REGISTERED INVESTMENT ADVISOR

Investment Planning

Every aspect of the financial planning process depends upon appropriate investment planning. Consider the five main areas of the financial planning process: insurance, retirement, education, estate and tax planning. Without understanding how investment choices affect the financial planning process, a financial plan could be lacking in breath and depth and therefore it could fall short of achieving the client’s goals.

Investment planning seeks to accomplish two equally important goals that naturally conflict with each other.

• To maximize returns on investments.
• To minimize investment risk.

Effective financial planning seeks to resolve these two goals in all areas of the investment planning process.

Analyzing the other four aspects of the financial planning process - insurance, tax, retirement and estate planning - may help to understand why investment planning plays such a pivotal role in the financial planning process.

The Process of Investment Planning- Understand Thoroughly

The development of a sound investment strategy should begin with the planner defining and establishing a relationship with the prospective client. In order to understand the goals (high-level statements identifying short and long-term financial requirements) and objectives (quantifiable, tactical statements that are in sync with the high level goals), it is first necessary to spend time getting to know the client, their general and specific attitudes towards their finances and towards the external factors that ultimately will affect their financial situation.

After the planner has established the client/planner relationship, it is important for the planner to help the client establish the short-term and long-term goals as they relate to insurance needs, retirement needs, estate needs, tax planning needs, educational funding needs and finally investment planning needs. The planner must then gather all relevant, current, financial data from the client.


Once all relevant data has been provided to the planner by the client, the planner must analyze the data as it relates to the client goals. Based upon the current financial situation of the client, the planner must develop and present a comprehensive plan that realistically addresses the client’s ultimate goals. If the client accepts the planner’s proposal, implementation of the plan can begin.

During the planning stage, the planner will work with the client to find out important factors about the client such as the degree to which the client is willing to accept risk and what the client’s timelines are for implementing their various goals. From the high level goals, objectives must be determined so that it is possible to measure the degree to which the goals are being successfully pursued.

During the process of implementation, proper investment planning will now become a major factor in insuring that the client has the best chance of success in maximizing the dollars committed to the financial plan. The planner must be astute enough to know in which vehicles to invest. If the planner lacks expertise in certain areas, the planner must work with other investment professionals in order to yield the most optimal results. Without effective implementation of the investment strategies and alternative contingencies, the best plan will fail. Investment planning is therefore a crucial step in the financial planning process.

Once the plan is implemented, it is important for the planner to monitor the plan with the client in order to insure goals and objectives are being met. If they are not being met, the planner should work with the client to make changes, where applicable.