The Importance of the Financial Planning Process

Paul Miller |

Planning a path for your money to grow over the next 20 or 30 years is no small matter. It involves balancing your income with your expenses, while making sure that you invest enough funds at the right times for the home that you need to buy, the college education that you need to give your children, and for retiring comfortably. You need an intricately crafted financial plan. Many people misunderstand the term plan, though.

A financial plan isn't something that you create once, and live up to afterwards. Rather, it is an ongoing process whose aim is to help an individual achieve his financial goals by taking changes into account as they occur -- new goals, new financial realities and surprise developments both in life and in the world at large. These variables can make running a successful financial plan so complicated, it tends to lie far outside the abilities of most people. This is where professional financial planners come in.


Several laws closely define the exact nature of the services that investment advisors and financial consultants should provide their clients. There is one important area that these laws say nothing about, though: fiduciary duty. 

A CFP® is held to a higher ethical standard than other financial advisors. If you choose to work with a CFP®, you are entering a fiduciary relationship. Each person who carries the CFP® designation is obliged to uphold the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence. They are to put your interests first when they enter into the advisor-client relationship. Financial advisors who lack the personal CFP® designation and RIA Firm Registration are under no fiduciary obligation.  

If you plan to hire a financial advisor, look for a professional who has the CFP® designation.

The first thing that a CERTIFIED FINANCIAL PLANNER™ will do

The job of a CFP® starts with analyzing your current financial position and developing a financial plan to help you reach your goals. Professional planners need to be skilled in reading their clients' financial position on a consistent basis, constantly making course corrections. They need to put in considerable work drawing up detailed information about your assets, your debts, all buy-sell agreements, trust agreements, wills, the level and steadiness of your cash flow, your investment preferences and your spending habits. A CFP® needs to gather all this information on a regular basis to be able to accurately steer your finances.

Making recommendations and executing them

Once a CFP® has enough insight into your financial position, his next move is to work out a strategy to help you get from where you are to where you want to be. Not only will he offer investment recommendations, he may give you advice about your spending habits and your choice of lifestyle, as they relate to your financial goals. Once you and your CFP® arrive at an agreement in the exact financial path to take, you can rely on having your choices put into effect.

Your relationship with your financial planner is likely to be one of the most productive ones that you will have in your life. With a CFP® at your side constantly monitoring your financial plan and giving you regular, meaningful recommendations, your financial goals will become that much more achievable. Investing in such a relationship is one of the best moves that you can make.

The importance of the financial planning process

Even as the specific pieces of advice that a CFP® offers clients and the value added to their portfolios tend to be important, these aren’t the greatest contribution made to the betterment of those clients’ lives.  

The most valuable contribution lies in the planning process taught to clients over the long term. Being put through a meticulous, long-term planning process by a dedicated planner, people tend to find their approach to money changing over time. They learn to deal with money as they see their planners do, always learning, thinking and acting with restraint. Under this influence, the client can become an active partner in their own financial success.