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This blog post aims to tie various elements together so it will be peppered with links to other posts deemed relevant for further elaboration. First and foremost, there exists already a financial planning process advocated by the FPSB (Financial Planning Standards Board) in the United States, adopted internationally by CFP (Certified Financial Planner) practitioners worldwide. This post aims to elaborate the processes within the process and set expectations within the process.
1) Establishing and Defining the Client-Planner Relationship
This stage is for introductions, obtain a namecard (marketing compliance controlled material) that should bear an RNF number (can be used to check in MAS website for regulated activities permitted by the person named on the card). You deserve to know what he/she can or cannot do for you.
This stage is great for understanding your adviser representative’s style, remuneration and whatever beliefs and values system that you might hold dear. It may be worth your while to understand where are interests aligned for you and your planner too. You should try and differentiate a salesperson from a true blue planner.
Your planner may have won awards in the past or maybe he/she is a member of the MDRT. In my honest opinion, it is not what was delivered in the past which drives today’s value. But what gets delivered today and in the future, that will drive today’s value. I may have the CFA charter, so what, put me through those exams again and I can surely confirm fail them, that’s how tough those exams are. And who cares? If my competency brings no value to you, what good is it? It is what competency value that is brought to you now and in the future that matters right?
2) Gathering Client Data, including Goals
Understanding your future expected liquidity drawdowns along a timeline is a start. Gathering information on your existing personal assets and liabilities as well as your income and expenses, will assist in preparation of deliverables for the next stage of the financial planning process.
Other data included will be financial plans currently in place for whatever investment, wealth protection or legacy planning purposes. These will assist in assessing shortfall gaps (if any) in your financial plans to be addressed.
3) Analyzing and Evaluating Your Financial Status
Financial Statements of Networth & Cashflow and Personal Financial Ratios prepared are simply the basic minimum expectations to prove that this stage of the process is completed. I conduct Microsoft Excel Programming workshops for this stage and the stage before.
The true essence of this stage comes at the end of it, that your current status is understood in full and in context with financial expectations and goals, with shortfall gaps identified and quantified where possible. (CPF nomination, ACP and LPA are examples of check boxes in a list rather than quantifiable shortfalls.)
In Singapore’s financial advisory industry language, expect your financial needs analysis to be done by the end of this stage.
4) Developing and Presenting Financial Planning Recommendation and/or Alternatives
The FDM Process. What is meaningfully relevant to you, ought to be recorded. Since we all want value for money, price competitiveness will always be a consideration. Emotions do tilt weightings of the factors. Do not be afraid to confront conflicting desires and make sure the weightings are reflective of what you seek.
Understandably, there will be iterations and adjustments to the weightings of the meaningfully relevant factors for consideration, as well as the relative ranking assessments of the various alternatives.
Price costs will always be a factor, albeit not the only factor for consideration. In some cases where budget permits, a blend of solutions since it does not need to be an either-or scenario.
5) Implementing the Financial Planning Recommendations
Depending on case specifics, underwriting may be required for life insurance cases. Or the services of a lawyer may be needed as part of implementing legacy plans. In local Singapore context, agencies like CPF (Central Provident Fund) have service centres island wide for the planner to accompany the client in the implementations of matters like CPF nomination (bypassing probate) and CPF Life (Annuity).
Self directed implementations like CDA (Child Development Account) and subscribing for SSB (Singapore Savings Bonds) can be guided by the planner using internet links and forwarding of relevant information.
6) Monitoring the Financial Planning Recommendations
Depending on life stage changes (ie becoming new parents), plans may have to change with changes in financial needs. The desire to secure the financial security of the newborn calls for increased sum assured of the family’s breadwinner is one example.
Changing income and economic prospects may also call for reviews to prioritise and optimise the financial plans to cater for immediate concerns of putting food on the table is another example. I do have a section for the budget constrained, for I acknowledge that insurance is contingent compared to the immediate need to feed the family.
Investments need to be monitored because markets are dynamic. Depending on the strategy adopted for the investment portfolio, the extent of the level of required monitoring varies. A person’s risk appetite is not static as well and if there are opportunities in the market for capture, an investment planning review is warranted. In fact, investment reviews are needed whenever investment views change.
Context is everything
Financial planning is an iterative process, and any changes made has to be done in the context of the individual’s circumstances for the good and betterment of his/her financial situation.
Without context, any advice is non specific and generic at best, without appreciation to the intricate relationships between nuanced competing priorities (risk vs returns and budget cannibalism are examples) of that individual.
Applying the financial planning process takes effort, do-it-yourself (DIY) is definitely possible and should you be willing for paid help, do not hesitate to make an appointment with me. You know what I do, how can I be of service?