Financial Planning Process (7 Steps)
The Financial Planning Process is the CFP Board's official 7-step framework for delivering comprehensive financial advice, beginning with understanding client circumstances and progressing through goal identification, analysis, recommendation development, presentation, implementation, and ongoing monitoring.
Exam Tip
Memorize all 7 steps in order. Step 1 = gather data (quantitative + qualitative). Step 7 = ongoing monitoring (can last decades). The process is iterative.
What is the Financial Planning Process?
The CFP Board's 7-step framework guides planners through comprehensive financial advice delivery.
The 7 Steps
| Step | Name |
|---|---|
| 1 | Understanding Personal & Financial Circumstances |
| 2 | Identifying and Selecting Goals |
| 3 | Analyzing Current & Alternative Courses of Action |
| 4 | Developing Recommendations |
| 5 | Presenting Recommendations |
| 6 | Implementing Recommendations |
| 7 | Monitoring Progress and Updating |
Step 1: Understanding Circumstances
- Quantitative: Income, expenses, assets, liabilities
- Qualitative: Values, attitudes, risk tolerance, time horizons
Step 7: Ongoing Monitoring
This phase can span decades and includes regular reviews, plan adjustments, and fiduciary duty throughout.
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Related Terms
Goals-Based Planning
Goals-Based Planning is a financial planning approach that organizes all strategies around specific client life goals rather than abstract metrics, measuring success by goal achievement rather than benchmark performance.
Investment Policy Statement (IPS)
An Investment Policy Statement (IPS) is a formal document between an advisor and client that outlines investment objectives, risk tolerance, constraints, asset allocation guidelines, and the rules governing portfolio management decisions.
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