In today’s show we use the CFP® Board’s “Job Task Domains” to frame the financial planning process as a helpful template for DIYers or as necessary information for financial planners. This framework and template is a comprehensive guide to the financial planning process, which is the method employed to get outstanding results.

Beginning Announcements:

  • It’s OK to have cash on hand! Don’t freak out about holding cash. Cash can be dry powder if you’re simply thinking through how to hold it so it’s available when you’re ready to deploy it. However, it’s not okay for cash to be your strategy because of fear!
  • I’m going to the Podcast Movement Conference in Dallas, TX. Dates are August 15-17. If you’re interested in coming, please use my affiliate link to enroll.
  • I’m also going to #FinCon14 in New Orleans, LA. Dates are September 17- 20. Let me know if you’re coming so we can arrange to meet up while there.
  • I wrote an essay this weekend on the idea of working together to find common financial ground. . It’s my plea for people to work together, especially in the financial media space. Financial bloggers and financial advisors have far more in common than they realize. Or discuss.
  • Forbes Article: “Can Financial Experts Agree on Anything?” by Tim Maurer
  • Financial Common Ground: The Unifying Principles of Personal Finance
    • Progress: The benchmark for success in personal financial planning is progress, not perfection. Excellence is more a product of good habits than a revolutionary event.Discipline: A household must consistently spend less than it earns, regardless of the level of income. The foundation of financial success is a disciplined cash flow system (such as a budget), which is designed to make household spending decisions purposefully and in advance.
    • Debt: Debt wisely used can help build wealth, but fueling unsustainable lifestyles with borrowing is the quickest path to financial ruin. We are well-served to pursue an eventual debt-free path.
    • Buffer: Changes, surprises and failures are guaranteed, but their impact can be minimized through the creation of a financial buffer. This buffer—a cushion of cash savings—will help lessen the burden of emergencies and other unexpected events.
    • Risk: It is better to make an informed risk management decision than to act on a consequential reaction. Many risks can be adequately managed through risk avoidance, risk reduction or self-insuring through risk assumption. However, the potential for catastrophes from which a household could not survive financially should be transferred through insurance.
    • Investing: Investors have succeeded utilizing strategies on a continuum ranging from entirely passive to surprisingly active. None succeed purposefully, however, without following a disciplined strategy.
    • Taxes: Taxes are an important element of financial decisions, but rarely the most important. Tax minimization is wise while tax evasion is illegal.
    • Giving: Giving of time and money is good for everyone, donors and recipients alike, and may also result in a reduction in taxes.
    • Future: Plan for tomorrow, live for today. Failure to plan for major expenses, such as education and retirement, is folly; but deferring all gratification for the future strips the joy from life today.
    • Estate: Everyone, with very few exceptions, should have well-conceived and clearly written estate planning documents including, at minimum, a will (with or without a revocable trust), a durable financial power of attorney and advance directives (including a health care power of attorney and living will).
    • Legacy: Leaving a legacy—a relational impact on friends, family and community—is as or more important than leaving an estate—the sum of your assets less your liabilities at death.
    • Guidance: Whether from a book, blog, article, class, radio program, TV show, advisor or specialist, financial advice is only beneficial to the degree that it is consistent with your values and goals and leads to action.

Primary Content: A Framework for Financial Planning – CFP® Board Job Task Domains

8 Major Domains:
1. Establishing and Defining the Client-Planner Relationship
2. Gathering Information Necessary to Fulfill the Engagement
3. Analyzing and Evaluating the Client’s Current Financial Status
4. Developing the Recommendation(s)
5. Communicating the Recommendation(s)
6. Implementing the Recommendation(s)
7. Monitoring the Recommendation(s)
8. Practicing within Professional and Regulatory Standards

Domain 1 – Establishing and Defining the Client-Planner Relationship
A. Identify the client (e.g., individual, family, business, organization)
B. Discuss financial planning needs and expectations of the client
C. Discuss the financial planning process with the client
D. Explain scope of services offered by the CFP® professional and his/her firm
E. Assess and communicate the CFP® professional’s ability to meet the client’s needs and
expectations
F. Identify and resolve apparent and potential conflicts of interest in client relationships
G. Discuss the client’s responsibilities and those of the CFP® professional
H. Define and document the scope of the engagement with the client
I. Provide client disclosures
1. Regulatory disclosure
2. Compensation arrangements and associated potential conflicts of interest

Domain 2 – Gathering Information Necessary to Fulfill the Engagement
A. Identify the client’s values and attitudes
1. Explore with the client their personal and financial needs, priorities and goals
2. Explore the client’s time horizon for each goal
3. Assess the client’s level of knowledge and experience with financial matters
4. Assess the client’s risk exposures (e.g., longevity, economic, liability, healthcare)
5. Assess the client’s risk tolerances (e.g., investment, economic, liability, healthcare)
B. Gather Data
1. Summary of assets (e.g., cost basis information, beneficiary designations and titling)
2. Summary of liabilities (e.g., balances, terms, interest rates)
3. Summary of income and expenses
4. Estate planning documents
5. Education plan and resources
6. Retirement plan information
7. Employee benefits
8. Government benefits (e.g., Social Security, Medicare)
9. Special circumstances (e.g., legal documents and agreements, family situations)
10. Tax documents
11. Investment statements
12. Insurance policies and documents (e.g., life, health, disability, liability)
13. Closely held business documents (e.g., shareholder agreements)
14. Inheritances, windfalls, and other large lump sums
C. Recognize need for additional information

Domain 3 – Analyzing and Evaluating the Client’s Current Financial Status
A. Evaluate and document the strengths and vulnerabilities of the client’s current financial situation
1. Financial status
A. Statement of financial position/balance sheet
B. Cash flow statement 3
C. Budget
D. Capital needs analysis (e.g., insurance, retirement, major purchases)
2. Risk management and insurance evaluation
A. Insurance coverage
B. Retained risks
C. Asset protection (e.g., titling, trusts, business form)
D. Client liquidity (e.g., emergency fund)
3. Benefits evaluation
A. Government benefits (e.g., Social Security, Medicare)
B. Employee benefits
4. Investment evaluation
A. Asset allocation
B. Investment strategies
C. Investment types
5. Tax evaluation
A. Current, deferred and future tax liabilities
B. Income types
C. Special situations (e.g., stock options, international tax issues)
6. Retirement evaluation
A. Retirement plans and strategies (e.g., pension options, annuitization)
B. Accumulation planning
C. Distribution planning
7. Estate planning evaluation
A. Estate documents
B. Estate tax liabilities
C. Ownership of assets
D. Beneficiary designations
E. Gifting strategies
8. Business ownership
A. Business form
B. Employer benefits
C. Succession planning and exit strategy
D. Risk management
9. Education planning evaluation
A. Sources of financing
B. Tax considerations
10. Other considerations
A. Special circumstances (e.g., divorce, disabilities, family dynamics)
B. Inheritances, windfalls, and other large lump sums
C. Charitable planning
D. Eldercare (e.g., CCRCs, LTC, Nursing Home)
B. Identify and use appropriate tools and techniques to conduct analyses (e.g., financial
calculators, financial planning software, simulators, research services) 4

Domain 4 – Developing the Recommendation(s)
A. Synthesize findings from analysis of client’s financial status
B. Consider alternatives to meet the client’s goals and objectives
1. Conduct scenario analysis (e.g., changing lifestyle variables)
2. Conduct sensitivity analysis (e.g., changing assumptions such as inflation rate, rates of
return, time horizon)
C. Consult with other professionals on technical issues outside of planner’s expertise
D. Develop recommendations
1. Considering client attitudes, values and beliefs
2. Considering behavioral finance issues (e.g., anchoring, overconfidence, recency)
3. Consider interrelationships among financial planning recommendations
E. Document recommendations

Domain 5 – Communicating the Recommendation(s)
A. Present financial plan to the client and provide education
1. Client goals review
2. Assumptions
3. Observations and findings
4. Alternatives
5. Recommendations
B. Obtain feedback from the client and revise the recommendations as appropriate
C. Provide documentation of plan recommendations and any applicable product disclosures to
client
D. Verify client acceptance of recommendations

Domain 6 – Implementing the Recommendation(s)
A. Create a prioritized implementation plan with timeline
B. Assign responsibilities (e.g., CFP® professional, client, other professional(s))
C. Support the client directly or indirectly with implementation of the recommendation(s)
D. Coordinate and share information, as authorized, with others
E. Define monitoring responsibilities with the client (e.g., explain what will be monitored, frequency
of monitoring, communication method(s)

Domain 7 – Monitoring the Recommendation(s) 
A. Discuss and evaluate changes in the client’s personal circumstances (e.g., aging issues,
change in employment)
B. Review the performance and progress of the plan with the client
C. Review and evaluate changes in the legal, tax and economic environments
D. Make recommendations to accommodate changed circumstances
E. Review scope of work and redefine engagement as appropriate
F. Provide client ongoing support (e.g., counseling, education) 5
Domain 8 – Practicing within Professional and Regulatory Standards
A. Adhere to CFP Board’s Code of Ethics and Professional Responsibility and Rules of Conduct
B. Understand CFP Board’s Disciplinary Rules and Procedures
C. Work within CFP Board’s Financial Planning Practice Standards
D. Manage practice risk (e.g., documentation, monitor client noncompliance with
recommendation(s)
E. Maintain awareness of and comply with regulatory and legal guidelines

Closing Comments

  • Tomorrow’s show will be an interview with Jake DeSyllas from The Voluntary Life. Let me know if you have any questions that you’d like me to ask him.
  • If you have questions for Jacob at Early Retirement Extreme, email them to me, please.
  • May I ask a favor? Please go and leave a review in iTunes. If you do that and then email me, I will send you one of our brand new Radical Personal Finance t-shirts as a thank you gift!
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