The advice process is a structured path for client engagement and essentially involves the following steps:
Assessment
The first step is to assess your financial position with the help of personal financial balance sheets and income statements. A personal balance sheet includes assets such as investments in various financial instruments, including bank, cash, property, shares etc. The balance sheet also includes personal liabilities, which includes all loans, credit card balances and any other liabilities.
Defining Goals
Goals may include worldly things like buying a home, saving for your child’s education or marriage or planning for retirement or even planning a vacation. One must also define objective and time frame of goals.
Making a Plan
The plan gives you the structure and clear cut roadmap to achieve your goals. A financial plan includes the investments you can make (with whatever existing assets and income sources), their expected yields, your current and expected future income and expenses. It also helps you look at your current expenses and how they might impact your financial goals. A financial plan will also include any risks to your plan in the context of death and disability (i.e. repayment of loans, loss of income to your dependents and medical emergencies) and estate planning and its effectiveness in relation to the transferring of your wealth.
Execution
An effective execution of a personal financial plan can help you achieve your goals. Your financial advisor plays a crucial role in helping you execute the plan.
Monitoring
It is important to monitor your financial health and the effectiveness of the investments you have made. It is essential to monitor on a regular basis as the micro and macro economic changes may impact your current or future position. It also helps you re-visit your current investments and take action on whether to keep or replace them.