How to create a Financial Plan

by Sian Ulia Davies Cole CFPᵀᴹ MCSI Chartered ALIBF

The key to achieving a client’s objectives is creating a Financial Plan for their personal finances and objectives in much the same way as a business owner would put together their Business Plan.

There are a few key areas to building a Financial Plan, and this takes a bit of time initially; however, once the fundamentals are agreed, it’s just a matter of updating and reviewing it on an ongoing basis. It is important to do this as a client’s personal views may change over time, as does the value of their financial arrangements, legislation and financial planning fundamentals.

Knowing your stuff

Getting a current understanding of what a client has in place already is a good place to start. This might be quite a quick and seamless process, or it might involve a bit of back and forth with plan providers depending on the complexity of the client’s arrangements.

What does the client want

This can and should take some time to decide and might involve some deep thinking, but, essentially, we are looking to understand what the client wants to achieve and why. We can then get to work with arranging the client’s finances in a way to make that happen.

Although this involves thinking about situations a long time in the future potentially, it is key to understand and question the kind of lifestyle the client wants or the things they want their money to achieve.

What does a client need

A key part of creating a Financial Plan is understanding the client’s lifestyle costs, both now and what they might be in the future. To understand this, it is really important to analyse how much they spend now, on what and how this might change.

Changing situations

There are many variables that we need to consider when building a financial plan – some of them a client will be able to judge personally, and some we might have to make assumptions on based on what has happened in the markets historically or decisions made by Governments in the past.

A few specific assumptions need to be agreed upon when building a Financial Plan, some of which are detailed below:


As the cost of the client’s lifestyle will likely increase overtime, it is sensible to include this as an increasing cost. The important part, after deciding how much a client will need to meet their lifestyle, is how much we should assume that increases by each year. Generally, unless there are known increases. RPI is generally considered as a suitable measure of inflation for lifestyle costs.

Investment growth

The growth a client’s portfolio achieves will depend on how much is invested and where but also what has happened in the economy – therefore, it is unpredictable. Based on what you know about past performance, the economy and a client’s portfolio, you should agree a suitable growth rate that you assume for their portfolio over time. This might be done at a firm level or with individual clients.

The Financial Plan

Once you have decided upon the client’s objectives, got all the details about their financial arrangements and considered the most appropriate assumptions for them, you are ready to build the plan.

Building the plan should be done behind the scenes, with the finalised plan showing two main things: income versus lifestyle costs per year and whether there is a shortfall in any year or in their lifetime and how the value of your whole portfolio might change over their lifetime.

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