Why it Pays to Understand the Six Stages of Financial Planning

Is one stage more important than the others?

Financial planning is for people at all ages and stages.
Financial planning is for people at all ages and stages.
Source: Adobe Stock

The six stages of financial planning set out exactly how a relationship between a financial planner and a client should develop. It’s an excellent framework for financial planners and a great tool for clients. Financial planners don’t always get the best rap and the guidelines below, as published on the web by the industry body, the Financial Planning Association of Australia (FPA), help solidify and formalise the boundaries in which planners work. Setting expectations and establishing a clear plan of action, gives potential and existing clients confidence and peace of mind.

For RJ Sanderson Wealth Management, as a high quality, long running, award-winning business, being open and honest about the processes we use is simply part of the job.

“The six steps of financial planning set out exactly how a relationship between a financial adviser and a client should develop.”

STEP 1 – Define the Scope of the Engagement

This first part is crucial. This is where you decide if you trust your financial planner and their knowledge enough to firstly tell them more about your financial situation and secondly, to allow them to help you. It’s the moment where you decide whether or not they are the right planner for you. Sometimes there is a simple personality clash. Not every client is suited to every planner. Other times, this lack of connection could indicate deeper issues.

A good financial planner will clearly explain their process, they won’t baffle you with jargon and terminology. They will listen to your needs, and your questions, and answer them honestly. They won’t make you feel stupid and they won’t talk down to you. You can ask them as many questions as you like, about their background, how they work and how they charge.

If you’re satisfied, you can move on to step two.

STEP 2- Identify Goals

Whatever dreams your dreaming about your financial future or retirement, now is the time to put them into words. Be honest with your planner about what you’re hoping for. Depending on your age, you might be working towards goals other than a retirement lifestyle. You might want to pay off your home, invest, or go on a family holiday every year. You might wish to set up nest eggs for your kids.  Whichever goals, you’re working towards, this stage is the basis for your future plan.

STEP 3 – Assess Your Financial Situation

At this stage, a good financial planner will ask a lot of questions. You need to be completely honest, and provide financial documents as needed, all this information will help your planner to establish where you are financially. Your planner will take a good look at your position – your assets, liabilities, insurance coverage and investment or tax strategies.

Financial Planner
Being a financial planner is ultimately a position of utmost trust. Source: Adobe Stock

 

STEP 4 – Prepare Your Financial Plan

Now, based on the information you gave in steps 2 and 3, your financial planner begins the hard work. The result of this step should be your individualised financial plan. It should be clear about the goals you wish to achieve. It should set out clear steps for you to take. It should be easy to follow and understand. There will be suggestions for products to invest in and strategies that suit your unique situation. There may be suggestions for cost cutting and it may not all be delightful reading. A good planner will not shy away from bad news and they’ll be tough if they need to. This is a good point for you to ask lots of questions about your plan, and satisfy yourself that it’s right for you.

STEP 5 – Implement Recommendations

Make sure you’re comfortable with the plan before you put it into action. As part of implementation your financial planner may work with specialist professionals, such as an accountant or legal specialist. They should advise you about the involvement of other parties and obtain your permission. The plan may include investment in a new product or asset you’re unfamiliar with, so ask as many questions as you need to. You can request changes until you’re happy with the final plan. It shouldn’t be a problem if you’ve chosen the right planner.

STEP 6 – Review the Plan

Over time, your circumstances, lifestyle and financial goals will change. Family circumstances change, so does your job, and of course, you’re always moving closer to retirement. Regular reviews of your financial plan are essential, and a good financial planner will schedule these in regularly, not only to make sure you’re on track, but to adjust the plan as your needs change.

Is one step more important than the rest?

These 6 stages, done well, help you identify, plan for, and reach your financial goals where possible. Is there one that stands out as more important than the others?
Yes, we believe so. The first step is the most important by far because it’s about relationships and trust. If you can’t trust your financial planner, if the relationship is not strong; there is no possibility of moving on to the next 5 steps. It’s important to make sure you are comfortable that your financial planner has taken the time to understand your needs, goals and preferences before they make any recommendations . It’s essentially the same as the FPA version, but the emphasis is on the relationship, rather than the work to be done.

Step 1 of the process is the key to your future prosperity

According to an investigation by Dr Rebecca Sheils of the Beddoes Institute, initiated by Zurich Financial Services, to build trust, financial planners must have a high emotional intelligence. They must be a good listener and communicator, always respectful and reliable, return calls, follow up and respond when they say they will. A high level of financial knowledge and technical expertise is expected as par for the course and nothing special, whereas emotional intelligence sets a good planner above the rest3.

The most important step in the Financial planning process is the first one, where you find a financial planner you can trust, who’s got your back and knows their stuff. That’s where RJ Sanderson Wealth Management comes in. We have a team of financial planners with buckets of financial knowledge and experience but also plenty of emotional intelligence. They’ll listen, answer all your questions (with no jargon) and always be there when you need them. Call us on 1300 27 28 29 today and arrange a coffee and a chat. It’s complimentary! 

Sources:

  1. Financial Planning Association of Australia: About Financial Planning – How it works
  2. Certified Financial Planners Board (USA) – Compliance : FAQ Financial Planning
  3. Education/Money Management – How advisers can build valuable relationships with clients

This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

When Financial Planners and Accountants Collaborate – YOU WIN

Arm yourself with many perspectives; create diversity among your professional advice team. And experience the power of having a team of financial professionals working together to create your lifestyle potential.

Financial Planners and Accountants

Financial Planners and Accountants working together means: 1+1=3 or even 5

At RJS Wealth Management, these two financial professionals are able to work together, so you can experience the dynamic combination of Financial Planners and Accountants working as one towards a common goal (your lifestyle potential). A team of financial experts sharing their skills and experience can be far more valuable than an Accountant and/or a Financial Planner working independently. Why? For many reasons but often simply because of professional pride. When finance professionals work together, 1+1 can really = 3 or even 5. They can bounce energy and ideas off each other, turning every stone to find what more is possible for you. Each professional has a different qualification, a different expertise and a different lens that could be used to help you.

What an Accountant might be best at

Accountants may be qualified as a CPA or CA, but unless they are authorised as a representative under an Australian Financial Services Licence (AFSL), they cannot provide financial strategy nor financial product advice. They can advise on plenty of other business and personal related matters, like tax planning, advice and strategy (GST, CGT, Income, Sales and many more) as well as depreciation, and small business advice like business advisory, business structuring, business insurances, budgeting and reporting compliance2.

While the tax and reporting side can be important to do well and get right, the area where a great deal of value could be added, is in business advisory. Business advisory specialists could advise on the best practices for a particular industry, business and situation. Modoras business advisory specialists assist businesses with cashflow management, growth planning and projections, risk management and succession planning.

How your Financial Planner can add the most value

With financial strategy advice that is tailored to individual financial circumstances. Before they give any advice, they can ensure they find out as much as they can about you and your financial goals2. They can also (if appropriate and with permission) speak to your Accountant to get an idea of what your personal or business financial situation is, so they can take this into account when developing a plan for your financial future. Your planner can also help you protect what’s most important to you. Perhaps through structuring your wealth and/or insurances such as life, critical illness, total and permanent disability and income protection.

Financial Planners and Accountants

Good things happen when Accountants and Financial Planners work together

RJS Wealth Management was built on the foundation of co-operation between financial professionals. Our success rests on seeing the value of sharing knowledge and skills. So invite us along on your financial journey. You’ll be amazed how far our expert guidance can take you.  Call us on (03) 9794 0010.

Sources:
1. Mansfield FP – June 2017: Accountant vs Financial Planner
2. American Express – Small business Articles: The difference between your Accountant and your Financial Planner.

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This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.