Prepare FINANCIAL PLAN For Fred and Francine Franklin
Developing a modular or comprehensive plan
- Developing a full or module plan for a client can be overwhelming. This document assists with process and high-level requirements in developing a plan.
- This document does not replace knowledge of technical information from other courses.
o This is simply a reminder guide on some steps and organization.
o All steps are not included here
Financial Planning Simplified Overall Structure
- Follow 6 steps regardless of plan being modular or comprehensive.
- Document steps
o Include documentation into plan where appropriate
o Use the Competency Matrix as a guide of detail
Structure of Financial Plan
1. Introduction of what the document is about
2. Engagement Document
3. Executive Summary where appropriate (longer documents require this)
4. Profile of client (will look like a case). Include all available quantitative and qualitative data, assumptions, etc.
5. Goals, Objectives
a. Include those indicated by client as well as those you are suggesting above
i. Break down into short term ,medium term, long term and wish list where appropriate
ii. Make sure they are actually goals. SMART
b. Prioritizing of goals and desires. This is critical for when decisions need made
6. Planning Components - The following applies to every component included. Added details later in document
a. Each should start on a new page
b. Introduction to explain this component to client
c. Current Situation
i. This includes taking the current situation forward to the time of need where appropriate
d. Desired Situation
i. Issues, Opportunities, Constraints, Assumptions
e. Gap analysis
i. What is the difference between where client is right now and where they need to be?
ii. This is commonly a present value calculation where money is involved. A future value calculation can also be used for future needs
f. Possible alternatives where appropriate
i. Outline some possibilities where you see reasonable choices
ii. Address direction given by client[ especially if not being followed
g. Recommendation(s) must be
i. Connected to goals and priorities
ii. Clear
iii. Based on facts
iv. Supported - ie. Why are you suggestion this? Especially over other alternatives
1. Include both quantitative and qualitative factors
v. Implementable given the information in recommendation
vi. In consideration of alternatives
1. There may be some alternatives that you are either able to or unable to get down to a single recommendation
7. Implementation Schedule
a. What needs to be done
b. By whom
c. When
d. Follow-up
e. Comments
8. Appendix
Please correct these and re-write plan accordingly:
Information, which connects to the plan but does not belong within the main content
- executive summary - need specific numbers as it is a summary of what you are asking them to do
- client profile was good - missing insurance and will details
- assumptions - missing altogether. Need inflation, return on investment (pre-retirement and post-retirement), expected salary increases, life expectancy and include the rationale for the assumptions (why we are using 0% inflation, why we are using 2.75% and not 4.75% pre-retirement, 1.25% and not 3.25% post-retirement)
- financial management - interest rate is wrong - follow FPSC guidelines, advised to take $60,000 loan but no analysis as to what to do with those monies, recognize initial surplus that clients have and reallocation of monies to meet the goals. Line of credit balances, credit card balances. No mention of child care benefit although it shows in your cash flow in the appendix
- investment management - time horizon, risk profile, asset allocation, experience. How much to RESP for Faith. How much to RESP for the twins - not enough to say they should put monies into the RESP
- insurance - how did you get $500,000? no work shown in appendix
- retirement - no recommendation as to how much to put into RRSP, no OAS amount, DCP was calculated but LIF calculations were not shown, no RRSP calculations for Fred nor RIF calculations, no income in retirement calculated (CPP + OAS + RIF + CPP + OAS + LIF), no tax deducted on retirement income, no calculation of income needed in retirement (look at their expenses in retirement - that will need to be their net income
Attachment:- Planning-Guide.zip