Six-step financial planning process

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Asset allocationThe decision on how to distribute a client's wealth across asset classes — the first decision in building a portfolio, and the one that explains most of what the portfolio then does.
• Client level segregationThe SEBI rule that no single client may receive both advisory and distribution services from the same investment adviser group — each client is one or the other, never both.
• Debt trapThe state a borrower reaches once debt is being used to meet ordinary living expenses, so fresh borrowing becomes necessary to service the borrowing already outstanding.
• Emergency fundA pool of money held in liquid assets, sized at six months of household expenses, kept aside so that an interruption in income does not force the sale of long-term investments.
• Estate planningDeciding during your lifetime who is to receive which of your assets after your death, and documenting it — mainly through a Will and nominations — so heirs can claim them easily and cheaply.
• Financial planningThe process of estimating what a person will need money for across their lifetime and building an investment plan to meet each of those needs — savings with a purpose attached.