What are the 7 steps of financial planning? (2023)

Certified Financial Planners (CFPs) follow sevenfinancial planningSteps to create recommendations for your customers. These steps are considered standards of practice for CFPs. They must be followed to comply with the Certified Financial Planner Standards Board code of ethics and standards of conduct if the planner and client agree that the standards are part of their job.

Individuals can also learn these steps and apply them to their own advantage if they want to present themselves as a lay financial planner.

What are the 7 steps of financial planning?

The seven steps of financial planning begin with understanding the client's current financial situation and goals, and end with continually measuring performance against those goals and updating them as necessary.

  1. Understand the client's personal and financial circumstances.
  2. Identification and selection of objectives.
  3. Analyze the customer's current course of action and possible alternative courses of action.
  4. Develop financial planning recommendation(s).
  5. Submit financial planning recommendation(s).
  6. Implementation of the financial planning recommendation(s).
  7. Track progress and updates.


The CFPB defines financial planning as "a collaborative process that helps maximize a client's potential to achieve their life goals through financial advice that integrates relevant elements of the client's personal and financial circumstances."

Step 1: Understand the client's personal and financial circumstances

The CFP begins their financial planning process by asking their clients questions designed to help them get a clear idea of ​​who the client is and what they want. Some of the questions are qualitative and lead to a better understanding of the client's health, family relationships, values, earning potential,risk tolerance, objectives, needs, priorities and current budget.

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Some of the questions are quantitative, leading to a better understanding of the client's income, expenses, cash flow, savings, assets, liabilities, liquidity, taxes, employee and government benefits, insurance coverage, and estate plans.

The consultant can ask open questions to discover the information needed to start the plan. This information can cover a variety of topics, from financial goals to feelings.market riskHe dreams of retirement in the Caribbean.

The adviser also reviews the client's financial information to ensure they have a clear understanding of their position.


For example when you workretirement planning, some of the most important information you will need is your annual income, your savings rate, the years remaining until retirement, the age at which you are eligible for Social Security or a pension, how much you have saved to date, how much you have in future savings and the expected return on your investments.

Step 2: Identify and select objectives

The consultant will use his financial experience to help his client choose goals. She will ask clarifying questions to identify these targets. For example, what is your time horizon? Do you want to achieve this goal in five, 10, 20 or 30 years? What is your risk tolerance? Are you willing to take relatively high market risk to achieve your investment objectives, or is a conservative portfolio a better option for you?

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Together, the financial planner and the client prioritize which goals are most important.

Step 3: Analyze the client's current practice

The counselor then reviews the client's current course of action to see if it is moving them toward their financial goals. If not, the consultant will provide alternative courses of action and inform the client of the pros and cons of each option.

Step 4: Developing the financial planning recommendation(s)

The financial planner selects one or more recommendations that he believes will help achieve the client's goals. They evaluate each recommendation considering the following:

  • What assumptions were made to develop the recommendation
  • How the recommendation meets the client's goals
  • How it integrates with other aspects of the client's financial plans
  • What is the priority of the recommendation?
  • Whether the recommendation stands alone or should be implemented with other recommendations

Step 5: Introduce financial planning recommendations

In this step, the financial planner presents the recommendations and the reasoning behind the recommendations. This helps the client make an informed decision about whether the recommendations are appropriate.

Step 6: Implementation of financial planning recommendations

Implementing the plan means putting the plan into practice. But as simple as it sounds, for many people implementation is the most difficult step in financial planning. Even if you have developed the plan, putting it into action requires discipline and will. You may be wondering what could happen if you fail. This is where inaction can turn into hesitation.

If the financial planner has implementation responsibilities, clarify those as well so you know exactly what steps your CFP is taking for you.

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Successful investors will tell you that getting started is the most important aspect of success. You don't have to start with a high level of savings or an advanced investment strategy. you could learnhow to invest with one fundOr you can start saving a few dollars a week to make your first investment.

Step 7: Monitor progress and update

It's called "financial planning" for a reason: plans evolve and change like life. Once the plan is in place, you are essentially one part of history. Therefore, the plan needs to be monitored and adjusted from time to time. Think about what you can change in your life, e.g. B. Marriage, having children, career changes and more.

These life events may require new perspectives or changes to your financial plans. Now think about events or changes that are out of your control, such as tax laws, interest rates, inflation, stock market fluctuations, and economic downturns.

Your CFP will work with you to ensure that your plan is meeting its goals and, if it is not, will recommend changes.


Now that you know the seven steps to financial planning, you can apply them to any area of ​​personal finance, including insurance planning,tax planning, Cash flow (Budget),estate planning, Investment and Retirement. While you can do it yourself, professionals can provide valuable advice and a neutral perspective on your finances.

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If youdo it yourself or hire a consultant, remember to keep referring to the steps whenever there are significant changes in your life or finances. You may also want to do what professional financial planners do and sit down and periodically reassess your plan, e.g. B. once a year.

Frequently Asked Questions (FAQs)

What is financial planning?

Financial planning is all about taking the time to set your short-term and long-term goals.financial goalsand plan how to get there. Financial planning can be done with a professional adviser such as a CFP, but it can also be done on your own. There are many tools you can use to help you with goals like paying off debt, evaluating your spending, and planning for retirement. If your situation is complicated, you have significant assets, or you want a neutral party to evaluate your situation, it may be helpful to get the help of a financial planner.

How much does a financial adviser cost?

Financial advisors use different fee structures. Some charge a flat fee for planning and consultation. Others charge a percentage of the assets they manage on behalf of a client. Some advisers may use a combination of the two methods, charging a flat fee for the plan and an ongoing fee for managing the funds.


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