Why it Pays to Understand the Six Stages of Financial Planning

20 March, 2018 by Katerina Sousalis Katerina Sousalis // Financial Advice

This article is published by Modoras Pty Ltd

Is one stage more important than the others?

Financial planning is for people at all ages and stages.

Financial planning is for people at all ages and stages.
Source: Adobe Stock

The six stages of financial planning set out exactly how a relationship between a financial planner and a client should develop. It’s an excellent framework for financial planners and a great tool for clients. Financial planners don’t always get the best rap and the guidelines below, as published on the web by the industry body, the Financial Planning Association of Australia (FPA), help solidify and formalise the boundaries in which planners work. Setting expectations and establishing a clear plan of action, gives potential and existing clients confidence and peace of mind.

For Modoras, as a high quality, long running, award-winning business, being open and honest about the processes we use is simply part of the job.

“The six steps of financial planning set out exactly how a relationship between a financial adviser and a client should develop.”

STEP 1 – Define the Scope of the Engagement

This first part is crucial. This is where you decide if you trust your financial planner and their knowledge enough to firstly tell them more about your financial situation and secondly, to allow them to help you. It’s the moment where you decide whether or not they are the right planner for you. Sometimes there is a simple personality clash. Not every client is suited to every planner. Other times, this lack of connection could indicate deeper issues.

A good financial planner will clearly explain their process, they won’t baffle you with jargon and terminology. They will listen to your needs, and your questions, and answer them honestly. They won’t make you feel stupid and they won’t talk down to you. You can ask them as many questions as you like, about their background, how they work and how they charge.

If you’re satisfied, you can move on to step two.

STEP 2- Identify Goals

Whatever dreams your dreaming about your financial future or retirement, now is the time to put them into words. Be honest with your planner about what you’re hoping for. Depending on your age, you might be working towards goals other than a retirement lifestyle. You might want to pay off your home, invest, or go on a family holiday every year. You might wish to set up nest eggs for your kids.  Whichever goals, you’re working towards, this stage is the basis for your future plan.

STEP 3 – Assess Your Financial Situation

At this stage, a good financial planner will ask a lot of questions. You need to be completely honest, and provide financial documents as needed, all this information will help your planner to establish where you are financially. Your planner will take a good look at your position – your assets, liabilities, insurance coverage and investment or tax strategies.

Financial Planner

Being a financial planner is ultimately a position of utmost trust. Source: Adobe Stock

STEP 4 – Prepare Your Financial Plan

Now, based on the information you gave in steps 2 and 3, your financial planner begins the hard work. The result of this step should be your individualised financial plan. It should be clear about the goals you wish to achieve. It should set out clear steps for you to take. It should be easy to follow and understand. There will be suggestions for products to invest in and strategies that suit your unique situation. There may be suggestions for cost cutting and it may not all be delightful reading. A good planner will not shy away from bad news and they’ll be tough if they need to. This is a good point for you to ask lots of questions about your plan, and satisfy yourself that it’s right for you.

STEP 5 – Implement Recommendations

Make sure you’re comfortable with the plan before you put it into action. As part of implementation your financial planner may work with specialist professionals, such as an accountant or legal specialist. They should advise you about the involvement of other parties and obtain your permission. The plan may include investment in a new product or asset you’re unfamiliar with, so ask as many questions as you need to. You can request changes until you’re happy with the final plan. It shouldn’t be a problem if you’ve chosen the right planner.

STEP 6 – Review the Plan

Over time, your circumstances, lifestyle and financial goals will change. Family circumstances change, so does your job, and of course, you’re always moving closer to retirement. Regular reviews of your financial plan are essential, and a good financial planner will schedule these in regularly, not only to make sure you’re on track, but to adjust the plan as your needs change.

Is one step more important than the rest?

These 6 stages, done well, help you identify, plan for, and reach your financial goals where possible. Is there one that stands out as more important than the others?

Yes, we believe so. The first step is the most important by far because it’s about relationships and trust. If you can’t trust your financial planner, if the relationship is not strong; there is no possibility of moving on to the next 5 steps. It’s important to make sure you are comfortable that your financial planner has taken the time to understand your needs, goals and preferences before they make any recommendations . It’s essentially the same as the FPA version, but the emphasis is on the relationship, rather than the work to be done.

Step 1 of the process is the key to your future prosperity

According to an investigation by Dr Rebecca Sheils of the Beddoes Institute, initiated by Zurich Financial Services, to build trust, financial planners must have a high emotional intelligence. They must be a good listener and communicator, always respectful and reliable, return calls, follow up and respond when they say they will. A high level of financial knowledge and technical expertise is expected as par for the course and nothing special, whereas emotional intelligence sets a good planner above the rest3.

The most important step in the Financial planning process is the first one, where you find a financial planner you can trust, who’s got your back and knows their stuff. That’s where Modoras comes in. We have a team of financial planners with buckets of financial knowledge and experience but also plenty of emotional intelligence. They’ll listen, answer all your questions (with no jargon) and always be there when you need them.

Over to you

Do you agree the first step of the financial planning process is the most important? Perhaps another is more important to you. Let us know in the comments.


  1. Financial Planning Association of Australia: About Financial Planning – How it works
  2. Certified Financial Planners Board (USA) – Compliance : FAQ Financial Planning
  3. Education/Money Management – How advisers can build valuable relationships with clients

This article is published by Modoras Pty Ltd ABN 86068034908 AFS and Credit License No. 233209. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

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