Financial Planning Workflow

Financial Planning Workflow

Core Concepts

Client Profile and Data Gathering

The financial plan begins with a structured intake that captures the client's complete financial picture. Incomplete data leads to unreliable projections and missed planning opportunities. The advisor should collect the following categories systematically before any analysis begins:

Household demographics — ages, marital status, dependents (ages and expected years of financial support), health status and family longevity history, employment status and expected retirement dates, state of residence (for state tax modeling).

Income and benefits — gross salary, bonuses, commissions, self-employment income, rental income, pension details (defined benefit formula, COLA, survivor options), Social Security statements for both spouses, deferred compensation schedules, stock option or RSU vesting schedules.

Expense analysis — fixed obligations (mortgage, loan payments, insurance premiums, property taxes), discretionary spending (travel, dining, entertainment), irregular expenses (home maintenance, vehicle replacement, medical), and expected changes (mortgage payoff date, child-related expenses aging out, healthcare costs in retirement).

Assets and accounts — taxable brokerage accounts, traditional and Roth IRAs, 401(k)/403(b) balances and contribution rates, HSAs, 529 plans, real estate (primary residence and investment properties with basis information), business ownership interests, cash reserves, and any concentrated stock positions.

Liabilities — mortgage balance, rate, and remaining term; student loans; auto loans; credit card balances; HELOCs; any contingent liabilities (co-signed loans, pending legal obligations).

Insurance — life insurance (term and permanent, face amounts, premiums, cash values), disability coverage (employer-provided and individual, benefit amounts, elimination periods, own-occupation vs any-occupation), long-term care coverage, umbrella liability, and health insurance details.

Estate documents — wills, trusts, powers of attorney, healthcare directives, beneficiary designations on all accounts and insurance policies, any existing irrevocable trusts or family limited partnerships.

Tax returns — most recent two to three years of federal and state returns, revealing effective tax rates, deduction patterns, AMT exposure, capital gain/loss carryforwards, and charitable giving history.

Cash Flow Analysis

Cash flow is the engine of the financial plan. Before projecting any future goals, the advisor must establish a reliable baseline of current income, spending, and savings. Key steps include:

1. Categorize income sources by stability (guaranteed vs variable), tax treatment (ordinary, qualified dividend, capital gain, tax-exempt), and expected duration (salary until retirement, pension for life, Social Security from age 62-70).
2. Build the expense baseline from actual spending data (bank and credit card statements), not estimates. Clients consistently underestimate discretionary spending. Apply a 10-15% buffer if only using estimates.
3. Calculate the savings rate as a percentage of gross income. A rate below 15% for clients more than 15 years from retirement is a yellow flag. Document where current savings flow (401k, IRA, taxable, 529).
4. Project cash flow changes over time: salary growth assumptions, expense step-downs (mortgage payoff, children finishing college), expense step-ups (healthcare in early retirement before Medicare, long-term care in later years), and inflation-adjusted lifestyle spending.
5. Identify surplus or deficit in the current year and in projected future years. A current surplus is the raw material for all goal funding. A current deficit means the plan must address spending reduction or income enhancement before layering on new goals.

Retirement Modeling

Retirement is typically the largest and most complex goal in the plan. The analysis has two phases: accumulation (saving and investing toward retirement) and distribution (drawing down assets to fund retirement spending).

Accumulation phase — project account balances forward using current savings rates, employer matches, expected returns by asset class, and tax-deferred growth. Model the impact of increasing savings rates (e.g., saving all future raises). Account for expected lump-sum events (inheritance, home downsizing, stock option exercises).

Social Security optimization — model claiming at 62, full retirement age, and 70 for both spouses. The optimal strategy depends on relative earnings, age difference, health, and other income sources. Delayed claiming increases the inflation-adjusted guaranteed income floor. For married couples, evaluate the restricted application and survivor benefit interaction.

Pension integration — if the client has a defined benefit pension, model the lump-sum vs annuity decision, survivor benefit election (joint-and-survivor percentages), and COLA provisions. The pension's guaranteed income reduces the withdrawal burden on the investment portfolio.

Sustainable withdrawal strategy — establish the initial withdrawal rate (commonly benchmarked against 4% but adjusted for plan duration, asset allocation, and flexibility). Model withdrawal sequencing across account types: draw from taxable first to allow tax-deferred accounts to compound, but consider Roth conversion opportunities in low-income years between retirement and Social Security/RMD onset.

Monte Carlo simulation — run probability-of-success analysis using 1,000+ randomized return sequences to stress-test the plan against sequence-of-returns risk. A plan with 80-90% success probability is generally considered funded. Below 70% requires material adjustment. Present results as a confidence range rather than a single deterministic projection.

Longevity risk — plan to age 90-95 for at least one spouse. Use mortality tables adjusted for client health and family history. Discuss the asymmetry: running out of money is catastrophic, while dying with a surplus is merely suboptimal.

Education Funding

For clients with children or grandchildren, education funding is modeled as a specific goal with its own timeline and inflation rate:

• Estimate total cost using current tuition for target institution types (public in-state, public out-of-state, private) inflated at the education inflation rate (historically 5-6% annually, higher than general CPI).
• Assess current 529 balances and ongoing contribution capacity. Model the investment glide path within the 529 (aggressive early, conservative as enrollment approaches).
• Analyze the funding gap between projected 529 balances and total cost. Determine how much must come from current cash flow at the time of enrollment.
• Consider financial aid interaction — 529 assets owned by the parent count as parental assets on the FAFSA (assessed at up to 5.64% vs 20% for student assets). The simplified FAFSA replaced the Expected Family Contribution with the Student Aid Index (SAI), and under SAI rules distributions from grandparent-owned 529s no longer count as student income. Verify current FAFSA treatment when modeling aid eligibility.
• Evaluate trade-offs between fully funding education and other goals. Retirement should generally take priority because education can be funded with loans while retirement cannot.

Estate Planning Integration

The financial plan must address wealth transfer, even for clients who do not consider themselves wealthy. Key elements:

• Estate tax exposure — calculate the gross estate (all assets including life insurance death benefits, retirement accounts, and real estate) against the current federal exemption. The scheduled TCJA sunset never took effect: the One Big Beautiful Bill Act (2025) set the exemption at $15 million per person (about $30 million per married couple) for 2026, made it permanent, and indexed it for inflation beginning in 2027. Verify current-year exemption values before modeling. For clients near or above the exemption, model lifetime gifting and trust strategies that use the exemption.
• Trust structures — identify whether existing or new trusts serve the client's goals: revocable living trusts for probate avoidance, irrevocable life insurance trusts (ILITs) for removing life insurance from the estate, generation-skipping trusts, and special needs trusts for dependents with disabilities.
• Beneficiary designation audit — verify that beneficiary designations on retirement accounts, insurance policies, and TOD/POD accounts are current and consistent with the estate plan. Beneficiary designations override wills.
• Charitable giving strategy — for charitably inclined clients, evaluate donor-advised funds, qualified charitable distributions (QCDs) from IRAs after age 70.5, charitable remainder trusts, and bunching strategies for itemized deductions.
• Business succession — for business owners, integrate the succession or sale timeline with the retirement plan. Model the after-tax proceeds from a business sale and the transition of income from active business earnings to investment portfolio withdrawals.

Risk Management Review

Assess whether the client's insurance coverage matches the risks identified in the plan:

• Life insurance gap — calculate the capital needed to replace the insured's income contribution, fund remaining goals (education, mortgage payoff), and provide for surviving dependents. Subtract existing coverage and assets. The gap determines additional coverage needed.
• Disability coverage — verify that combined employer and individual coverage replaces at least 60% of gross income. Check elimination periods, benefit duration, own-occupation definitions, and coordination with other income sources.
• Long-term care — for clients over age 50, model the potential cost of extended care (in-home, assisted living, skilled nursing) and evaluate traditional LTC insurance, hybrid life/LTC products, or self-insurance strategies based on asset levels.
• Liability coverage — ensure umbrella liability coverage is adequate relative to net worth. Minimum recommended coverage is typically equal to net worth or $1 million, whichever is greater.

Scenario Modeling

A single deterministic projection creates false precision. The plan should present at least three scenarios to frame the range of outcomes:

1. Base case — reasonable assumptions for returns, inflation, income growth, and spending. This is the plan the client tracks against.
2. Optimistic case — higher returns, earlier-than-expected inheritance, lower healthcare costs, or ability to work part-time in early retirement. Shows upside potential and what becomes possible.
3. Pessimistic case — lower returns, job loss at age 55, major health event, market crash in early retirement years (sequence-of-returns stress test), or need to support aging parents. Shows downside risk and what breaks.

Additionally, model specific what-if questions the client raises: "What if I retire at 58 instead of 62?" "What if we move to a no-income-tax state?" "What if we pay for private school?" Each what-if should show the impact on retirement success probability and the trade-off with other goals.

Prioritized Recommendations

The output of the planning process is a ranked list of action items. Prioritization follows this framework:

1. Foundation items first — emergency fund adequacy, appropriate insurance coverage, estate document completion. These protect against catastrophic risk and cost relatively little.
2. Employer match capture — maximize 401(k) contributions to the employer match. This is an immediate 50-100% return.
3. High-interest debt elimination — pay down debt with interest rates above the expected portfolio return (typically any debt above 6-7%).
4. Tax-advantaged account maximization — fill remaining 401(k)/403(b) space, fund Roth IRAs (or backdoor Roth), HSA contributions.
5. Goal-specific funding — direct remaining surplus to prioritized goals (retirement shortfall, education funding, home purchase).
6. Tax optimization moves — Roth conversions in low-income years, tax-loss harvesting, asset location optimization, charitable giving strategies.
7. Estate planning actions — trust creation, beneficiary updates, gifting strategies.

Each recommendation should include a specific action, responsible party, target completion date, and the quantified impact on the plan (e.g., "Increasing 401k contribution from 6% to 10% improves retirement success probability from 72% to 84%").

Plan Presentation and Delivery

The plan presentation meeting converts analysis into client commitment. Effective delivery requires:

• Lead with goals, not numbers — begin by restating the client's goals and concerns as expressed in the discovery meeting. This demonstrates that the plan is personalized, not generic.
• Present the base case first — show that the plan works under reasonable assumptions before introducing stress scenarios. Clients anchor on the first number they see.
• Use plain language — translate Monte Carlo success rates into concrete terms: "In 85 out of 100 simulated market environments, your portfolio sustains your spending through age 95."
• Discuss trade-offs explicitly — when goals compete for limited resources, present the trade-off clearly: "Fully funding both children's education at private universities reduces your retirement success probability from 88% to 71%. Here are three alternatives that balance both goals."
• Document agreed-upon actions — end the meeting with a written list of next steps, owners, and deadlines. This becomes the implementation checklist that the advisory team tracks.

Ongoing Monitoring

A financial plan is a living document. Establish triggers for plan updates:

• Scheduled reviews — full plan update annually, brief progress check at semi-annual or quarterly client reviews.
• Life event triggers — marriage, divorce, birth of a child, job change, inheritance, health diagnosis, home purchase or sale, retirement date change, death of a spouse.
• Market-driven triggers — portfolio value deviates more than 20% from the plan projection, interest rate environment changes materially (affecting bond allocation and mortgage decisions), or tax law changes affect planning assumptions.
• Goal completion — when a goal is achieved (mortgage paid off, child graduates, insurance need expires), reallocate the freed cash flow to remaining or new goals.

At each update, re-run the probability-of-success analysis and compare to the prior review. Track whether the plan is improving, stable, or deteriorating, and adjust recommendations accordingly.

Worked Examples

Example 1: Dual-Income Couple with Retirement and Education Goals

Scenario: Michael (44) and Sarah (42) are married with two children (ages 10 and 7). Combined gross income is $285,000. They have $620,000 in retirement accounts (mix of 401k and Roth IRA), $85,000 in 529 plans, a $480,000 mortgage at 3.25% with 22 years remaining, and $45,000 in taxable savings. Both have employer-sponsored health and disability insurance. They have basic term life policies ($500,000 each) and outdated wills drafted before their second child was born. They want to retire at 62, send both children to four-year public universities, and pay off the mortgage before retirement.

Planning Elements:

• Cash flow analysis reveals a $2,800/month surplus after all current obligations and savings. Current savings rate is 18% of gross income (strong).
• Retirement modeling projects $2.1M in retirement assets at age 62 assuming 6.5% nominal returns, current contribution rates, and employer matches. Estimated retirement spending is $9,500/month in today's dollars. Social Security at full retirement age (67) provides

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Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

• Author: JoelLewis
• Source: JoelLewis/finance_skills
• License: MIT

Install and usage instructions live in the source repository linked above.