What Is the CFP® Board's 7-Step Financial Planning Process?

The CFP® Board oversees the Certified Financial Planner™ designation and gives planners a guideline to a seven-step process for providing financial advisory services. The process takes the financial advisor and client through the entire relationship, beginning with the initial meetings and progressing through years or decades of monitoring and adjusting the plan as the client’s circumstances change. The CFP® financial planning process is designed to progress in an organized manner, with each step supporting the one that follows. And by the end, the goal is for the client to have a comprehensive and financially sound plan.

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The 7-Step CFP® Financial Planning Process

A man approaching retirement, searching for CFP® financial planning services.

There are several different approaches to providing financial planning services. Some financial planners provide standardized services, while others might segment clients into tiers and customize the process according to characteristics such as assets under management or high-net-worth clients.

The CFP® financial planning process is intended to provide a template for solo practitioners to use while working with the typical client. The seven steps include:

Understand the client’s personal and financial situation. The advisor should ask the client questions to gather a broad spectrum of relevant qualitative and quantitative information. This includes their age, health, life expectancy, marital status and dependents, as well as purely financial data on income, expenses, cash flow, assets, liabilities, savings, insurance coverage, risk tolerance, values, attitudes and expectations.
Identify and set goals. Advisor and client take a closer look at financial objectives raised during the first step, expanding and prioritizing as necessary. For instance, a client may want to pay off student loans, purchase a vacation home, and pay for a child’s college. The advisor could suggest that obtaining additional insurance, boosting savings, and creating an estate plan are also important goals.
Analyze the current course of action and alternatives. This step will involve assessing how well the client is doing on achieving their goals and how their current practices, such as contributing a set percentage of their earnings to a retirement plan, are advancing them forward. The advisor can work to identify changes, such as starting a college savings plan, refinancing a mortgage, or changing their investment portfolio asset allocation, to help them get closer to their goals.
Develop a financial plan. The advisor then communicates with their client to refine, clarify and confirm information developed in the previous steps. Following that, the advisor will use financial modeling and assumptions for key elements such as life expectancy to generate recommendations that can help the client achieve their financial goals. Recommendations may follow changes identified in the previous step, such as insurance, estate planning and asset allocation, as well as other areas of financial life such as borrowing practices and education funding.
Present the financial plan. The actual financial plan will consist of a printed document and access to additional information should be available through a secure online connection. It will be presented during a face-to-face meeting customized to fit the client’s level of financial literacy. The advisor will take the time to ensure that any calculations and assumptions are understood by the client.
Implement the plan. In some client engagements, the advisor will only develop and present the plan without having the added responsibility of implementing it. In that case, this step won’t be part of the process. If implementation is included in the scope of the engagement, the advisor will provide a written implementation plan describing a schedule of future events. Both client and advisor may have responsibilities. The client may have a timeline to reallocate their retirement plan investments per the advisor’s recommendations. The advisor may be called on to provide referrals to insurance brokers, attorneys, or other professionals and confirm that steps have been carried out.
Monitor progress and update. The advisor will periodically review investment performance, asset allocation, insurance needs and similar matters, and recommend changes designed to help further the client’s achievement of financial goals. The advisor will also solicit updated information about changed goals, employment status and other life events that may affect the plan.

Planning Process Perspectives

The CFP® financial planning process is just one way a financial planner could serve a client while complying with the code of ethics and standards of conduct to which a CFP® must adhere. According to their professional judgment, a CFP® might choose to follow a different process.

For example, a CFP® might begin with a somewhat different first step that includes a discussion of the type of financial planning services the client will receive. This could include providing the client with the planner’s training, credentials and history, as well as information on the variety of services available and pricing.

Bottom Line

The CFP® financial planning process is just one way a financial planner could serve a client while complying with the code of ethics and standards of conduct to which a CFP® must adhere.

Beginning with gathering information about a client’s financial situation and plans, the CFP® financial planning process takes the planner and client through a logically arranged sequence of steps that concludes with overseeing and adjusting the plan to reflect future changes. While this process is not guaranteed to produce a perfect plan, and is only one possible way a competent and responsible CFP® might work with a client, anyone pursuing the CFP® designation will become familiar with it during the process of completing the required studies.

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