Financial goals are the heart of the financial planning process. They define what the client expects to achieve through financial planning. All succeeding stages of the financial planning process are directed by the financial goals. The planner assists the client in establishing realistic goals and quantifying them in terms of measurable objectives. Goals such as "to be successful" or "to live the good life" may not produce efficient results because of their nebulous nature and/or because of a lack of commitment on the part of the client to achieve such goals. Since they are the central focus of the planning process, financial goals should be quantified in dollar amounts and time frames instead of remaining general in nature.

Clients usually have a variety of goals that they wish to achieve through a financial planning process. Examples of goals include future major purchases, such as a new home, boat, or car; travel plans; funding a new business; or providing education for children. Other goals that should generally be established include ensuring adequate protection against personal risks (including unemployment, disability, death, medical expenses, property losses, and liability losses), meeting retirement needs, minimizing expenses, and planning for distribution of the estate. Since the achievement of goals usually requires saving and investing, an important ancillary goal of financial planning is structuring investments in a manner that enables the client to meet goals, consistent with his or her tolerance for risk.

Clients may have many objectives they would like to attain, so they should be ranked in order of importance. Depending upon the nature of the objective, certain constraints, or limiting factors, need to be considered. Some constraints, such as available resources, will be identified to a degree in the data gathering stage. Later in the financial planning process, the financial planner needs to consider all factors that might restrict the range of alternatives appropriate to meeting client needs and achieving client objectives.

For example, the client's needs for liquidity, marketability, and diversification affect the portfolio construction process. Regulatory constraints affect all areas of financial planning.

The gathering of quantitative and qualitative data is accomplished through meeting with the planner. Quantitative data come from "hard" questions and qualitative data come from "soft" questions. The soft questions seek to find out what people want, how they feel, and who they want to benefit.

Whatever the sequence of interviews might be, the financial planner collects quantitative and qualitative data such as that outlined below, depending upon the client's goals.

Quantitative Data

• General family profile
• Names, addresses, and telephone numbers of financial advisors
• Assets and liabilities
• Cash inflows and outflows
• Insurance policy information
• Employee benefit and pension plan information
• Tax returns for the last several years
• Details on current investments
• Retirement benefits available
• Client-owned business information
• Copies of wills and trusts
• Lifetime gifting programs

Qualitative Data

• Goals and objectives (dreams and desires)
• Health status of client and family members
• Interests and hobbies
• Expectations about employment
• Risk tolerance level
• Anticipated changes in current/future lifestyle
• Other planning assumptions

Another process undertaken in the data gathering stage is the construction of financial statements. Financial statements enable the financial planner to obtain a clear picture of the client's situation in a minimal amount of time. The two statements used most frequently by planners are the statement of financial position and the cash flow statement. The statement of financial position presents the client's assets, liabilities, and resulting net worth at a given point in time. Click here for a sample financial statement. The cash flow statement presents the client's cash in flows and expenditures for a given period of time.

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