What does a financial plan involve?

You've had your initial meet and greet with a financial adviser and feel confident they're the right fit for you. Here's what's involved when formulating a plan with them.

There's a considerable amount of territory that needs to be covered with a financial adviser to develop a plan that's right for you. 

As we explored in part one of this series , during your initial meeting (usually complimentary) you should spend a lot of time asking the financial adviser questions about themselves, how they work, what their motivations are, and how they charge.

They'll also ask you a number of exploratory questions about your background and your needs to work out whether or not they're a good fit for you.

During this initial relationship-building meeting the adviser will also usually define their scope of engagement, which is basically explaining the process they will follow.

If you both decide to move forward with one another, here's what to expect over the next few meetings. These tend to be a little more formal and may vary from one financial adviser to another

1. Working out your goals

A financial adviser can't develop a plan for you if they don't know what you want to achieve, which means much of your first official meeting will involve nailing down your goals.

Now, these will vary from person to person, and family to family, depending what stage of life you're at.

According to the Financial Planning Association of Australia,  your financial adviser should make clear recommendations, outline the risks involved and communicate any possible strengths or weaknesses in your plan. 

2. Looking at your financial position

Once your goals have been identified your financial adviser will run through your financial situation to determine whether or not they can be met – and if not – what sacrifices or compromises need to be made in order to reach your goals.

This step usually involves your financial adviser assessing your assets, liabilities, investments and tax statements – and ways you can possibly improve or tweak each.

They may also review your insurance coverages – such as Life Insurance, Total Permanent Disability, and Income Protection – this can help to ensure your goals and the plans you have for your family won't be derailed by any unfortunate accidents.

3. Creating a financial plan

Once the previous steps have been taken into consideration, your financial adviser will prepare a financial plan – called a statement of advice

This can take up to a few weeks and usually involves the financial advice firm preparing a plan that recommends suitable strategies, products and services, and answers any questions you have. 

Not much will be required of you during this period, although you might get the odd follow-up email or phone inquiry to clarify certain detail

4. Reviewing the plan and implementing it

Once your financial plan has been prepared you'll get a chance to review it and give the go-ahead before it's put into action.

This will likely involve another meeting in itself, and to get the plan into action you may also need to call upon the services of your accountant and/or lawyer.

Final step: Regularly tracking the plan's progress

Once the plan is in place it doesn't mean your work is done. Quite the opposite.

You should regularly check in with your financial adviser to ensure your plan is working at optimum capacity in relation to your life status. 

For example, a lower level of Life Insurance cover could be suitable for you when you're a single adult, but once you're married with children and may become the main breadwinner you might want to reassess to ensure you have the right level of cover to protect your family's future.

Some financial advisers like to touch base quarterly, others annually – it depends on what both you and your chosen financial adviser decide to ensure you reach your goals.