FINANCIAL FINANCIAL PLANNINGPLANNING

Simon LamOct 10, 2003

Financial planning or personal financial planning is “a scientific workflow model that assists clients in determining their financial needs and resources, and provides a systematic method of achieving their goals and objectives in an optimal manner.”

Financial Planning Practice Standards of APLIC for FChFP designees

The Key Role of the Financial

Practitioner/Planner

To remove financial worries from a client’s life as much as possible.

THE SIX STEP FINANCIAL PLANNING PROCESS

1. Setting goals,objectives & priorities2. Gathering relevant data & information3. Analyzing information & assessing financi

al status4. Developing and presenting a financial pla

n for implementation5. Executing the financial plan6. Monitoring execution & reviewing of the fi

nancial plan

Setting Goals, Objectives & Priorities

The Financial Planning Process1

Client Motivation to Seek Financial Planning Services

A desire to insure against certain riskTo increase my expected income in retirementTo save tax

What else?

The Financial Planning CirclePension adviser

The press

Friend

Estate agent

Insurance

Lawyer

Accountant

Stockbroker

The Financial Planning CircleMotivation

Wills

Pensions

Selling business

Creating Time

Insurance

School fees

Tax saving

To dig out the client’s need

A Typical Individual’s Financial Life Cycle

INFLUENCES

•Marital

status

•Employment

•Economic

outlook

•Age

•Number of

dependents

•Family

money

NEEDS VS WANTS

Know Your Client!

Never judge a book by its cover

Different Money Personalities

HoardersSpendersMoney monks

Moneyavoiders

Moneyworriers

Moneyamassers

Risktakers

Riskavoiders

Goal Setting - SMART

S = specificM = measurableA = achievableR = realisticT = tangible

List the client’s precise goals or objective and their priority ranking.

$ Dates

Gathering Relevant Data & Information

The Financial Planning Process2

TYPES OF INFORMATION REQUIRED

Quantitative

information

Qualitative information

PERSONAL DETAILS

Names, genders, birth dates and

places

Health status of all members

Family structures and history

Employment information

ASSETS AND LIABILITIES

Assets

Liabilities

Remember to advise your clientDon’t count everything

Set a value limit

Using Fair Market Value

QUALITATIVE INFORMATION

Attitude to risk

Attitude to investment

Investment experience

Income needs

Investment time horizon

Analyzing Information & Assessing Financial Status

The Financial Planning Process3

Developing and Presenting a Financial Plan for Implementation

The Financial Planning Process4

All Financial Plans Involve 3 Steps

Maximizing Income and Wealth

Using Money More Effectively

Monitoring ExpendituresPreparing the Pro-forma Cash Flow Statements (Budget Statements)

The Interlocking Network of Financial Plans and Statements

Evaluate and plan major outlays Reduce taxes Establish savings/investment

program Manage credit Secure adequate insurance coverage

Monitor and control income, living expenses, purchases, and savings on a monthly basis

Actual financial results: Balance sheet Income and expenditures statement

Financial Plans

Budgets

Financial Statements

FEED

BA

CK

There should be a balance between oral and written presentation

Presenting the Financial Plan

Preparation

Presentation

PreparationPrepare the presentation documents

Prepare for the meetingKeep your office clean and neat Review the plan prior to the meetingPrepare list of point if necessaryBe groomed

PresentationExplain the cost structures

Ensure client understandingListen to client’s concern and revise the recommendations as appropriateTime frames

Executing the Financial Plan

The Financial Planning Process5

Action PlanAction Plan

What

When

Whom

Coordination of other professionals

Monitoring Execution & Reviewing of the Financial Plan

The Financial Planning Process6

Checking and adjusting the execution to ensure goals and objectives listed are met.The plan should be monitored annually or at other agreed intervals, to ensure the client continues to progress towards his goals.

Establishing Client-Practitioner Relationship

What is Relationship Marketing?

Dialog is established with customer to discover

needs

Customers needs are addressed and

communicated

Purchase/Service is purchased

PRIMARY OBJECTIVE: Growing Customers

Relationship Marketing

Customeris predisposed to additional communications

Client Relationship Management (CRM)

•CRM refers to the management of all interactions with the customer that an enterprise indulges in. Its focus is on managing and optimising the entire customer life cycle.

Outcome of all smartCRM decisions

LoyalRelationship

Loyalty

Customer LoyaltyCustomer Loyalty / Satisfaction Model

Lifetime

Sleepers

Trapped

Promiscuous

CUSTOMER SATIFACTIONHIGH LOWC

US

TO

ME

R

LOY

ALT

Y

Implementing CRM

• Identifying your client

•Differentiating clients one from another

Potential client?

• Interacting with client

•Customizing your services to meet the client’s individual needs

• Meeting the client

Sign contract with client

This contract should specify:

The range of services to be

performed by the financial practitioner

The method of

compensation The client’s responsibility in

the planning process

Important Steps to Effective CRM

• Treat the Client as the Boss

• Go to see the Client• Don’t Make Excuses to the Client

• Take the Client’s Phone Calls• Provide the Client with

Proactive Feedback

• Solicit Feedback From the Client• Do the Client’s Job

• Enhance the Product Delivered to the Client

• Allow the Client Easy Access to Staff

• Understand the Client’s Perspective

• Establish a Climate of Mutual Respect

Things Not To Do

Taking the traditional insurance broking or selling approachDelegating to non-professionalsAccepting a half hearted commitmentFailure to sell the serviceFailure to get things doneFailure to move with the times

10 MOST COMMON

MISTAKESMISTAKES

FIANANCIAL PRACTITIONERS MAKE

Failing to take your own medicine

Elephant hunting with an unloaded gun while ignoring pet rabbits that will eat out of your hand

Procrastinating

Putting product selection first

Insisting on doing everything yourself

Playing hide and seek

Never trying on a client’s shoes

Hiding from clients when investments go south

Confusing technical jargon with good communication

Failing to take responsibility

T O P ST O P S

Trust

OpportunityPS

ainolution

End of This Part