The Financial Planning Process

by | Jan 8, 2024 | Blog

Here at Mullooly Asset Management, we often stress the importance of the financial planning process. 

So what is the financial planning process? 

To try and sum it up into one sentence: the financial planning process is the process of determining whether clients can meet their financial goals through practical management of their financial resources.  

As financial planners, we walk each client through our financial planning process step by step.  With us, that starts with what we call a Fit Meeting.  This initial meeting typically lasts up to 30 minutes and is a chance for both parties to get to know each other.  We can outline how we work with clients and the clients can ask any questions they might have about our firm and how we operate.  

No papers, commitments, or pressure to get onboard is required at this meeting.  This is our chance, as advisors, to discuss expectations for the relationship with clients and outline the scope of the client relationship.

We then move onto what we call ‘Data Gathering’.  This is where we gather information necessary to create a financial plan and fulfill our end of the engagement.  It also requires a tiny bit of homework from the prospective client as well.  After all, the financial planning process only works as well as the information and effort that is put into it.

Data Gathering gives us a chance to identify the current landscape of a client’s mindset.  We can discuss values, financial needs, priorities, goals, time horizons, etc.  It’s also a chance for us to get a feel for the client’s level of financial knowledge, investment risk tolerance, and more. 

Data Gathering is also an opportunity to put some hard numbers behind what we’ve discussed during the Fit Meeting and initial stages of the financial planning process.  We build out a statement of cash flow and balance sheet looking at monthly income and expenses along with assets and liabilities.  

We also look for other areas like adequate insurance coverage, estate planning documents, retirement plan information, education planning, tax returns, Social Security, Medicare, and current investment portfolios.  This is not a comprehensive list, and some of these items may not pertain to every client, but it gives you an idea of the type of information we’re looking for during this part of the process.

It’s important for us to fully understand a client’s current situation before we can even begin to consider any changes or recommendations, both pertaining to the investment portfolio and outside the investments. 

What comes after Data Gathering in the financial planning process?

After the Data Gathering phase of the financial planning process is complete, we begin to analyze and evaluate the situation.  Considering the client’s priorities and goals, we can identify important items to tackle first, and which items can be addressed later.  

Depending on what stage of life a client finds themselves will largely dictate what priorities need to be addressed first.  Clients nearing retirement might prioritize retirement income planning over education planning for example, and clients with young kids might prioritize in different ways. 

As financial planners, it’s our responsibility to help clients focus their financial goals and create a workable plan to address their most pressing needs.

Once the analysis is complete and the recommendations have been developed, the next step in the financial planning process is to effectively communicate our recommendations.  

We reconvene with the prospective clients to share our initial feedback.  At this meeting we can review client goals, explain any assumptions made in our analysis, share our observations, discuss potential alternatives, and go over their top priorities.  

This step of the process is incredibly important for a few reasons.  It allows us to illustrate how we work with clients, and how the nature of the ongoing relationship would go.  Choosing an advisor to work with is an extremely important decision, and we want our clients to make the best decision possible. 

After a client has decided they’d like to engage in a relationship with our firm, we can then move onto the next step in the financial planning process: implementing the recommendations.  We create a plan for implementing our feedback, and who is responsible for implementing those changes.  

As advisors, we can only do so much in certain situations.  Sometimes, implementing changes falls on the client, and it’s our job to communicate those responsibilities at the onset.  We don’t want any miscommunication when it comes to important financial decisions and changes.  

What is the final step of the financial planning process?

The final step of the financial planning process involves monitoring of the financial plan over time.  We don’t want to be a pest to our clients, but we do like to stay in front of clients and remind them we are constantly monitoring their plan.  However, we aren’t mind-readers, so when big changes happen in a client’s life – we need to know about it!

Outside of communication regarding the client’s specific plan, we also try to educate our clients as best we can.  We send out weekly podcasts, videos, and emails for our clients to tune into.  In these pieces of content, we discuss personal finance topics, financial planning questions, and we discuss the headlines impacting market and economic news.

The financial planning process isn’t a one-sided arrangement.  Both parties (the client AND the advisor) have responsibilities to make sure everyone gets what they’re looking for.  

For the advisor, it’s our responsibility to take obligations seriously and, as fiduciaries, place client interest over personal gain.  It’s also the planner’s responsibility to use experiences and judgement carefully to demonstrate an appropriate level of knowledge when considering the client’s situation.  The planner also needs to discuss goals and objectives with each client and explain what everyone can expect from the relationship.

For the client, it’s their responsibility to take an active role in shaping their financial future, to make sure goals are realistic, and to share relevant personal and financial information with the planner on a regular basis.

As you can see, our financial planning process has a handful of very important steps to it.  The process was designed this way so that all parties involved can have the best experience possible.  Open lines of communication and honesty are paramount to any mutually beneficial relationship.

If you’re thinking about working with a financial planner and you have more questions for us about how our financial planning process works, please do not hesitate to click the ‘Schedule a Meeting’ button at the top of this page.  We’d be happy to answer any questions you might have.

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