Financial planner

Financial planner

A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). The work engaged in by this professional is commonly known as "personal financial planning". In carrying out the planning function, he is guided by the "financial planning process" to create a detailed strategy tailored to a client's specific situation, for meeting a client's specific goals.


People enlist the help of a financial planner because of the complexity of knowing how to perform the following:

* Providing direction and meaning to financial decisions;
* Allowing the person to understand how each financial decision affects the other areas of finance; and
* Allowing the person to adapt more easily to life changes in order to feel more secure.

Defining personal financial decisions

Personal financial planning is broadly defined as "a process of determining an individual's financial goals, purposes in life and life's priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals." The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals.

Alongside the data gathering exercise, the purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.

Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual's current lifestyle so that the 'pain' in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.


Financial planning should cover all areas of the client’s financial needs and should result in the achievement of each of the client's goals. The scope of planning would usually include the following:

; Risk Management and Insurance Planning : Managing cash flow risks through sound risk management and insurance techniques; Investment and Planning Issues : Planning, creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending; Retirement Planning : Planning to ensure financial independence at retirement; Tax Planning : Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes; Estate Planning : Planning for the creation, accumulation, conservation and distribution of assets; Cash Flow and Liability Management : Maintaining and enhancing personal cash flows through debt and lifestyle management; Relationship Management : Moving beyond pure product selling to understand and service the core needs of the client

The process

The "personal financial planning process" is generally accepted as a six-step process as follows:

Step 1: Setting goals with the client This step (that is usually performed in conjunction with Step 2) is meant to identify where the client wants to go in terms of his finances and life.

Step 2: Gathering relevant information on the clientThis would include the qualitative and quantitative aspects of the client's financial and relevant non-financial situation.

Step 3: Analyzing the informationThe information gathered is analysed so that the client's situation is properly understood. This includes determining whether there are sufficient resources to reach the client's goals and what those resources are.

Step 4: Constructing a financial planBased on the understanding of what the client wants in the future and his current financial status, a roadmap to the client goals is drawn to facilitate the achievements of those goals.

Step 5: Implementing the strategies in the planGuided by the financial plan, the strategies outlined in the plan are implemented using the resources allocated for the purpose.

Step 6: Monitoring implementation and reviewing the planThe implementation process is closely monitored to ensure it stays in alignment to the client's goals. Periodic reviews are undertaken to check for misalignment and changes in the client's situation. If there is any deviation or significant change to the client's situation, the strategies and goals in the financial plan are revised accordingly.

What is a financial planner's job function?

A financial planner specializes in the planning aspects of finance, in particular personal finance, as contrasted with a stock broker who is only concerned with the actual investments, or with a life insurance intermediary who advises on risk products.

Financial planning is usually a six-step process, and involves considering the client's situation from all relevant angles to produce integrated solutions. The six-step financial planning process has been adopted by the International Organization for Standardization (ISO). [ [ International Organization for Standardization - ISO Standards] ] Financial planners are also known by the title financial adviser in some countries, although these two terms are technically not synonymous, and their roles have some functional differences.

Although there are many types of 'financial planners,' the term is used largely to describe those who consider the entire financial picture of a client and then provide a comprehensive solution. To differentiate from the other types of financial planners, some planners may be called 'comprehensive' or 'holistic' financial planners.

Other financial planners may specialize in one or more areas, such as insurance planning (risk management) and retirement planning.

Financial planning is a growing industry with projected faster than average job growth through 2014. [ [ U.S. Department of Labor - Financial Analysts and Personal Financial Advisers] ]

Licensing, regulations and self-regulation

The title of 'financial planner' is largely an unregulated term in many countries. Lack of regulation has allowed financial services personnel in these countries to use the title indiscriminately. Often, financial products intermediaries, such as life insurance and unit trusts agents, use the title to project a professional image to clients even when they are not trained in the professional aspects of financial planning. This has sometimes led to abuse. Clients may be deceived to receive financial planning services that are unprofessional, from unethical providers.

To protect the industry, financial planning professionals and practitioners from across the globe (starting from the United States) have begun to form trade organisations to provide self-regulations and to maintain some orderliness in the industry. Some, such as the FPA, have begun to organize high-level training programmes and certify members who successfully completed these programmes.

The title of 'financial planner' continues, however, to be used by individuals in the financial industry in most countries, as there are little or no legal barriers to prevent the use of the title. The governments in many countries where the financial planning profession is taking roots are beginning to play an increasingly active role in tasking themselves to ensure the market is orderly. More stringent laws and guidelines are being progressively introduced to keep the profession in check. Additional qualifications have also recently emerged that have extended on the financial planner series of designations, to include specialist skill sets like those in wealth management or private banking.


In Australia, the financial planning services are initially delineated by law by the granting of licence to "deal in securities" or "advise on investments". Licences are issued under stringent criteria by the Australian Securities and Investments Commission (ASIC), which has evolved these regulations vigorously over the years. [ [ Australian Securities & Investments Commission] ] Financial planning is now a highly regulated industry in Australia especially where financial advice to the public is involved. Practitioners who offer advice that could influence a client's decision to purchase a financial product must meet minimum training requirements and be licensed by the ASIC. The meaning of 'licenced' refers to Australian Financial Services Licence (AFSL) holders and representatives or authorised representatives of licence holders. Broadly, most people embarking in financial planning will start as an authorised representative of a licence holder.

Becoming a financial planner in Australia involves two main steps:

# Meet the training requirements of Regulation Guideline 146;
# Select a licence holder with whom to be affiliated.

The licence holder is the authorised representative, and will be ultimately responsible for the advice given by the planner. The licence holder therefore must make sure the representatives meet all compliance and training prerequisites. As of November 2005, there were approximately 4,300 licence holders registered with ASIC and over 42,500 authorised representatives in Australia.


The first country to introduce legislation that requires a person to be licensed before he can hold himself out to be a 'financial planner' is Malaysia. Financial planning is considered a newer profession in the Asian region as compared to those in the west, such as the United States and Australia where the profession is more established. The Securities Commission (SC) of Malaysia introduced legislation through amendments made to the Securities Industry Act in 2003 to regulate financial planning and the use of the title or related-title of 'financial planner' or to conduct activities related to financial planning. [ [ Financial Planning Association - Financial Planning History Made in Malaysia] ]

In 2005, amendments to the Malaysian Insurance Act require those who carry out financial advisory business (including financial planning activities related to insurance) and/or use the title of financial adviser under their firm (which, like in Singapore, must be a corporate structure) to obtain a licence from Bank Negara Malaysia (BNM). [ [ Bank Negara Malaysia - Introduction of Financial Advisers] ] Some persons who offer financial advisory services, e.g. licenced life insurance agents, are exempted from licensing as a practising requirement.

Again, in 2007, the Capital Market Services Act (CMSA) comes into force as another of the consolidation exercises of the government to move the industry towards a one regime regulatory environment.

As it currently stands, one of the basic requirements to apply for a financial planner or financial adviser licence in Malaysia is that the key company officers, e.g. directors, must be an RFP designee (most if not all Malaysian FChFP designees also carry the RFP designation). Subsequently, in September 2006, the CFP qualification is included as one of the alternatives that can be used by the financial adviser licence applicant. With this development, the demand for financial planning courses has begun to take root in more concrete forms in Malaysia. The licence applicant must also be a member of a self-regulatory organisation (SRO) in financial planning recognised by the authorities. For this purpose, the two SROs currently recognised by both the Security Commission and Bank Negara are the Malaysia Financial Planning Council (MFPC) and the Financial Planning Association of Malaysia (FPAM). The purpose of this requirement is to ensure some form of self-supervision for persons practicing financial planning.

Other countries

In some countries, e.g., the United States, financial planners must be registered as an investment advisor first. This requires an employee within a firm to pass the series 65 or 66 Registered Investment Advisor Exam. A private advisor or company can apply to the state and SEC for an RIA Registered Investment Advisor License or Status.

Being 'licenced' to practice financial planning is not the same as merely having a professional 'qualification' in financial planning. A person may be professionally qualified in financial planning, but without a licence required by the law, he cannot practice the trade in that country or call himself a financial planner there. As of now, there are quite a bit of qualifications related to financial planning that can be found in world. The most prestigious financial planning designations are those which are not just of advanced standing and well-known, but are also recognised by the relevant authorities for licensing purpose.

In some places, individual employees within a licensed & registered Investment Advisor firm such as a: brokerage, bank or insurance company may be exempt if providing complementary financial planning services in relation to their existing products and services. Moreover, financial planners should be extremely careful in providing estate planning or taxation advice for a fee, as these fields are highly regulated by government agencies that control the practice of lawyers and Certified Public Accountants (CPAs). The term "Investment Advisor" also includes any person who uses the title "financial planner" and who, for compensation, engages in the business, whether principally or as part of another business, of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of a regular business, publishes analyses or reports concerning securities.

From the California Department of Corporations

A financial planner will be registered with the state if he or she has less than $25 million in assets under management (AUM), and with the SEC if he or she has more than $30 million in AUM. The planner is required to present a client with the ADV Part II or equivalent before the client enters into a contract with the planner. No certification, tests or training ensure that any planner is suitable for the client or any investor, and it is important to read the ADV Part II, interview them, and fully understand any contract.

History of certifications in financial planning across the globe

In a newly emerging profession such as financial planning, there is a lack of regulation, especially in the early years of development. The need for some forms of self-regulation and the demand that a financial planner be competent and trustworthy have prompted several independent financial services organizations to introduce certifications and ethical benchmarks to meet these challenges in accordance to the need in each country. Those who meet the requirement of the certification process and ethical standards will be awarded a professional financial planning designation.

One of the oldest, best-known financial planning certification service marks is the Certified Financial Planner (CFP), which has gained global recognition because of its active standard setting activities and worldwide presence. The CFP designation was first introduced in the United States in the early 1970s to meet the need of the consumers. The CFP mark now belongs to the CFP Board of Standards (CFP Board), USA, which has member associations world-wide.

The CFP Board was founded in July 1985 as the International Board of Standards and Practices for Certified Financial Planners, Inc., (IBCFP) by the College for Financial Planning (College) and the Institute of Certified Financial Planners (ICFP). The IBCFP became Certified Financial Planner Board of Standards Inc. (CFP Board) on February 1, 1994. As a professional regulatory organization acting in the public interest by fostering professional standards in personal financial planning, the CFP Board establishes and enforces education, examination, experience and ethics requirements for CFP certificants. The CFP service mark is promoted world-wide through member associations, the FPAs.

The Fellow Chartered Financial Practitioner (FChFP) designation was developed by the National Association of Malaysian Life Insurance and Financial Advisors] (NAMLIFA) in 1996. The designation was adopted by the Asia Pacific Financial Services Association (APFinSA) in 2001 as the unified designation for its member associations in 11 countries.

The Registered Financial Planners Institute (RFPI) formed in 1983 in the United States to promote professionalism among those who are or will be active in the field of financial planning for individuals and businesses. The RFPI is an international organization with chapters and members throughout the world. The RFPI offers study programs both in classroom conducted seminars and correspondence courses. RFPI is a collective membership of financial planners and is designed to serve the interest of both its members and the general public in matters relating to financial planning. RFPI recognizes qualified individuals by designation of RFP, SRFP who are in the field of financial planning which would include: insurance, attorneys, real estate, bankers, CPAs, stock brokers, securities or other professionals licensed in similar fields that have the ability to properly financial plan individuals or businesses in their related fields.

The Personal Financial Specialist (PFS) credential was established for CPAs in the United States who specialize in personal financial planning. The credential is awarded exclusively to members of the American Institute of Certified Public Accountants (AICPA) who have demonstrated considerable experience and expertise in that area. As of today, the AICPA has granted approximately 3,300 CPA/PFS credentials.

In Australia, the financial planning specialisation, CPA (FPS), is available to those members of CPA Australia who can demonstrate their eligibility through experience and education within the financial services industry.

The objectives of the FPS designation are to:

* achieve public recognition for those who hold the specialisation;
* enhance the quality of financial planning services that members provide; and
* increase practice development and career opportunities for CPAs.

The FPS designation is available to CPAs, and is based on a points system, where a minimum of 100 points must be accrued. Although all CPA Australia members who provide financial product advice must be licensed by ASIC, a member does not have to be licensed to first obtain the CPA (FPS) designation.

The Chartered Financial Consultant (ChFC) is another financial planning qualification, conferred by American College, USA). Since 1982, the ChFC has remained among the most extensive education available for professionals seeking a designation in financial planning. To date, more than 41,000 individuals have attained this distinction. This designation has also spread to Asia, where designees are found in countries like Singapore, Malaysia, Indonesia, China and Hong Kong.

In Europe, the €uropean Financial Planner (€FP) designation conferred by the €uropean Financial Planning Association (€FPA) is gaining ground as a financial planning certification mark. The €FPA is the largest professional and educational organisation for financial planners and financial advisors in Europe and is the only Financial Planning Association created solely in the interest of European financial planning consumers and practitioners.

Globally the Chartered Wealth Manager (CWM) is one of the fastest growing financial planner specializations which focuses on developing critical relationship management skills for financial planners and advisors. The designation is conferred by the Board of Standards of the American Academy of Financial Management in 145 countries.

The rest of the certification qualifications related to financial planning include:Fellow, Financial Services Institute (conferred by LOMA, USA; the Certified Private Banker designation (conferred by the American Academy of Financial Management); the Certified Financial Marketing Consultant (CFMC) conferred by the Institute of Marketing Malaysia.

Accredited business school, training centers and other providers

Globally, cross-recognition agreements are being developed to facilitate the learning of financial planning. The 2 major accrediting agencies, the Association to Advance Collegiate Schools of Business (AACSB) and the Association of Collegiate Business Schools and Programs (ACBSP), which accredit over 560 of the best business school programs, provide the Certification of MFP Master Financial Planner Professional from the American Academy of Financial Management, which is available to AACSB and ACBSP business school graduates with finance or financial services related concentrations.

See also

* Certified Financial Planner
* Fee-Only financial advisor
* Financial advice
* Financial adviser
* Financial plan
* Financial planning (business)
* Stock broker
* Chartered Wealth Manager


External links

* [ Certified Financial Planner Board of Standards (CFP Board)]
* [ International Federation of Financial Standards Associations]

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