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A financial planner or personal financial planner is a professional who prepares financial plans for people. These financial plans often cover cash flow management, retirement planning, investment planning, financial risk management, insurance planning, tax planning, estate planning and business succession planning (for business owners).
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 as required. 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, including managing for risk-adjusted returns and to deal with inflation
- Retirement Planning
- Planning to ensure financial independence at retirement including 401Ks, IRAs etc.
- 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
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 client This would include the qualitative and quantitative aspects of the client's financial and relevant non-financial situation.
Step 3: Analyzing the information The 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 plan Based 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 plan Guided 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 plan The 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 significant change to the client's situation, the strategies and goals in the financial plan are revised accordingly.
Licensing, regulations and self-regulation
In Australia, a company providing financial services must be obtain a licence from ASIC. However, there are no requirements for the individuals providing the financial advice and the ASIC website states "Holding an AFS licence does not provide a guarantee of the probity or quality of the licensee's services".
The Securities Commission 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.
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 license from Bank Negara Malaysia (BNM). Some persons who offer financial advisory services, e.g., licensed life insurance agents, are exempted from licensing as a practising requirement.
- Registered Investment Advisor
- Certified Financial Planner
- Family planning
- Fee-Only financial advisor
- Financial advice
- Financial adviser
- Financial plan
- Financial planning (business)
- Life planning
- Brokerage firm
- Financial Planning Association - Financial Planning History Made in Malaysia
- Bank Negara Malaysia - Introduction of Financial Advisers