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Financial Planning Competency Handbook, 2nd Edition by CFP Board

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CHAPTER 73 Analyzing and Evaluating the Client’s Current Financial Status

Thomas Warschauer, PhD, CFP®

San Diego State University

Vickie Hampton, PhD, CFP®

Texas Tech University

Andrew Head, MA, CFP®

Western Kentucky University

After defining the scope of the engagement and collecting both quantitative and qualitative data, the financial planner is prepared to evaluate and document the strengths and vulnerabilities of the client’s current financial situation. The quality of this analysis is dependent on the planner’s success in building a trusting relationship with the client that results in sufficient and accurate data.

DEFINITION

Clients come to the planner for a specific reason. Sometimes it is to achieve a particular goal such as educating children, planning for retirement, or determining what to do with a windfall such as an inheritance, and sometimes it is to solve a problem such as excessive taxation or too much debt. Occasionally, clients come to planners for the purpose of a comprehensive plan. Regardless of the client’s motivation for arriving at the planner’s office, the planner needs to evaluate the strengths and vulnerabilities of the client’s current situation. In the words of CFP Board’s Standards of Professional Conduct, “A financial planning practitioner shall analyze the information to gain an understanding of the client’s financial situation and then evaluate to what extent the client’s goals, needs, and priorities can be met by the client’s resources and ...

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