So you’ve decided you need a comprehensive financial plan, and selected a professional to do the work, perhaps from the Money list of the best financial planners. It’s time now to better understand the planning process and prepare for the conversations, paperwork, decisions and costs you’ll encounter along the way.
Here’s more on what you can expect from a planner, and what they’ll need from you – from input about the plan’s scope to documents to support the work through payment for their services.
Some planners do more than plan, they implement too, including managing your investments in a hands-on way. This guide, though, focuses solely on the planning process and its deliverables.
Meeting possible client requirements
Alas, you don’t need only to find a planner that seems to meet your needs – you need to confirm that you meet any requirements they have for taking on new clients. If the planner has these, they should have come up during the back and forth that precedes the steps below. But it’s worth reviewing the most common conditions planners have, to be sure you indeed meet the requirements of the planner you hope will soon serve you.
The first requirement can involve the total value of the assets you hold, other than such non-liquid ones as your home. While some planners impose no minimum combined value for these, many do set out such figures.
However, these minimums shouldn’t prevent even those of modest means from finding a good planner who will work with you. More than 4 in 10 of Money’s best financial planners said they had no minimum asset requirement. A further quarter required between $250,000 and $1,000,000; the same proportion reported an asset minimum of $1,000,000 to $5,000,000. Only two planners catered to the highest rollers, requiring that their new clients have assets for more than $5,000,000.
Also, it’s possible you will need to agree not only to have the planner prepare a financial plan for you but to implement it through ongoing hands-on management of your assets. For example, some planners take on only new clients who agree to allow them to manage the client’s portfolio after the plan is prepared. This service typically comes at additional cost.
Determining the scope of the plan
A comprehensive financial plan can be a fairly sweeping document. Its scope is wider– and its cost usually higher – than if you engage a financial professional to address a short-term issue, such as how to manage your income and assets for an upcoming tax filing or which investments you should cash in to pay for college.
The breadth of your plan will be among the first topics of discussion with your planner. They’ll likely propose a scope, based on your stage of life and the key financial milestones and challenges that lie ahead.
As a rule, a comprehensive financial plan encompasses an analysis of your income from all sources versus your spending, from your mortgage and car payments to the amount you typically spend on food and travel. The planner will look at your taxes, too, to ensure you’re neither overpaying, nor underpaying in a way that could cost you later.
Debts will also be evaluated, including the balances for your mortgage, car and student loans and credit cards. Investments will be analyzed, and adjustments recommended if its mix is out of sync with your future needs and appropriate risk level.
The planner’s take on your retirement readiness – or, if you’re already retired, your retirement reality – is a given, too, even if your golden years are still decades away.
Expect an evaluation of your insurance coverage, as well, including your life insurance and whether you need to buy long-term care insurance. Your estate planning, if any, will be considered, with advice on creating wills and trusts, naming beneficiaries and determining how your assets will be disbursed after you pass away. (The planner can’t create such legal documents themselves, but can identify your needs and direct you to other professionals who can help you fulfill them.)
Firming up what you’ll pay, and when
Now comes the paperwork, in the form of at least one document from the planner that formalizes the work they’ll be doing. Typically, the planning agreement (sometimes called an engagement agreement) lays out the services to be provided and when.
The agreement will also specify what the plan is going to cost you and how you’ll be billed. The cost could be a flat fee, of which you may be required to pay a part upfront (often, half of the total), with the remaining balance due upon the plan’s completion.
Financial planning advice may also be included in the fees you pay for the planner to manage your investments. Typically, you will pay a percentage of the value of your portfolio.
Alternatively, the planner might propose billing you by the hour.
Certain planners – instead or in addition to fees – also receive commissions on financial products they buy on your behalf. In these cases, be sure to ask the planner if they act as a fiduciary – that is, in a way that considers only your needs, without regard to their own financial gain from any commissions. (As a condition of their certification, professionals who are Certified Financial Planners – as are all of Money’s best financial planners, for example – are required to act as fiduciaries, regardless of how they are compensated.)
Conversations about your finances, present and future
Expect to have in-depth conversations with the planner to explore your values and priorities, and to finetune your financial goals and plans to align with those.
For example, the planner will want to know the age at which you’re hoping to stop working, at least at your main career? If you’re married, have you considered whether you’ll retire together or at different times – in which case, about how many years apart? What about your retirement lifestyle? Do you anticipate a move, and if so, to where? Is travel on your agenda, and if so how extensive will it be? Might you want to relocate for part of the year?
They’ll also inquire about any other assets you own or will receive in future. These might range from anticipated inheritances to second homes to grandparents’ pledges to pay some or all of your kids’ college bills.
Gathering and sharing documentation
Your planner will want to see the details of your financial life. Expect, then, to share documentation. The requested information could range from income and tax information (including tax returns and statements from Social Security and your pension plan) to details on what you spend, such as a budget worksheet and statements from your credit card, loan and mortgage companies.
Be prepared, too, to make available investment account statements along with your will and any trusts, assuming you have such documents. Insurance policies will also need to be shared.
The planner goes to work
With the information gathering mostly done, you’ll then have to wait a period of weeks or even months, depending on the timetable you agreed upon for your plan.. During this time, your planner will analyze the information you provided and formulate a plan for your financial life, now and into the future.
From time to time, your planner may reach out to clarify any anomalies between several documents, say, or to seek further information. The planner may also want to clarify goals or priorities you expressed in earlier meetings, in order to finetune their recommendations.
The plan is presented
When the plan is ready, the planner will meet with you to discuss whether you’re on track to meet your financial goals and provide options and recommendations about your money. Ideally, that’s an in-person get-together, although video meetings or phone calls are usually an option if meeting at an office or home isn’t feasible. (All of Money’s best planners of 2024 said they offer virtual options.)
The scope of the plan should have been well-defined in your initial meeting, and formalized in the planning and/or engagement agreement. As a rule, though, you can expect your planner to begin with your present financial situation, including your cash flows and anything they feel might merit adjustment. Their analysis may, for example, have noted ongoing expenses that are notably high, and which they feel might feasibly be reduced.
They’ll assess how much you’re saving, and make recommendations on ways to increase (or perhaps even decrease) that as needed.
Then you can expect the planner to provide their view of your readiness for retirement or other major expenses, such as those for college, with further recommendations (or assurances). That will include whether they feel your life insurance is sufficient, and whether you – and potentially your spouse – are financially ready were one or both of you to suffer a disability serious enough that long-term care was needed. Would you have assets available to pay those costs, or do you need to consider insurance that would cover them?
As for estate planning, the planner will advise you on how best to organize your finances and prepare documents that will help simplify the settlement of your estate. Planners rarely draft wills or other legal documents but they can refer you to professionals to do that work.
Next steps are finalized
Now that the plan is presented, the planner will likely want you to decide if and how you continue to work with them – assuming such continuing service wasn’t part of the agreement up front (see “Making sure you meet the planner’s client requirements,” above.)
Some planners are willing – usually at extra cost, of course – to implement much of the plan’s recommendations themselves. For example, if you feel ill-equipped to change the mix of your investments in line with the planner’s recommendations, you might hire them to do that work, or to consolidate and move accounts among brokerages to minimize fees.
Expect a discussion about if and when you hold periodic check-in meetings to ensure the plan is on track and that any changes in your life, or the market, demand that it be adjusted.
While such follow ups – say, annually – are optional, they can be a smart step.. Ideally, your financial planner will be your money guide for life, and your plan will need to be adjusted as your life changes.