What does a CFP Do? 

A Certified Financial Planner or CFP is a licensed, educated and well-trained person who deals with other people’s money. They jump through hoops and plenty of them to ensure that your money is safe and well protected.  There is nothing hidden about how a CFP handles your money. 

Building a relationship and your financial plan with a planner is similar to the process of building a home. You would possibly meet with an architect to talk about what you wanted your home to look like, a real estate agent to buy the lot, the builder and even a home decorator to get things just right!  There are several steps to build your new house  and so there are for financial planning. Here are the six fundamental steps involved in building your financial dream home.

1. Get to know each other
2. Gather information and determine your goals and expectations
3. Clarify your present financial status and identify any problem areas and opportunities.
4. Develop and present the financial plan.
5. Implement the financial plan
6. Monitor the financial plan and make necessary changes

1.  Get to know each other!

You are entering into an important relationship and there are certain things that your planner should do.  They should:

• Explain issues and concepts related to the overall financial planning process that are appropriate to you.
• Explain the services he or she will provide and the process of planning and documentation.
• Clarify your responsibilities as a client.
• Clarify his or her responsibilities as your planner. This should include a discussion about how and by whom he or she will be compensated.

You and your planner should:

• Discuss the scope of the client/planner engagement.
• Agree on how decisions will be made.

2. Gather information and determine your goals and expectations.

Who are you?  What do you want out of this relationship?  This is a two-way street, not a “this is the way it needs to be done” conversation.  You want to feel part of the planning, not intimidated or overwhelmed.

Your planner should:

• Obtain information about your financial resources and obligations through interviews or questionnaires.
• Gather all the necessary documents before giving you the advice you need.

You and your planner should:

• Define your personal and financial goals, needs and priorities.
• Investigate your values, preferences, financial outlook and desired results as they relate to your financial goals, needs and priorities.

3. Clarify your present financial status and identify any problem areas and opportunities.

In order to build a solid financial dream home for yourself, you need to know what you are starting with.  There is no need to feel embarrassed or ashamed of where you are in the current moment.  Every house started with a piece of dirt and after some careful planning, effort and time, a beautiful home is built.  So don’t despair no matter what your situation!  You can do it together given the proper tools and resources which is why you have engaged a financial planner!  They are your architect, realtor, builder and decorator – all in one!

Your planner should:

• Analyze your information to assess your current situation (cash flow, net worth, tax projections, etc.).
• Identify any problem areas or opportunities with respect to your:
  • Capital needs
  • Risk management needs and coverage
  • Investments
  • Taxation
  • Retirement planning
  • Employee benefits
  • Estate planning
  • Special needs (i.e. adult dependent needs, education needs, etc.)

4.  Develop and present the financial plan.

This is now the responsibility of the CFP.  After gathering all the information, they go away and prepare a plan that is right for you, for your unique situation and goals.  It’s important that you feel comfortable and understand the financial plan.  You wouldn’t leave it up to your builder to decide how many bedrooms you want or if you are going to put a basement in your home or have a garage, so don’t accept the financial plan without understanding why your planner is suggesting that you do certain things.  This is YOUR money!

Your planner should:

• Develop and prepare a financial plan tailored to meet your goals and objectives, values, temperament and risk tolerance, while providing projections and recommendations.
• Present the plan to you and establish an appropriate review cycle.

You and your planner should:

• Work together to ensure that the plan meets your goals and objectives.

5.      Implement your financial plan

This is the exciting part – the financial dream home is underway!  There will be papers to sign and maybe even butterflies in your stomach as the construction begins.  However, if you have done the previous four steps thoroughly, this part should be exciting and well…almost fun! 

Your planner should:

• Assist you in implementing the recommendations discussed if you want. This may involve coordinating contacts with other professionals such as investment funds sales representatives, accountants, insurance agents and lawyers.

6.  Monitor the financial plan

This is the easiest part – watching the progress of your house building.  Feel part of the on-going process and meet with your financial planner to ensure you’re your goals and dreams are being met.  Markets fluctuate, stock prices change so there will be a need to tweak and revise as you go along. 

You and your planner should:

• Agree on who will monitor and evaluate whether your plan is helping you progess toward your goals.

If your planner is in charge of the process, your planner should:

• Contact you to review the progress of the plan periodically and make adjustments to the recommendations required to help you achieve your goals.

This review should include:

• A discussion about changes in your personal circumstances and how they might affect your goals.
• A review and evaluation of the impact of changing tax laws and economic circumstances.
• A review of your life circumstances and an adjustment of the recommendations if needed as those circumstances change through life events such as birth, illness, marriage, retirement, etc.

These six steps are critical for anyone engaging a CFP to assist them in building their financial dreams.  Just as it would be a rather ambitious project to decide to design and build your own home, although some do it, your financial dream home is even more important.  By following these six steps, you have every reason to feel confident, prepared and knowledgeable as you work together with your CFP.