How to correctly define financial planning? What is the true essence of financial planning? Please follow my steps to explore together.

What is Financial Planning and Its Connotations

The China Banking Regulatory Commission issued the "Interim Measures for the Administration of Personal Financial Business of Commercial Banks" in 2005, which defined personal financial business in Article 1, Section 2 as follows: "Personal financial business refers to the specialized activities such as financial analysis, financial planning, investment advice, and asset management provided by commercial banks to individual customers."

In fact, this definition delineates the nature, scope, and content of personal financial business in commercial banks, but it does not fully reflect the connotations of financial planning.

As a member organization of the Financial Planning Standards Board (FPSB), FPSB China, the Institute of Financial Planners of Hong Kong (IFPHK), and the Financial Planning Association of Taiwan (FPAT) have given different definitions of personal financial planning.

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The Institute of Financial Planners of Hong Kong refers to personal financial services as financial planning, believing that financial planning is the specialized personal financial service that uses scientific and fair financial analysis procedures to plan and manage an individual's financial plans and investment strategies reasonably, in order to achieve their long-term financial and life goals.

The Financial Planning Association of Taiwan refers to personal financial services as financial planning, believing that financial planning is the process of planning people's current and future financial resources to meet the needs at different stages of life and to achieve predetermined goals, enabling people to be financially independent and self-reliant.

FPSB China refers to personal financial services as financial planning, believing that personal financial planning is a comprehensive financial service. It involves professional financial planners collecting information about the customer's family situation, financial status, and life goals, clarifying the customer's financial goals and risk attributes, analyzing and assessing the customer's financial situation, customizing suitable financial plans for the customer, and executing, supervising, and adjusting them in a timely manner, ultimately meeting the customer's financial needs at different stages of life, enabling them to ultimately achieve financial freedom, autonomy, and ease in life.

The definition of financial planning by FPSB China emphasizes the following points:

1. Financial planning is a comprehensive financial service, not the promotion of financial products.2. Financial planning is a financial service provided by professional financial advisors, not a self-managed financial activity by the clients themselves.

3. Financial planning is a long-term plan for a client's entire life, not a plan for a specific phase of the client's life.

4. Financial planning is a process, not a product.

Standard financial planning should include the following six steps:

- Establishing and defining the relationship with the client,

- Collecting client information and assisting the client in determining financial goals,

- Analyzing and assessing the client's current financial situation,

- Formulating and presenting a financial planning proposal to the client,

- Implementing and supervising the execution of the personal financial planning proposal.

Based on the levels of financial planning needs of the clients, financial planning can be further divided into life financial planning and investment financial planning.Life financial management primarily involves financial professionals assisting clients in designing financial plans related to their entire life's career events, including:

Career choices, education, home purchasing, insurance, healthcare, retirement, inheritance, business succession, various taxes, and more.

Professional financial advisors help clients maintain their quality of life through life financial services, ensuring that they can maintain their desired living standards even when they are old, frail, or experiencing a significant decrease in income, ultimately achieving financial freedom, autonomy, and ease in life.

Investment and financial management, on the other hand, involves financial professionals helping clients invest in various investment vehicles to achieve reasonable returns and accumulate wealth, based on the satisfaction of their basic life goals. Common investment tools include:

Stocks, bonds, financial derivatives, gold, foreign exchange, crude oil, real estate, art, and more.

Through investment and financial management, professional financial advisors help clients pursue optimal investment returns while ensuring safety and liquidity, accelerating the growth of personal or family assets, and improving the quality of life.

In this context, companies in which individuals have shares or controlling interests also fall within the scope of investment and financial management; therefore, financial management is closely related to corporate treasury management and investment and financing activities.

Strictly speaking, life financial management and investment financial management are inseparable and difficult to distinguish completely. The reason for emphasizing this division is to clarify that the ultimate goal of financial management is not solely to maximize people's investment returns.

After understanding the definition and connotation of financial management, you might wonder, what is the significance of financial management? What is the value of financial management? Or, in layman's terms, why does society need financial management services, and why does every family or individual need financial management?

Please continue to follow my footsteps, and in the next installment, I will tell you about the significance and value of financial management, continuing to reveal a true financial life to you!Please provide the text you would like translated into English.