Most 6 Steps of Financial Planning Process

Financial Planning & Financial Planner is a misused term in India. Anyone who inherits a post office or life insurance business from his father attains the title of being a Financial Planner. In absence of any regulation or anyone with shallow financial knowledge can call himself or herself a financial planner. The 80-90% of people in this fraternity will carry business cards with designations like “Financial Planner” or “Authorized Financial Advisor” without knowing its actual meaning. This creates confusion in minds of clients.

Must Check- Everyone Should Know What is Financial Planning?

That’s the reason, the CFP Board recommends standard Financial Planning Process to be followed by their CFP Professionals. So every time you visit the website of true planner you will find a similar 6 Step Financial Planning Process on his website. But here also you will find even fake planners are using these processes without knowing the actual facts.

So make sure your financial planner follows these 6 steps financial planning process.

The Financial Planning Process consists of the following 6 steps:

1. The initial interaction and establishment of the Financial Planner & Client Relationship.

  • The Planner will explain the entire process. He will document the services to be provided to you and define both his and your responsibilities.
  • The Planner will also disclose his remuneration and will tell how he will be paid and by whom.
  • The Planner will also elaborate if he has any restrictions on his ability to give unbiased advice or if he has any conflicts of interests.
  • You and the Planner should agree on how long the professional relationship should last and how decisions will be made.

2. Data Gathering & Goal Finalization

  • The  Planner will ask for information about your financial situation. This will be your assessing your present financial condition.
  • Based on the data provided, the Planner will assist you in defining your personal and financial goals, understand your time frame for results and discuss your risk profile.
  • The Planner should gather all the necessary documents before giving you the advice you need.

Also, Read- How to Setting SMART Financial Goals

3. Analyzing and evaluating your current financial status.

  • This part is about the strategy. The Planner should analyze your information to assess your current situation and determine what you must do to meet your goals.
  • Depending on what services you may have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments, or tax strategies.

Financial Planning Process

Financial Planning Process

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4. Developing and Presenting Financial Plan.

  • This is the step when the financial plan comes into being.
  • The Planner should offer Financial Planning recommendations that address your goals, based on the information provided by you.
  • The Planner should go over the recommendations with you to help you understand them so that you make informed decisions.
  • The Planner should also listen to your concerns and revise the plan.

5. Implementing the Recommendations of the plan.

  • You and the Planner should agree on how the recommendations will be carried out.
  • The Planner may carry out the recommendations or just advice, coordinating the whole process with you and other professionals.

6. Reviewing & Monitoring the Financial Planning recommendations.

  • You and the Planner should agree on who will monitor your progress towards your goals.
  • If the Planner is in charge of the process, he should report to you personally to review your situation and adjust the recommendations, if needed, as your life changes.

A true Financial Planner will be a process man and not a transaction machine. He will always explain the merits and demerits of all steps that are undertaken in Financial Planning. A faker will jump to products and make you buy one. So next time when you reach out to someone or someone reaches you as a financial planner – ask him about his process. Let him speak whatever he wants to say – you just compare is on the right track.

Would you like to share your experience with your planner or advisor?


  1. Hi Hemant Ji,

    I must complement you for your simple language. Even naive like me like me can understand them.

    I will be thankful if you can write something on accidental policies.

    • Thanks Amit & as you suggested I will write something on accidental policy very soon.

  2. Dear sir
    Now am 64 year old. I can’t more read or more things. just tel me how I can get with out tax pay Rs 25,ooo/- per month for monthly exp. How much invest money ?

    • Hi Ashok Ji,

      I am really sorry but I can’t help with this small information on such important goal.

  3. Hi Hemant,

    I am seeing this page first time & your explanation is really good. I would like to appreciate you whole heartedly.

    I was going thru the web to find a suitable plan(insurance& investment) for my kid. I am 34 yrs old & my kid is 2 yrs now. I would like to consult some insurance agents for the same. What queries do i need to get clarified. The reason for requesting you about the same is…you might provide some checklist & i could go ahead with that. I would like to invest Rs, 20000 per yr for my son. And i am not looking for tax benefit out of it. I would want this money to be used for my son’s future needs. Pls do help on the same. Pls also let me know if i need to provide more info on the same. thanks.


  4. Hi Prakash,

    1.Firstly you should quantify your goal.What is the total cost you will have to incur for you child education and marriage.

    2. Then asses the right insurance coverage which will help your family in meeting child expenses as you desire, in case of any mishappening.You can refer to online tools available.

    3. Then assess investment tool which will yield the returns higher tha inflation.Do consider your tax before you make any decsion.

    4. Search for advisor who advises you on basis of your requirement.You can cross question on based of your goals which will give you an indication whether advisor is really interested in meeting your goals.

    5. lastly, do not mix insurance with investment.

    I hope this will clarify some of your concern, if not all.


  5. The biggest problem is to find out whether the financial planner is genuine or fake.Recently a friend of mine had sent some financial planners to me.While talking to them I could make out that instead of listening to my requirements they were trying to push ULIP, Insurance or Post office products.Most of the so called financial planners I have met are actually agents dealing with banks, post offices,Insurance companies and Mutual Fund Houses.So there is clearly a conflict of interest.A true financial planner is a rare breed and difficult to find for average investor.

  6. Hi,

    I would like to avail personal financial planning consultancy from you.
    Could you please let me know the process involved.

    D G

  7. Hi,
    I want to invest in gold . Which would be the better way.
    1. SIP of Rs 1000 per month – Reliance Gold Saving Fund
    2. Purchase of 1 gram gold , after every two months from MCX directly

    Please suggest.

    Amit Kumar Gupta

    • Hi Amit
      I had invested a small amount in Reliance Gold Fund when it was launched.This was done before reading Hemant’s comment against investing in this fund.So far I am satisfied with the return I have got.

      • Hi Anil,

        I was not against any fund – I gave a different perspective. One thing that is good for you doesn’t means it good for others.

        • Hi Hemant
          Most of the people have this misconception that Financial Planning is only meant for people with high incomes.The truth is that low and middle income people require it more than high income people.Same is the case of investments in mutual funds.Most of the investments in this sector are also limited to well to do people of metros.

  8. My self is planning to invest a sum of Rs. 15,00,000/- recent now. I am planning to invest in a fixed deposit scheme. I may please be guided if possible by your good self to show me a good way of investments.

    • Hi Tarak,

      Interest in fixed deposit is taxable at your income tax slab rate. You can consider bifurcating this investment between fixed deposit and debt mutual funds. The choice of debt scheme will be based on the time horizon of your investment.

  9. Dear Mr Hemanth,

    I need your help. I am an LIC Agent for the last 7 years. I want to be professionally qualified. What should i do?

    Any course equivalent to CFP is availble for Insurance Advisors??

    Please advise.

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