Six Steps of Financial Planning
UBUNCWANE IS COMMITTED TO HELPING YOU, the advisor, achieve the financial and lifestyle goals for your clients through a comprehensive support structure, as they understand your financial planning process. We believe that by understanding the financial advisor and the client’s needs, ambitions, aspirations and fears we are able to provide a unique and personalised solution, we follow and advise in our audit - the six step financial planning process, developed by The Financial Planning Standards Board Ltd. (FPSB) and to which the Financial Planning Institute of Southern Africa (FPI) is affiliated.
The auditing and support process is comprehensive, ongoing and encompasses all aspects of your business albeit; financial planning which includes investment planning, retirement planning and estate planning and structuring. It details the strategy for getting to where you ultimately want to be and how to protect you from unnecessary unsupported or opportunistic claims. For the first time there will be a Body not only owned by, but representative of the service provider.
In the audit process we determine and build the complaint file as follows:
Did the member (representative) do the following:
- Step 1 – Did the advisor establish and define the professional relationship? (during the first appointment)
- Step 2 - Gather enough information? (Including the client’s goals, timeframe and attitude to risk)
- Step 3 – Analyse and evaluate the complainant's financial status objectively?
- Step 4 – How did the representative develop and present the recommendations?
- Step 5 – How was the recording of The Implementation of the financial planning recommendations done?
- Step 6 – What monitoring was done of the financial planning recommendations/process? (we will include a free review of existing compliance documentation, processes and comment on the lasts reports received)
In our assessment attention will be placed from the client’s point of view as follows: (maintaining objectivity to ensure feedback is comprehensive to the various Ombud institutions)
Steps in Detail
Each of the six steps are described in detail below:
Step 1 – Establishing and defining the professional relationship (The first appointment)
The first meeting detail is important to confirm that the client/advisor relationship was appropriate for both parties. The planner/advisor had to provide information about themselves, their competencies and services that they offer as well as whether they established an understanding of the client’s needs and requirements. This will determine if they were able to assist the client. This is usually all contained in the Disclosure document which we will review to ensure the information is comprehensive and updated.
As part of our training and support: We teach the member’s employees (administrative, para-planning and advisor) that the first meeting is also about establishing a good working relationship and partnership between themselves and defining the scope of their engagement by:
- Explaining the process to be followed
- Identifying the needs and level of advice required
- Being clear about what the advisor and the client's responsibilities are and how decisions will be made
- Providing the client with clear service package options
- Discussing payment for services
- Mapping out the process and obtaining consent to proceed
Step 2 – Gathering information
We will ask from you (the advisor) to provide us with all the documents on file, including, personal details, information pertaining to their current financial situation, commitments and short to long-term financial goals. We will then discuss your knowledge about the client’s personal and financial goals, whether you set a time frame for results. We will look at your and the client’s objectives, concerns and aspirations and discuss your understanding of their attitude to investment and other risks. In planning the client’s financial future, we believe that all these factors are critical to understanding their personal approach to financial planning and risk taking.
Step 3 – Analysing and evaluating the financial status
This step involves analysing the information collected from your client and assessing where they currently stand in relation to their goals. Depending on what services you offer, and they require, this might incorporate an analysis of the following:
- The balance sheet (assets, liabilities, and cash flow)
- Current risk (assurance) portfolio
- Reviewing discretionary and compulsory retirement investments
- Reviewing last will and testament and estate planning structures in place
Step 4 – Developing and presenting the financial planning recommendations
Once the personal and financial information have been analysed you would have developed a financial plan. This details the recommendations and strategies for achieving their goals and objectives. Usually this is recorded in your Record of Advice. The Record of Advice should entail existing financial arrangements and a plan for the future, and will cover their assets, investments, liabilities, and income. It will also, importantly, look at contingency planning and help them plan for any disasters which may arise. Your financial plan for them (the proposal) can also include a will and other estate planning structures, along with any other specific personal needs that they may have.
We will audit this file with you (the advisor) and discuss and review these recommendations with you the advisor, to ensure that at the time, they understood and that it was suitable, along with any concerns that you, or the client, might have had.
We teach the broker that The Financial Plan will enable a review of all aspects of a client’s financial portfolio:
- The balance sheet (lifestyle and investment assets and liabilities)
- The risk (assurance) portfolio
This is important in our defence as this is the content of the majority of claims.
Step 5 – Implementation
This stage details the implementation process (action plan) and calls for agreement from the client. Your planner / advisor will record any agreed implementation plan and attach all the necessary documentation in support of the plan. (This will form part of the complaint file. Any information you deem not necessary might be your saving grace.) Other professional expertise will be brought in if required.
Other professional expertise will be brought in if required.
Step 6 – Monitoring the financial planning recommendations
The final stage is about whether you regularly reviewed the plan to make sure everything works for the client. Your planner must look at any change in circumstances and, if necessary, whether he/she changed the plan to incorporate them. (Reviews are usually done annually but can be done more often if needed. This is extremely important in our feedback to the Ombud) This review is also a chance for you to ask any specific questions from the client, ask if any changes happened in their life and ask them about any concerns they may have. This proactive review is about making sure your plan really works for the client, every step of the way. It is also proof that you continuously interacted with the client.
Given the personal nature of a client’s financial affairs and our member’s ability to assist them in achieving their goal, we feel that personal interaction is extremely necessary to allow this process to work efficiently.