If you have never consulted a financial advisor, it is difficult to know what to expect.
The Financial Planning Standards Board (FPSB) has developed a six-step process that is widely used by financial advisors and brokers when meeting with clients. The FPSB develops education programmes for financial planners and is also the owner of the Certified Financial Planner (CFP®) programme.
Wouter Fourie, CFP® and director at Ascor Independent Wealth Managers, says the six-step process provides continuity. In the unfortunate event that something happens to the advisor, another financial planner can step in without major disruption.
Below the six-step process is set out in brief.
1. Establish and define the relationship with the client
During the first consultation the client will generally be provided with information about the company, its competencies and the financial planning process, Fourie says.
The financial planner will also determine whether the firm is in a position to meet the client’s needs. Where it is clear that a client will not be willing to engage within the advisor’s ethical framework or has unrealistic return expectations, the advisor may terminate the relationship early on.
Fourie says the scope of the engagement will also be defined. A client mandate sets out exactly what the client expects.
At this stage, the client will also indicate whether a single or product analysis or a comprehensive financial planning exercise is required.
2. Collect the client’s information
During the second step of the process, the advisor will collect the client information.
This will include identifying the client’s personal and financial objectives, needs and priorities and collecting quantitative (assets, liabilities and documentation) and qualitative information.
Fourie says during the collection of qualitative information the advisor will ask “softer” questions around life planning and probe the client’s experience with money, how it affects his or her choices, whether the client has a budget and how he or she perceives risk and financial independence.
These types of discussions allow the advisor to get a better sense of a client’s priorities, he adds.
3. Analyse and assess the client’s financial status
This usually happens after a first and possibly even second consultation, Fourie says.
In analysing and assessing the client’s financial status, the advisor will analyse the information that was previously collected. The client’s objectives, needs and priorities will be assessed and the advisor will provide a written quotation for the services offered.
Once the quotation is approved, the parties will proceed to the next step.
4. Develop the financial planning recommendations and present them to the client
During this phase, financial planning strategies will be identified and evaluated. Financial planning recommendations will also be developed and presented to the client in writing, Fourie says.
5. Implement the financial planning recommendations
Fourie says during step five the client will be provided with a written plan of action and the parties will agree on the implementation and responsibilities.
The advisor will get the client’s consent to proceed with the implementation and assist the client with the necessary paperwork, lodge applications to relevant product providers and keep the client updated with the progress of the application.
Clients may decide to implement the plan themselves, or contract the advisor to implement. In the latter case, the advisor will keep the client up to date about the progress.
6. Review the client’s situation
Fourie says the advisor and client will agree on the responsibilities and the terms of review of the financial situation.
A review should be done at least annually.
Situations that warrant a review include a change in marital status, new child, loss or change in job, inheritance, death, change in responsibilities, change in goals or financial objectives and health changes, he says.