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What might a financial planning process that follows the fiduciary standard look like?

| May 30, 2017
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Not all fiduciaries actually use a financial planning process that adheres to the Fiduciary Standard

I have previously described Financial Folks of different "flavors" because - unknown to many in the public, not all financial folks are required by regulation or law to uphold the Fiduciary Standard. Act only in clients' best interests. Some folks are required to do so.  Some are not. (IMPO - In My Professional Opinion, this current state of law and regulation in the U.S. makes no sense.  But it is what it is ... at this time.)

But let's suppose your financial "folks" are of the fiduciary flavor to properly act as fiduciaries. In that case, do they follow a Financial Planning Process that adheres to the Fiduciary Standard?  As a CFP®  -- CERTIFIED FINANCIAL PLANNER Professional,  I like the financial planning process shown by the CFP® Board.  

For my research on this topic, I Googled "fiduciary" and got more than 13,000,000 hits.  I got 765,000 for "Fiduciary Financial Planning Process."  So there are clearly multiple views and professional opinions on this topic.

Several thoughts below are quoted directly from the CFP® Board, because I believe they make important points:

"Financial Planning Process"

"To develop a solid financial plan, it's important to cover all your bases. Here’s how:

  • Examine your current situation
  • Set financial goals
  • Measure your progress

From start to finish, a CFP® professional is required take you through the financial planning process to help you achieve your financial goals."

[Source: CFP® Board]

(Editor's Note:  I am a CFP® professional.  I do use the financial planning process described by CFP® Board.  But I differ with the Board.  I do not believe a CFP® professional is required.  Helpful, but not required. But I quote from materials of the CFP® Board so readers might understand the Board's viewpoint and opinions.)


"SIX STEPS TO HELP YOU CREATE A FINANCIAL PLAN"

  1. "ESTABLISH A RELATIONSHIP WITH A CFP® PROFESSIONAL.  Your financial planner is required to explain his or her financial planning services and define each of your responsibilities.  Along with compensation, you'll discuss how long the professional relationship can last and how to make decisions.

  2. GATHER YOUR DATA AND DEVELOP YOUR FINANCIAL GOALS.  You should gather any necessary documents and talk to your planner about your current financial situation. Together, you can define your personal and financial goals, including timeframes.  You may also want to discuss your comfort level when it comes to taking financial risks.

  3. ANALYZE AND EVALUATE YOUR FINANCIAL STATUS.  Your CFP® professional will consider all aspects of your situation to determine what you need to do to meet your goals.  Depending on what services you've asked for, your planner may analyze your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

  4. REVIEW YOUR CFP®  PROFESSIONAL’S RECOMMENDATIONS.  Your CFP® professional will go over his or her financial recommendations, explaining the rationale so you can make informed decisions. At this stage, share any concerns with your planner so any recommendations can be revised if necessary.

  5. SET YOUR COURSE.  You and your CFP®professional need to agree on how the recommendations will be carried out.  Your planner may carry out the recommendations or serve as your coach, coordinating the process with you and other professionals, like attorneys or stockbrokers.

  6. BENCHMARK YOUR PROGRESS AGAINST THE FINANCIAL GOALS YOU ESTABLISHED.  As you work toward your goals, you and your CFP®professional need to decide who monitors your progress so you stay on track. If the planner is in charge, he or she will check in from time to time, reviewing your situation and making any necessary adjustments to his or her recommendations."  

    [Source: CFP® Board]


"WHY CHOOSE A CFP® PROFESSIONAL"

Most people think all financial planners are “certified,” but this isn’t true.  Anyone can use the title “financial planner.” Only those who have fulfilled the certification and renewal requirements of CFP® Board can display the CFP® certification trademarks which represent a high level of competency, ethics and professionalism. And because they are held to a fiduciary standard of care when providing financial planning services, a CFP® professional is required to act in your best interest."

[Source: CFP® Board] See link and below. And Consumer Guide to Financial Planning brochure from CFP® Board. P. 11.]

Is the above a financial planning process following the fiduciary standard?  CFP® Board says it is.  I agree.  Is it the only one.  Clearly not.  If you have gone through a financial planning process following the fiduciary standard, you probably realize it.  If you have not, do you want to

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