Any one of several things might come to mind when the number six is mentioned. Maybe you think of it as a common package for your favorite canned beverage, the atomic number of carbon, Bert’s favorite number on Sesame Street or the number of geese a-laying. However I doubt that the number of steps in the classic financial planning process is likely to be among the more obvious answers.

As I have written before, it was not my lifelong ambition to become a financial planner. I made a successful mid-career change from engineer to stockbroker in my 40’s. However, after a few years, found myself increasingly uneasy trying to answer people's investment questions outside the context of their entire financial lives. Understanding that I needed to address those concerns, I left the world of selling investments. After several years of study I became a Certified Financial Planner® certificant with Jalene following soon thereafter. During the course of study, we both became believers in the six-step financial planning process.

One of the most common questions we hear is, “What’s the difference between planning and simply investing?”. Hopefully, this article will shed some light on the issue and maybe even provide an answer. There are certainly some financial questions with fairly simple answers so the entire process is not required for all clients. Still, we utilize it whenever we can since it has proven such an effective way to identify issues and help provide answers.

Here are the steps and some thoughts about how each is applied.

Step 1: Setting goals with the client. We try to learn about a potential client’s current situation but, more importantly, where that person hopes to be in the future. There is just no way to develop a meaningful plan without having accurate information about a client’s long-term goals.

Step 2: Gathering relevant information about the client. We usually do this at the same time as Step 1. We ask each client to complete one or more questionnaires to help us learn more about them. Of course, we also review relevant financial documents.

Step 3: Analyzing the information. After seventeen years in the business, I can confirm your suspicion that every person’s situation is unique. Analysis is required so we can understand a client’s circumstances as well as what resources can be brought to bear on meeting the desired goals.

Step 4: Constructing a financial plan. After we have a clear picture of the situation, we develop a personalized strategy to guide the client in achieving his or her goals.

Step 5: Implementing the strategies in the plan. Usually, plan execution is accomplished jointly. For example, we might review and make recommendations regarding the funding of a college education while the client might begin contributing more to his or her retirement account.

Step 6: Monitoring implementation and reviewing the plan. A plan is of little value without some sort of follow-up. No matter how carefully we plan, life doesn’t always follow the script. We schedule periodic follow-ups so we can evaluate how things are going, which also gives us a chance to be sure nothing significant has changed.

Although managing investments is often the reason people come to Warren Ward Associates, it is only one of the services we typically provide. The six step planning process allows us to learn a great deal about our clients, their immediate situation and their long-term goals. While the process is more time-consuming than simply selling them an investment, we believe it greatly increases the likelihood that our clients will be successful in achieving their goals.

Oh and the sevens mentioned in the title? Well, an investor can always decide to simply depend on luck . . .