Process overview — CFP IFP — Trustner Academy

FPSB defines a six-step financial-planning process. CFPs must master this for exam and practice. Each step builds on the previous; documentation throughout enables audit trail and dispute defense.

Foundation

Six-step process: 1. Establish client-planner relationship (engagement letter, scope, fees) 2. Gather data (income, expenses, balance sheet, goals) 3. Analyse current situation (cash flow, ratios, gap analysis) 4. Develop recommendations (across investment, tax, retirement, risk, estate) 5. Implement (execute recommendations with client) 6. Monitor and review (ongoing, periodic) Documentation at each step: • Engagement letter • Client questionnaire + financial statements • Analysis workpapers • Written plan (often 30-50 pages) • Implementation log • Review minutes For SEBI-RIA: many of these are mandated; for CFP-only practitioners: best practice.

Deep Dive

Engagement letter contents: • Scope of services • Fees + payment terms • Conflicts of interest disclosure • Confidentiality • Client responsibilities • Termination clause • Dispute resolution • Both parties signed and dated Data gathering: • Personal: age, family, profession, residence • Income: salary + bonus + investments + business • Expenses: monthly + annual + irregular • Balance sheet: assets + liabilities (including life insurance, real estate, gold, etc.) • Goals: specific amounts, timing, priority ranking • Risk profile: questionnaire + observed behaviour • Existing financial structures: IPS, will, trust, insurance, retirement accounts Analysis: • Cash-flow projection (income vs expenses) • Net-worth tracking • Goal-funding adequacy • Gap analysis (current trajectory vs goals) • Risk exposures (uninsured, under-insured) • Tax efficiency assessment • Estate plan adequacy

Worked example

Worked example — engagement letter excerpt [Client Name] — [Date] This Engagement Letter outlines the financial planning relationship between [Client] and [CFP/Firm]. Services: 1. Comprehensive financial plan covering investment, retirement, tax, insurance, and estate 2. Quarterly progress reports 3. Annual comprehensive review 4. Implementation support for recommendations Fees: ₹50,000 + GST per annum, payable in 4 instalments • [or hourly rate / project-based fee disclosed] Fee additional services beyond scope: ₹3000 per hour Conflicts of Interest: • [CFP] does/does not earn distribution commissions on products recommended • [Specific arrangement disclosed] Confidentiality: • [CFP] maintains client information in confidence • Disclosure only with explicit consent or as required by regulation Termination: • Either party may terminate with 30-day notice • Pro-rata refund of unused fees Client responsibilities: • Accurate information disclosure • Timely review of recommendations • Decision authority on implementation Dispute resolution: • Mediation through FPSB India in case of dispute Signed: [CFP], [Client], [Date] This form ensures clear understanding of the relationship.

Real-world scenario

Real-world scenario — Mr. Sharma's plan delivery Mr. Sharma engages CFP for comprehensive plan. Process unfolds: Week 1: Initial meeting, engagement letter signed. Week 2-3: Client questionnaire, document collection, balance sheet creation. Week 4-5: Analysis of current state, goal-funding gaps identified. Week 6-7: Recommendations drafted, internal review. Week 8: Plan presented to client (30-page document). Week 9-12: Implementation: term insurance applied, will drafted, SIPs started, NPS opened. Week 13: Implementation review. Month 4-12: Quarterly reviews, monthly portfolio statements. Year 2: Annual comprehensive review. Year 3: Plan refined based on observed behaviour and life changes. This is the structured 6-step process in practice. CFP-FPSB candidates demonstrate this on the capstone exam.

Advanced

Recommendations integrate across modules: Example household: • Investment: ₹50K/month SIP across equity (60%) + debt (40%) for retirement goal • Retirement: 30-year accumulation; project corpus; recommend NPS for tax efficiency • Tax: optimise old vs new regime; NPS 80CCD(1B); ELSS for 80C • Risk: term insurance ₹3 cr; health ₹15L family floater; PA ₹50L; critical illness rider • Estate: will drafted; nominees updated; POA + living will for elderly parents Implementation calendar: • Quarter 1: Term insurance, health insurance, will draft • Quarter 2: SIP starts, NPS account opened, PPF maximised • Quarter 3: Asset allocation review, rebalancing • Quarter 4: Annual review, tax planning, charitable contributions Review schedule: • Monthly: portfolio statements • Quarterly: progress vs IPS • Annual: comprehensive review with client + plan revision • Major life events: trigger plan update

Regulatory references

CFP-FPSB Six-Step Process
SEBI IA Regulations on engagement
Indian Contract Act on agreements

Common mistakes & pitfalls

Skipping engagement letter (verbal agreements).
Inadequate data gathering.
Plans without specific implementation calendar.
No follow-up after delivery.
Documentation inconsistent or absent.

Frequently asked

How long should a complete plan take?

8-12 weeks for comprehensive plan including data gathering, analysis, recommendations, and implementation. Faster for simpler situations; longer for HNW with complex structures.

Should fees be percent-of-AUM or flat?

CFP-RIA in India typically: flat annual retainer for advisory clients (₹50K-1L+ depending on complexity). AUM-based: 0.5-1% of advised assets. Fee transparency mandatory.

What if client doesn't implement recommendations?

Document the recommendation; document the client's decision not to implement. Continue advising on what client did agree to do. Annual review covers both. Ultimately client's autonomy.

Practice questions

Click each question to reveal the answer and explanation.

Q 1

FPSB six-step process begins with:

(a)Implementation
(b)Establish client-planner relationship
(c)Annual review
(d)Investment selection

Correct: (b) Establish client-planner relationship

Step 1: Establish client-planner relationship via engagement letter. Sets scope, fees, expectations.

Q 2

Engagement letter is:

(a)Optional verbal agreement
(b)Written contract specifying scope, fees, conflicts, responsibilities; signed by both
(c)Required only for HNW
(d)Replaces all other documents

Correct: (b) Written contract specifying scope, fees, conflicts, responsibilities; signed by both

Engagement letter: written contract. Specifies scope, fees, conflicts, responsibilities. Signed by both. Mandatory practice.

Q 3

Data gathering in plan-process:

(a)Skipped if client has small portfolio
(b)Comprehensive: balance sheet, goals, risk profile, existing structures
(c)Limited to investment portfolio
(d)Quick verbal review

Correct: (b) Comprehensive: balance sheet, goals, risk profile, existing structures

Data gathering must be comprehensive: balance sheet, goals, cash flow, risk profile, existing structures. Foundation for entire plan.

Q 4

Implementation calendar:

(a)Optional for simple plans
(b)Specific quarter-by-quarter timeline of recommendations
(c)Government requirement
(d)Insurance company schedule

Correct: (b) Specific quarter-by-quarter timeline of recommendations

Implementation calendar: quarter-by-quarter timeline of which recommendations get done when. Helps client see progress and plan execution.

Q 5

Annual review of plan:

(a)Verbal phone call
(b)Comprehensive review with client + written documentation of changes
(c)Skip if no changes
(d)Optional

Correct: (b) Comprehensive review with client + written documentation of changes

Annual review: comprehensive review with client. Document changes, update IPS, refresh recommendations. Best practice; SEBI-RIA mandated.

Educational purposes only. The numbers, returns, and examples used in this lesson are illustrative. Past performance does not guarantee future results. Mutual fund and securities investments are subject to market risks. This lesson is not investment advice; for advice tailored to your circumstances, consult a SEBI-registered Investment Adviser. Read our full disclaimer.