if the investment strategy and asset allocation are optimum for your specific case and if not, then the Planner will point out inadequacies and recommend changes.


Risk Management- The Financial Planner will identify and evaluate your pure risk exposures such as untimely death, disability, healthcare, long term care, property losses and liability for the probability of occurrence and severity of loss. This is followed by reviewing your actual portfolio of insurance to determine the adequacy of insurance coverage. The planner will notify you of any inadequacies and recommend the adequate amount of insurance required for covering catastrophic risk exposures.


Income Tax Planning- Your Financial Planner will review your existing tax situation and ensure that income tax planning and optimization is integrated at every stage throughout your financial plan.


Estate Planning- Your Financial Planner can assist you with developing estate planning strategies while navigating different aspects of gift tax and estate tax planning. The goal is an efficient and effective transfer of wealth considering legal, tax and personal objectives.


A comprehensive financial plan can cover all the above areas and more, depending on your individual financial situation and goals. The Financial Planner will also scrutinize the interrelationship of the goals to analyze how one goal might affect another in the larger scheme of things. After analyzing your current course of action and its material advantages and disadvantages, the planner will first determine if the current course is the optimum course for meeting the client’s goals and if not, the Financial Planner will recommend alternative courses of action to maximize your potential for achieving your financial goals. The Financial Planner will usually spend anywhere between 15 to 30 hours or more (depending on the complexity of your plan) analyzing your case and developing recommendations. The Planner will set up another meeting with you once he/she is ready to present recommendations.


Analysis and Recommendations Meeting 

At this meeting, the Financial Planner will walk you through the analysis and present clear and specific recommendations to achieve your financial goals. Based on your feedback and willingness to work on the recommendations, the planner might make alterations to better fit your personal and financial circumstances. You will also mutually decide who will be responsible for implementing the recommendations. The Financial Planner might also give you a pdf copy of your plan and/or online access to it, depending on how the organization operates. This meeting will last for about 1-2 hours and depending on whether or not the planner has implementation and monitoring responsibilities,  this could also be your final meeting with the Financial Planner.


Implementing Financial Planning Recommendations 

Mere good intentions and a pdf document outlining your financial plan are of no use unless you follow through on the recommendations. Certain recommendations might be easy to implement while others might require more effort, time and coordination with other financial professionals. If the Financial Planner has implementation responsibilities, they will identify and analyze actions, products and services best suited for your case. In most cases, implementation will require coordination with other professionals like estate attorneys, insurance agents, tax consultants and investment managers. The cost of these products and services is usually independent of the financial planning fees and varies depending on the actual product or service selected. Certain financial advisory firms offer these implementation tools at their firm while some might recommend non-affiliated professionals.


Monitoring and Updating

Monitoring the plan involves comparing actual results of the implemented recommendations relative to what was expected and if the two differ, then adjustments to the plan may be required. You also need to revisit and update the plan in case of any major life changes or changes in the external environment. The planner and the client will establish whether the Financial Planner has monitoring and updating responsibilities along with the terms of the engagement. Certain financial advisory firms charge a retainer fee for providing such service, some might bundle this service with other services provided such as investment management while others might charge a separate fee each time the service is requested.



The financial planning process will help you identify financial risks and establish and prioritize goals. A financial plan is like a roadmap which analyzes your starting destination (current financial situation) and gives you clear direction (specific recommendations) while identifying obstacles (risk assessment) and suggesting the best route (efficient and effective resource utilization) to help you reach your final destination (achieve your financial goals). The Financial Planner will help you get your financial life in order, educate and coach you, create accountability, all while objectively steering you away from making emotionally driven financial decisions. Finally, a CERTIFIED FINANCIAL PLANNER™ equipped with education, expertise and experience will bring you the confidence that with clear direction you can accomplish your financial goals.

To schedule a complimentary 30 minute initial consultation, email me at

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