What Is the 7-Step CFP® Financial Planning Process?

Earning the CFP® credential may help you attract more clients to your business, increase assets under management (AUM) and boost revenues. Professionals who earn this designation are expected to adhere to specific practice standards when providing financial planning to clients. The CFP® planning process comprises seven key steps that guide how professionals develop and present financial advice.

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CFP® Planning Process: Step by Step

The CFP Board’s Code of Ethics and Standards of Conduct outlines the ethical responsibilities of CFP® professionals, including what the financial planning process should look like. The seven steps are designed to ensure that any advice a client receives is informed, comprehensive and tailored to their needs.

Here’s what happens in each phase.

Step 1: Understanding the Client’s Personal and Financial Circumstances

The first step of the financial planning process requires CFP® professionals to do three things:

Obtain quantitative and qualitative information about a client’s financial situation
Analyze that information
Address any gaps in that information that need to be filled in order to offer financial advice

The type of quantitative information you would gather in this step includes the client’s age, number of dependents, income, expenses, cash flow, assets and liabilities. In other words, you’re looking for the hard numbers that tell you where a client stands financially.

Qualitative information includes details about their health and life expectancy, family circumstances, values and beliefs, expectations, earning potential, risk tolerance and goals. These are the details that are harder to tie to specific numbers and may shift over time.

You can collect the necessary information by asking your clients questions in your discovery meeting or having them complete a questionnaire each year to update their numbers and preferences. Once you have the information you need, you’re ready to organize and analyze it.

For example, you might use a client’s numbers to generate a cash flow analysis or create a one-page financial report to share with them. The information you gather in step one is critical for completing the remaining steps of the CFP® planning process.

Step 2: Identifying and Selecting Goals

The second step of the financial planning process is where you’ll talk with your clients to identify their potential goals, help them select which to pursue and prioritize those goals in order of importance.

In this step, the focus is on determining whether a client’s goals are achievable and realistic, and whether there may be other goals they need to set to complete their financial plan. For example, you might have a client whose goal is to retire at 65 with $1 million. You might advise them to set a secondary goal of obtaining long-term health care insurance to preserve their wealth should they require nursing home care at some point.

As you help clients set goals, you can map out the specific action steps needed to accomplish each one.

Step 3: Analyzing the Client’s Current Course of Action and Potential Alternative Courses of Action

In the third step of the CFP® planning process, you’ll assess where the client is now and whether any potential alternative courses of action may be needed to get them where they want to go. The CFP Board suggests evaluating a client’s course of action by weighing its advantages and disadvantages side by side.

This type of analysis can tell you:

How likely the client is to reach the financial goals you’ve helped them establish in step 2
Where the opportunities lie to strengthen their financial plan

For example, say you advise a married couple who’s sitting on $500,000 in cash, plus another $1.5 million in investments. They have a fairly low risk tolerance so the advantage of such a large cash buffer is that they don’t have to worry about it being affected by market volatility. The disadvantage, however, is that the money is parked in regular bank accounts that earn a 0.01% interest rate.

You might point out that they have an opportunity to increase their interest earnings by moving that cash into a high-yield savings account at a bank or a high-yield cash management account with a brokerage. They could get a better return from their savings, without sacrificing security.

Step 4: Developing the Financial Planning Recommendation(s)

Step 4 of the CFP® planning process is where you’ll flesh out your recommendations for a client’s financial plan. For each recommendation you make, you must consider:

The assumptions and projections underlying each recommendation
The rationale supporting the recommendation
The recommended order and timing for implementation
Whether the recommendation stands alone or depends on other actions

Certain recommendations may take more time to implement than others and this step can help you develop a realistic window for checking each one off a client’s list. You also have an opportunity to revisit your original recommendations to confirm that each one is appropriate for your client’s needs and goals.

Step 5: Presenting the Financial Planning Recommendation(s)

Once you’ve finalized the details of each recommendation you want to make to the client, it’s time to present them. Here, you will provide the client with a written document outlining your planning advice and walk them through each recommendation. Depending on the client’s preferences, you may do that over the phone, via virtual call or at an in-person meeting.

You may include supporting documentation or visuals to help underscore why you’re making specific recommendations. Visualizer tools, for example, can help you generate charts and graphs to illustrate to clients the projected financial outcome of a particular recommendation or investment decision.

As you present your recommendations, be prepared to answer client questions and tackle objections. The better you know and understand your clients, the easier this step of the planning process may be.

Step 6: Implementing the Financial Planning Recommendation(s)

If your clients agree to your recommendations, you can move ahead with implementing them. In this step, you must:

Define who is responsible for carrying out each step
Evaluate and choose appropriate actions, products and services
Present recommended actions, products or services for execution
Carry out the selected actions, products or services

Implementation may be a collaborative effort, depending on the recommendations you’re making. For example, if your clients agree to a change in their allocation, they may need to take on the responsibility of making those changes for assets held away. Or if they’ve agreed to your recommendation to shift some of their cash to a high-yield savings account, they would need to open the new account and initiate the transfer.

As you work through your implementation checklist, make sure clients understand what’s expected from them and their timeframe for completion. If you expect the process to stretch over several months, regular weekly check-ins with the client can help you to track their progress.

Step 7: Monitoring Progress and Updating

After implementation comes the monitoring phase. Here, you must:

Define how monitoring and updates will be handled with the client
Track the client’s progress over time
Regularly review and refresh client information
Adjust goals, recommendations or implementation decisions as needed

It may help you and the client to establish a communication and meeting schedule to maintain consistency. For example, you might suggest a quarterly or biannual meeting in person, with monthly status updates via phone or email. Every client is different when it comes to how they prefer to communicate and how often, so take time to ask what feels most comfortable for them.

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Frequently Asked Questions (FAQs)

Does CFP Board require a CFP® professional to complete all seven steps of the financial planning process?

A CFP® professional who provides financial planning advice must follow the first five steps of the process. The last two are not necessary if those steps are specifically excluded from the financial planner’s scope of engagement.

Are all financial advisors required to follow the steps in the CFP® financial planning process?

The CFP® planning process is for CFP® professionals. If you don’t hold this type of credential, you’re not obligated to follow these steps. You may, however, use them as a guide for delivering advice to your clients.

What are the ethics and code of conduct standards for CFP® professionals?

The CFP Board outlines ethical standards and codes of conduct that credentialed financial planning professionals are required to observe. That includes acting in clients’ best interest when offering advice, disclosing and addressing potential conflicts of interest and completing necessary continuing education (CE) requirements.

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Bottom Line

The CFP® planning process is a multi-step approach to financial planning that’s designed to help planners serve their clients more effectively. If you’re considering a professional designation as a financial planner, it helps to know what would be expected of you before pursuing the CFP® path.

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A CFP® certification is just one credential you might hold, and there are number of other advisor certifications to choose from. For example, you may pursue a chartered financial consultant (ChFC) designation or become a chartered financial analyst (CFA). When comparing designations, consider the requirements to earn it, continuing education standards and its potential to help you grow your business and income.