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Financial Planning Software and the 7 Step Financial Planning Process

Celeste Revelli April 9, 2020

Updated on: December 13, 2023

What is financial planning software?

At the most basic level, any program that can complete financial calculations and projections across multiple accounts could be considered financial planning software.

But given the near-universal perception that advancing technology should offer so much more, it’s reasonable to expect that professional financial planning software should accomplish more than a spreadsheet. Modern tech has set a high bar for advisor and client expectations when they interact with a new platform.

On the client side, financial planning software can offer:

  • Aggregated account information for an all-in-one financial picture powered by automatically updated data.
  • Client portals for contextual presentation of financial data, plans and goals. Bonus points if this renders effectively in mobile settings.
  • Document storage and collaboration tools, including screen share.

On the advisor side, this could mean:

  • The ability to generate financial plans for clients with different types of goals.
  • Alert triggers for next steps or client check-ins.
  • A customizable interface that tracks the whole of book of business.

Are some features of financial planning software more important to different types of advisory firms?

The advice industry has traditionally split along familiar lines, with registered investment advisors (RIAs) running smaller independent practices and brokers affiliating with larger enterprises. But we’ve seen these lines increasingly blur as RIAs have grown and combined into larger operations, brokers have broken away and gained varying degrees of independence with new home offices, and enterprises began pursuing various partnership arrangements with standalone advisory practices.

With this in mind, it’s helpful to think about the different ways that financial planning software can elevate a practice—both at the individual advisor level and the practice management level.

At the individual practice level, advisors need software that enables the development of plans for clients at every point in the wealth cycle. From the earliest days of the accumulation phase when the need for long-term goal-oriented planning is most acute, to cash-flow planning that will carry clients through the latest stages of retirement distribution, financial planning software needs to provide enough flexibility to plan for different client needs. A comprehensive financial planning platform will cover both basic and advanced needs across the entire wealth cycle. Features like scenario and tax planning will increase the quality and range of issues that advisors will be able to tackle.

Switching perspectives from the practitioner to the client, what is the practice-level value of enabling clients to interface directly with financial planning software? A smart practice can create a greater sense of collaboration with software that features a client portal. This gives clients the ability to see the fruits of planning in action, from anywhere. The ability to aggregate a range of client account data in a useful way can help ensure that planning software serves as a client’s hub of financial information.

These types of client-facing features, paired with mobile accessibility, can turn client mobility into an asset. Clients expect mobile access from all of their apps, and their advice relationship—arguably their most consequential professional engagement—should deliver to that standard.

Last but not least, at the larger practice level, compliance processes designed to mitigate legal and regulatory risks are a perennial time and efficiency drag that divert scarce resources away from client development. The risk and compliance features of financial planning software, while obviously not related to the production side of the practice, can nevertheless help streamline a time-consuming operation. A ready-built platform can offer:

  • Systematic, tracked client deliverables
  • Automatic archiving for all client-specific changes
  • Efficient audit-ready document preservation

At the enterprise level, it’s fair to say all of the above practice-level benefits can scale. Every time-saving efficiency­—from archiving to data aggregation—obviously has a much more profound impact when implemented across a fleet of advisors. At the home office itself, enterprise-scale financial planning software should be able to provide helpful business analytics across the entire company as well as a deeper dive into the varying types of production efficiency in different practices.

Whether independent or enterprise-wide, advisors may require customization to interface with other parts of their tech infrastructure. While this may require ongoing training and support, it allows different types of advisory firms to deploy planning technology in unique ways to best serve their clients as a part of their financial advisor business plan

An Introduction to the Seven-Step Financial Planning Process

The winds of change have descended on the rules that guide advisor engagement. The Certified Financial Planner Board of Standards (CFP Board) will begin enforcing compliance with its new financial planning standards on June 30th. These actually went into effect beginning in October 2019 as part of an update to the CFP Board’s new Code of Ethics and Standards of Conduct, but will be enforced for CFPs and their firms starting this summer.

The CFP Board’s update includes a re-imagined financial planning process. Expanded from six steps to seven, the new Practice Standards for the Financial Planning Process formalize the centrality of goals within planning and acknowledge that the development and presentation of planning recommendations are not only important, but deserve distinct attention.

For advisors at all levels of professional maturity—from those who are new to planning straight through to those with their finger on the pulse of a planning-led practice—these changes merit attention and consideration.

In some ways, financial planning software can function like an equalizer for advisors that are less-experienced planners. Platforms that can support personalized planning, great client experiences, and compliance can really help drive an advisory practice from end to end. Advisors that are already in tune with financial planning still need to know how technology can help comply with each part of the seven-step planning process—both to remain in compliance and to deliver the best possible financial advice.

Breaking Down the Seven Steps of the Practice Standards for the Financial Planning Process

1. Understanding the Client’s Personal and Financial Circumstances

Clients will need to begin trusting you with their personal financial information right from the outset. It’s noteworthy that the old Step 2—Collect the client’s information—has been implicitly folded into this first step, as this is an integral part of understanding a client’s circumstances.

For the purposes of efficiency and retention, collecting financial information can be driven by the client during onboarding and automated right from the outset with account aggregation engines. Putting data collection on auto-pilot can be a tremendous time-saver and will cut down on error-prone manual entry.

2. Identifying and Selecting Goals

Conversely, the new Step 2 incorporates part of the old Step 1—Establish and define the relationship with the client. This stage in the process is indispensable in determining the scope and focus of your work together.

Advisors are judged based on their ability to help clients reach their goals. Providing clients with a clear roadmap to measure their progress increases the likelihood that they’ll remain engaged on the long path toward their goals.

Digging down a bit, the CFP Board explicitly associates Step 2 with selecting and prioritizing goals, as well as determining whether they’re realistic. This means getting into the details of short-term versus long-term needs and wants. Financial planning software can help here with features that tie goal-setting directly to funding plans. It can also provide a critical and dispassionate perspective on the likelihood and degree to which each goal will be achieved.

3. Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

Step 3 is where advisors drill down into the viability of client goals under their existing financial habits as well as what it would mean if they changed course. Can clients achieve their goals? What needs to change?

The complexity of these questions may increase as clients accumulate assets and they approach different life milestones. Having the ability to simulate different scenarios can be a powerful advantage at this step in the process. If advisors are using financial planning software to simulate different scenarios, they will need a clear understanding of the methodology and assumptions employed in these projections to be capable of fully evaluating the results.

Software can also offer other helpful features for the research stage, including:

  • Cash flow-based analysis to generate insight into expenses versus income and whether a client is saving enough toward goals
  • Monte Carlo reporting to show a client’s probability of achieving success based on their current plan and potential courses of action
  • Budgeting tools, in conjunction with updated and aggregated financial information, presented through a client portal to offer deep insight on current versus potential courses of action

4. Developing the Financial Planning Recommendation(s)

Steps 4 and 5 were previously one step, but now more attention is being given to the development and presentation of recommendations as distinct steps. Steps 4 (Develop), 5 (Present) and 6 (Implement) in the new planning process are where advisors need to be most conscious of risk management.

Advisors need to balance clients’ preferred outcomes with their ability and willingness to achieve them. They should develop multiple recommendations to achieve each goal and simulate how decisions can impact outcomes.

The flexibility and scalability of financial planning software will really begin to show here. Having the ability to provide plans that range from addressing basic needs to the most complex issues, coupled with a large library of planning techniques, can drastically increase efficiency and provide advisors more time to spend on developing interpersonal client relationships.

For compliance purposes, there should be explicit documentation of the planning process to clearly outline individual responsibilities in achieving these recommendations.

5. Presenting the Financial Planning Recommendation(s)

As we noted above, it’s important to offer clients multiple recommendations for achieving their goals. This approach, which requires that clients buy into a recommendation with their decision, will help ensure clients accept their share of responsibility for success. But it’s also necessary to make sure clients understand which options strike the best balance between their goals and constraints.

This really boils down to effective presentation. Using the right tools can help making and documenting your case much easier. It can enhance the type of ongoing collaboration required to resolve big consequential decisions. And it can make clients understand clearly why they’re making tradeoffs.

Being able to demonstrate the benefits and tradeoffs of different decisions in an interactive way can be an extremely powerful feature of financial planning software.

6. Implementing the Financial Planning Recommendation(s)

Once clients have agreed to a recommendation or compromised on another realistic path, advisors need to steer all relevant parties—including outside professionals—to execute their respective responsibilities. This creates a communication and collaboration challenge for every required service that you don’t manage in house.

A pre-determined and clearly communicated follow-up strategy will help increase the likelihood that clients and third-party professionals execute their responsibilities on schedule. A comprehensive planning platform can track next steps to help ensure that each party implements their respective segment of the recommendations. Marketing communications that educate clients on various aspects of their finances can encourage them to follow through on their assigned responsibilities by reinforcing the value of following their financial plan.

Finally, an integrated document vault where advisors and clients can upload and store sensitive information in a secure area can help further centralize financial planning software as the primary rallying point for collaboration.

7. Monitoring Progress and Updating

Advisors need to set expectations for conducting performance reporting and goal tracking. This includes agreeing on the best modes for follow-up communication and ongoing collaboration. Alerts and triggers built into the financial plan can help keep follow-ups on track by prompting action from advisors and clients, and they can generate a digital paper trail for data compliance.

As clients’ financial lives evolve, they’ll also need to discuss changes to their circumstances and goals, which can necessitate revisiting their plans. Good collaboration tools that keep advisors and their clients on the same page regardless of where they are can serve as the basis for a flexible and fulfilling client experience. Financial planning software can provide deep visibility into a client’s whole financial situation. With the right APIs, connections and integrations, clients can use the most up-to-date financial information to see their progress toward goals.

Financial Planning Software Elevates Advisor-Client Interactions

Risk and compliance efforts continue to grow into an increasingly heavy lift. Advisors can free a lot of resources for the client-centric parts of their businesses by harnessing financial planning software that runs support processes for their compliance efforts in parallel with each step of the financial planning process.

Whether that’s data collection, analysis, scenario modeling, developing and recommending plans, implementation, or follow up, having a platform that systematically tracks client deliverables, automatically archives changes and preserves documents in an efficient audit-ready format will allow advisors to reclaim a lot of time for more productive ends.

With all this newfound bandwidth, advisors can refocus on deepening their relationships through a better client experience. Financial planning software needs to be able to improve the quality of plan development through the entire planning process.

Today, clients also expect a savvy interface—so advisors need to consider platforms that can serve as their clients’ financial hubs—with auto-updated and aggregated data, goal tracking, and ideally the ability to render clearly on mobile devices. That’s what clients have come to expect, so advisors should be prepared to deliver for them.

Continue learning on this topic by watching a CE webinar my colleagues Brett Tharp, CFP®, Financial Planning Education Consultant, and Brandon Heid®, CFP, Financial Planning Practice Management Consultant, explain how to apply the financial planning process across the entire financial lifecycle (CE credits not awarded for watching on-demand version). 



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About the Author

Celeste Revelli is currently Director of Digital Planning at Fidelity Investments, where she works on digital financial planning experiences for Fidelity advisors and clients. Starting her career as a registered advisor for a few years, Celeste has been in the financial services industry since 2009. She worked at eMoney Advisor for almost 11 years, where she led advanced planning support escalation, product research support, and eMoney’s financial wellness and financial education strategy as Director of Financial Planning. Celeste received her bachelor’s degree in communications and marketing from Loyola University Maryland and her certificate in financial planning from Boston University. She is a CERTIFIED FINANCIAL PLANNER™ professional and is currently pursuing her MBA specializing in financial psychology and behavioral finance from Creighton University. Celeste dedicates time to serving her community in the areas of pro bono financial planning and financial literacy, and she also serves the industry through her support of next generation planners, diversity and inclusion efforts, and exam and technology committees for the CFP Board. She lives in Philadelphia with her husband and son.

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