Many intelligent, well-educated adults readily confess to having trouble grasping even simple financial concepts. This isn’t shocking, considering that financial management concepts aren’t taught in most school curricula. However, this is where the services of a licenced financial planner come into play. Financial advisors consult with individuals to help them arrange and control their finances.
Unfortunately, many people are apprehensive about working with a financial advisor because they are unfamiliar with the method. Find out here E.A. Buck Financial Services
The method of financial planning is explained.
The financial planning method can be broken down into seven easy steps:
Preliminary Meeting & Assessment (Step 1)
The financial advisor and the prospective client meet for the first time during an introductory interview. This usually entails a first meeting in which the planner discusses the purpose of the services to be given and how he or she will be compensated for them. As a result, the prospective client has the opportunity to assess whether the planner is capable of providing the services required. This is an excellent opportunity for the planner to get a general understanding of the prospective client’s current financial situation and long-term objectives. For both parties, it is critical that the relationship begin on a foundation of mutual trust and confidence.
If it is agreed to proceed, the planner should write an engagement letter to the prospective client that acts as a contract detailing the services to be rendered, the fees to be paid, and the client’s obligations during the financial planning process.
Stage 2: Collect data and set objectives
The financial planner must collect a significant amount of information about the client in order to be accurate. Quantitative (e.g., financial details about the client’s income, expenses, and assets) or qualitative (e.g., non-financial information about the client’s risk tolerance, aspirations for future standards of life, and health of the client and family members) information may be collected. The client’s short- and long-term objectives must also be established. “Adequate income in retirement” or “providing for a child’s education” are examples of such priorities. It’s important to prioritise or rate objectives in order of importance once they’ve been identified.
During the data-gathering process, some of the most relevant financial and legal records are normally secured:
Wills, trusts, and powers of attorney are all examples of estate planning.
Statements of personal finances
Budgets are essential.
Statements from a retirement plan, a brokerage account, and a mutual fund
Policies of insurance (life, disability, health, and property and casualty)
Settlements in divorce
Returns on federal and state income taxes
Agreements to buy and sell
Step 3: Analyze Data and Create a Strategy
Here, the planner takes the information gathered, considers the client’s objectives, and creates a financial plan to assist the client in achieving his or her objectives. The planner would often use computer programmes to complement his written analysis and advice to aid in the process.
A detailed evaluation of properties, liabilities, current and expected profits, insurance coverages, and savings is typically included in a statistical analysis. The planner can also enlist the help of other practitioners if the client authorises it. (For example, an attorney or an insurance agent).