Financial Planning is the process of determining how an individual can meet
life goals through the proper management of his or her financial resources.
Examples of life goals include a comfortable retirement, buying a home, saving
for a child's education or starting a business.
A Financial Planner is someone who uses the Financial Planning process to
help clients figure out how to meet their life goals. A Financial Planner can
take a "big picture" view of a client's financial situation and make
Financial Planning recommendations based on the client's needs in areas such as
budgeting and saving, taxes, investments, insurance and retirement planning.
Or, the planner may work with a client on a single financial issue but within
the context of that client's overall situation.
A Financial Planner helps a client analyze either all or selected areas of
his or her finances and develops a "plan" bringing together all of
the client's financial goals, or provides advice on specific areas as needed.
This big picture approach to a client's financial goals sets the planner apart
from other Financial Advisers, who may have been trained to focus on a
particular area of a client's financial life. The Financial Planning process as
described on the following page distinguishes Financial Planning practitioners
from other Financial Advisers.
The Financial Planning process includes the following six key steps:
||Establishing and defining the client-planner relationship.
||Establishing and Gathering client data, including goals.
||Establishing and Analyzing and evaluating the client's financial status.
||Developing and presenting Financial Planning recommendations and/or alternatives.
||Implementing the Financial Planning recommendations.
||Monitoring the Financial Planning recommendations.
Financial Planning is a process, not a product. While the practice of
Financial Planning can be performed in conjunction with providing financial
products, it can also be performed as a distinct and separate function from the
practice of any other profession or occupation.
The Financial Planning process includes the following steps:
1. Establishing and defining the
||Does the Planner explain or document the services to be
||Are the Planner's and your responsibilities clearly defined?
||Are the compensation arrangements clear to you?
||Have you and the Planner agreed on how long the
professional relationship should last?
2. Gathering client data, including
||Does the Planner ask for relevant information or ask you to fill out a questionnaire about financial resources and obligations?
||Does the Planner help you to define and prioritize your personal and financial goals and assess your risk tolerance and time horizons?
||Does the Planner request applicable records and documents?
3. Analyzing and evaluating your
||Does the Planner analyze and evaluate the information gathered above to determine whether or not your goals can be met?
4. Developing and presenting Financial
Planning recommendations and/or alternatives.
||Are the Financial Planning recommendations tailored to meet your specific goals and based on analysis and evaluation of the information provided to the Planner?
||Does the Planner communicate the recommendations to you in a way that you can make informed decisions?
5. Implementing the Financial
||Do you and the Planner agree on implementation activities and who should perform them?
||Will the Planner help implement his/her recommendations or coordinate or refer you to other professionals, such as attorneys or stockbrokers?
6. Monitoring the Financial Planning
||Have you and the Planner agreed to have recommendations and your financial progress monitored periodically?
||If so, does the Planner review and evaluate changing circumstances and make new recommendations based on these changes, as appropriate?
The phrases "Financial Planning" or "Financial Planner"
are sometimes used by individuals to promote the sale of financial products, or
are confused with the sale of such products. Many Financial Planning
practitioners may also be registered representatives who sell securities
products, insurance agents who sell insurance products, or investment advisers
who recommend certain financial products. As a result, the public is often
confused about the distinction among
1. An individual solely offering Financial Planning services
2. Someone selling financial products and related services in
conjunction with his or her Financial Planning practice and
3. A financial services representative who offers no Financial
To assist you, we have compiled the following list of terms describing
individuals who work in the Financial Planning and financial services
Accountants perform one or more of the following services involving the use
of accounting or auditing skills: issuance of reports on corporate and
individual financial statements, consulting, preparation of tax returns and the
provision of tax-related advice. Many accountants have broadened their
activities in recent years into computer systems analysis, management advisory
services, corporate or individual tax planning or other areas of Financial
Planning, such as investment planning.
CFP Certificants are individuals who
have met the FPSB India's Education, Examination and Experience requirements,
are committed to high Standards of Ethical conduct and who complete the FPSB
India's biennial certification requirements to use the certification marks CFPCM and . A CFPCM
Certificant is a financial professional authorized to use the CFP
Certification marks that has identified himself or herself to the FPSB India as
being actively engaged in providing Financial Planning services. All CFP
Certificants have voluntarily submitted to the regulatory authority of the FPSB
CERTIFIED FINANCIAL PLANNER
Holders of the Chartered Financial Analyst (CFA®) designation are securities
analysts, money managers and investment advisers who focus predominately on the
analysis of investments and the securities of particular companies or industry
groups. Individuals earn the CFA designation by completing the Association for
Investment Management and Research's® (AIMR®) experience, education,
examination and ethics requirements. All CFA charter holders have voluntarily
submitted to the regulatory authority of AIMR.
An Adviser who is compensated both by fees paid by the client and
commissions that are contingent on the purchase or sale of financial products.
An Adviser who is compensated solely by the client, with neither the adviser
nor any related party receiving compensation that is contingent on the purchase
or sale of financial products.
"Financial Advisor" is a generic term used broadly by
consumers and financial services professionals to describe an individual
engaged in providing financial advice, services or products to a client for
compensation. The term "Financial Advisor" covers a broad spectrum of
financial professionals including Financial Planners, registered
representatives, money managers, investment advisors and individuals who sell,
or advice people on, financial products.
These professionals are usually employed by investment brokers, banks,
mutual fund managers, venture capitalists or investment institutions to conduct
investment research and analyze the value of securities and financial condition
of a company, group of companies or industry sector. Based on their analysis of
a given stock or market sector, analysts will make investment recommendations
to buy, sell or hold a given stock.
Insurance agents are individuals licensed by IRDA to sell life and health
and/or property and casualty insurance products. Many Financial Planners are
licensed to sell or give advice on insurance products. Other Financial Planners
might identify insurance needs for a client, but turn to a licensed insurance
agent for recommendations about which existing insurance products best meet the
client's needs. Insurance brokers sell products for two or more insurance
companies; exclusive insurance agents represent only one.
Investment advisors may sell or recommend stocks, bonds, mutual funds, partnerships or
other SEBI-registered investments for clients.
The term "portfolio manager" is often used to describe the
investment manager of a mutual fund or private institutional fund. The term
"portfolio manager" is often used to describe the investment manager
of a mutual fund or private institutional fund.
A real estate broker arranges the purchase or sale of property for a buyer
or seller in return for a commission. A real estate agent is an individual who
works for a real estate broker. Real estate brokers may help consumers finance
a real estate purchase through their contacts with banks, savings and loans,
and mortgage bankers.
A stockbroker, is affiliated with a stock exchange and recommends to clients which securities to buy and sell, and earns a
commission on all trades as compensation. All stockbrokers, including any
Financial Planners who execute buy or sell orders for mutual funds, stocks,
bonds, commodities or other securities on behalf of clients for compensation,
must be registered with SEBI and licensed by the appropriate stock exchange.