PARTE III Publicidad de Jabón Dove, con el tema Autoestima

An internationally recognised six-step financial planning process is used to provide independent and professional financial advice (Rossini & Maree 2010:7-8; Cull 2009:27). The financial planning industry has previously received significant negative publicity due to the use of commission-based payments, rather than service-based payments, for financial planning services rendered to individuals. The use of service- based payments has been a factor that has contributed to financial planning being recognised as a profession. Commission-based payments have led financial planners to sell products to individuals with the aim of achieving high levels of commission. As a result of using service-based payment systems, individuals might no longer

associate financial planners with the commission-based payments that did not always take the best interest of individuals into consideration.

In the light of the above points, it is evident that a financial planner is a professional who facilitates, implements, and monitors various aspects of financial planning (Rossini & Maree 2010:7-8; Cull 2009:27). In making use of the six-step financial planning process, the previously perceived sales-driven process has been converted into a service-oriented process (Botha et al. 2014a:18). For instance, when an individual receives a financial planning service, the sale of a product occurs as a result of the financial planning process, and not as a result of a sales-driven process that will increase commission-based payments to the financial planner. Botha et al. (2014a:18) explain that the six-step financial planning process has provided a standardised method of providing financial advice in financial planning services, thus contributing to financial planning being regarded as a profession. In addition, the act of standardising the six-step financial planning process has encouraged the development of long-term relationships between financial planners and individuals, built on trust. (Botha et al. 2014a:18).

Rossini and Maree (2010:7-8) mention that an individual who uses the services of a professional financial planner, and invests in the advice of that professional planner, is referred to as a “client”. A client is also an individual with whom the financial planning professional has a formal planner-client relationship (Rossini & Maree 2010:7-8). Therefore, the term “client” will be suitable to use in this study, as the six-step financial planning process makes reference to individuals who seek advice from a financial planning professional. Figure 2.1 highlights the financial planning process.

Figure 2.1: The six stages of the financial planning process

Source: Adapted from Botha et al. (2014a:19)

The six-step financial planning process is discussed next.

2.4.1 STEP ONE – ESTABLISH AND DEFINE THE PROFESSIONAL RELATIONSHIP WITH THE CLIENT

Building a relationship with a financial planner is the first step in achieving the financial goals a client desires (Botha et al. 2014a:19). In this step, financial planners must discuss their competencies and disclose any potential conflicts of interest that might arise. The roles and responsibilities of both the client and the financial planner must be discussed, as well as the scope of engagement of their professional relationship. Cull (2009:27) states that the scope of engagement or contract between the financial planner and the client should specify the services the financial planner can offer the client, as well as compensation arrangements or remuneration details for the services rendered. The provisions for the termination of the relationship should also be discussed in this step. Botha et al. (2014a:19) elaborate that, once the terms of the relationship are defined, the financial planner can start gathering the necessary information from the client (which is step two of the process) in order to begin the

formal financial planning process (Financial Planning Institute 2014; FPSB 2014; Irving 2012:50).

2.4.2 STEP TWO – COLLECT THE CLIENT’S INFORMATION

The financial planner, according to Cull (2009:27), should ask for information about the client’s financial situation. This can include the client’s income, debts, statements in investment holdings, risk tolerance, insurance coverage, and information about tax provisions (Irving 2012:55). Prior to developing a financial plan, the financial planner needs to determine the clients’ attitudes towards debt, propensity to save, attitudes towards taxation, health planning, lifestyle issues, and financial literacy (Botha et al. 2014a:23). The client and the financial planner should mutually define the client’s personal and financial short-term, medium-term and long-term goals. In addition to gathering data about the client’s financial situation, Botha et al. (2014a:22) state that it is necessary to collect documentation about the details of the client’s spouse, their dependents, their marriage contract, trust deed, their will, and any other relevant legal documentation. Finally, the time frame to achieve the client’s financial objectives should be discussed. The potential strategies to achieve these objectives should also be under discussion in step two of the financial planning process. (Botha et al. 2014a:20-23; Financial Planning Institute 2014; FPSB 2014; Irving 2012:50; Cull 2009:27).

2.4.3 STEP THREE – ANALYSE AND ASSESS THE CLIENT’S FINANCIAL STATUS

Irving (2012:55) states that, in step three, the financial planner should analyse the client’s information to assess his/her current financial situation and determine what is required from the financial planner to meet his/her financial goals. The analysis can include a consideration of the client’s assets, liabilities, and cash flow in the form of personal financial management. Similarly, Botha et al. (2014a:25) mention that any existing investments or policies of the client will have to be evaluated and included in the financial planning process. The current insurance coverage, business financial planning, investments, or tax strategies must also be taken into account. The client’s goals for estate planning, beneficiaries’ protection, and the preservation of assets in the event of death are included in this step in order to tailor the personal financial plan

accordingly. (Botha et al. 2014a:24-25; Financial Planning Institute 2014; FPSB 2014; Irving 2012:50; Cull 2009:27).

2.4.4 STEP FOUR – DEVELOP THE FINANCIAL PLANNING RECOMMENDATIONS AND PRESENT THEM TO THE CLIENT

Botha et al. (2014a:28) advise that, after having conducted an analysis of the client’s financial situation, the financial planner should offer financial planning recommendations that address the client’s desired financial goals, based on the information that the client provided in step three. Cull (2009:27) states that the financial planner should discuss the recommendations with the client to ensure that they understand the recommendations that will assist them to make informed financial decisions. The financial planner should also listen to the client’s concerns and revise the recommendations accordingly. However, Botha et al. (2014a:30) explain that, in step four, the financial planner might experience some resistance from the client, as they might not understand the recommendations made by the financial planner. Another possible reason for client resistance is that they might not believe that the proposed recommendations will achieve the financial goals. Additionally, the client might believe that the recommendations would not address their concerns. Once the client is satisfied with the financial planner’s recommendations, the financial planning process proceeds to step five. (Botha et al. 2014a:28-30; Financial Planning Institute 2014; FPSB 2014; Irving 2012:50; Cull 2009:27).

2.4.5 STEP FIVE – IMPLEMENT THE CLIENT’S FINANCIAL PLAN

Irving (2012:50) explains that the advice given and recommendations made by the financial planner should be discussed, and an agreement drawn up about how the recommendations will be implemented. In recommending financial products, the financial planner must be mindful whether the suggested financial products will be in the best interests of the client. (Botha et al. 2014a:28-30; Financial Planning Institute 2014; FPSB 2014; Cull 2009:27).

2.4.6 STEP SIX – REVIEW THE CLIENT’S SITUATION

According to Cull (2009:27), the financial planning recommendations require constant monitoring of economic, environmental, and lifestyle changes. Various circumstances

might warrant a review of the financial plan, such as changes in the global macro- economy, legislative changes, or the introduction of new products and services. Lifestyle changes are equally important, and might require a financial plan to be adapted. Lifestyle changes might include changes in marital status, the birth or the loss of a child, an inheritance, or changes in the client’s financial goals. (Botha et al. 2014a:32; Irving 2012:50).

Botha et al. (2014a:30) contend that there must be an agreement between the financial planner and the client, stating who will be responsible for monitoring which parts of the financial plan. A periodic meeting with the financial planner is recommended in order to keep up to date with the client’s situation, and to remain informed on the progress of the client’s investments and the status of the financial plan. This review process also assists in building a long-term relationship between the financial planner and the client. (Botha et al. 2014a:28-30; Financial Planning Institute 2014; FPSB 2014; Irving 2012:50; Cull 2009:27).

The six steps of the financial planning process are followed when different components of financial planning are considered in individuals’ financial plans.