What Is Holistic Financial Planning?
When it comes to managing finances, you might be used to thinking about budgeting, saving, and investing.
These concepts, although very useful when you’re DIY-ing your personal finances, are just a small portion of what financial planning can help with.
True financial well-being requires a more comprehensive approach. A recent survey found that 40% of Americans think a complete look at their financial condition would be extremely helpful. By taking into account all aspects of the client’s financial situation, financial advisors can create a more comprehensive strategy to help clients achieve their financial goals.
To do this, holistic financial planning uses a top-down approach when it comes to your client’s financial journey. This means, instead of viewing the client's journey from what they can afford with their current assets, it follows the client's journey in relation to their goals.
In this article, we'll explore what holistic financial planning is, what’s included in holistic financial planning, why it's important for our clients, and how we can incorporate it into the financial planning process. We'll also discuss the benefits of using holistic financial planning services and how they can help our clients and our financial advisory practice.
What Is Holistic Financial Planning?
As we’ve mentioned above, holistic financial planning focuses on a top-down approach. Rather than considering the assets your clients have right now and paving a path to grow their wealth, holistic financial planning starts from your client’s goals. Here are some questions holistic financial planning takes into consideration:
What are your client’s financial goals?
Where are they right now relative to their goals?
How can your clients bridge that gap? What are the next steps they need to take?
To answer these questions, you’ll need to take into account all aspects of your client’s life. This includes their financial situation — such as tax planning, insurance planning, and estate planning — and non-financial factors — such as personal goals and values that matter to them.
Holistic financial planning helps your clients make informed financial decisions that are also aligned with their overall goals and values, on top of creating a cohesive plan that addresses all of their financial needs and concerns.
To ensure that your client’s financial plan remains relevant and effective over time, as a financial advisor you need to be adaptable and responsive to changes in your client’s circumstances. By using a holistic approach, financial planners can consider how significant life events may impact their clients and plans — such as getting married, having children, starting a business, or other life changes.
Topics Covered In a Holistic Financial Plan
Since holistic financial planning takes a broad and comprehensive approach to managing your client’s financial situation, it’s expected for the plan to cover many components of their financial life.
Basically, any topic that touches on the client’s financial life is on the table.
While different advisory services may have slightly different coverage, a holistic financial plan typically includes:
Budgeting and cash flow management: Help your clients create a budget and manage their cash flow to ensure that they are living within their means and saving for the future.
Credit and debt management: Review your client's credit history and help them develop a plan to manage debt, pay off loans, and improve their credit score.
Retirement planning: Review your client's 401k, IRA, annuities, and other retirement accounts to ensure they are on track to achieve their retirement goals. This includes assessing their contribution levels, investment choices, and overall retirement savings strategy.
Investments: Review the client's portfolio and current investment strategy, including mutual funds, stocks, bonds, and other investment vehicles to ensure that it’s diversified across a variety of asset classes, sectors, and geographies. It’s also important to make sure the basics are covered — such as checking for SIPC membership on the brokerage and keeping up with FINRA Investor Bulletins. All of this can help reduce risk and improve investment performance over time.
Tax planning: Review your client's tax situation and strategies to minimize taxes and maximize deductions. This may include strategies such as contributing to a 401k or other tax-advantaged accounts and taking advantage of tax-loss harvesting.
Insurance coverage: Make sure that your client has insurance coverage, such as auto, home, health, and life insurance. Insurance guarantees that if disastrous life events were to happen to your client or their loved ones, they have financial protection to keep them afloat.
Estate planning: Make sure that the client's estate plan, including their will, trust, and power of attorney documents, are in order.
Real estate: Review your client's real estate assets and provide guidance on real estate investments, purchases, and sales, and help them consider what role real estate should play in their overall financial plan.
College planning: If applicable, review the client's college savings plan and make recommendations to help your clients save for college expenses.
Long-term care planning: This includes in-home care, assisted living, or nursing home care, and is necessary to ensure that your clients are planning for future needs.
Philanthropic planning: You should also consider the client's philanthropic activities and recommend ways to make charitable donations that align with their values and goals.
With that in mind, a holistic financial planning and advisory service will work best if you’re a fiduciary.
Knowing fiduciary obligations will ensure that your clients receive advice that’s in their best interest, aligning the advisor's and client's goals and priorities, and providing transparency thus eliminating any sort of conflicts of interest.
Benefits of Holistic Financial Planning
Generally, holistic financial planning is considered to be a better approach than the usual segmented financial planning.
It’s a more comprehensive approach that considers the whole person, not just their money. A holistic financial planning service can benefit your clients in many ways, such as:
Help them clarify and focus on short and long-term goals in order to develop a tailored strategy to reach them.
Coordination and integration of different financial aspects ensure a comprehensive approach, resulting in overall financial well-being.
Your client’s plan will be personalized and tailored to their unique circumstances, goals, and values, rather than being based on a one-size-fits-all approach.
A holistic financial plan is flexible and can be updated and modified as needed in response to life changes — such as marriage, having children, or retirement — ensuring the plan remains relevant and effective over time.
Provide a clear picture of your client’s current financial situation — even when their plans have been thrown off by various obstacles along the way — and the steps needed to reach their financial goals. Thus reducing stress and anxiety about their financial goals.
With a holistic approach, financial professionals can provide guidance on more comprehensive financial strategies and help the client to build a diversified portfolio that aligns with their risk tolerance, goals, and interests. Meanwhile, for financial advisors and planners, a holistic approach will provide benefits in its own ways, such as:
Holistic financial planning can lead to increased client satisfaction, as it provides a comprehensive and tailored approach to financial planning.
A stronger relationship with your clients, leading to an improved retention rate.
Providing a comprehensive approach allows clients to make better-informed decisions which leads to better outcomes and long-term success, reflecting your skills as a financial advisor.
All in all, holistic financial planning establishes the advisor as a trusted and professional expert in the field and can be a competitive advantage for the advisor's practice.
Start Your Holistic Financial Planning With Asset-Map
Unlike segmented financial planning, holistic financial planning uses a top-down approach that considers all aspects of the client’s financial situation and goals. It aims to align them in a way that will be best for your clients — without any pieces left unaccounted for.
The plan typically includes various aspects of financial advice and planning, such as retirement, tax, estate, and even long-term care planning as well as investment advice and investment management.
The holistic approach provides additional value for both you and your clients. Among many benefits, clients get a flexible, adaptable financial plan for their unique life situation, while financial advisors can improve the retention rate for their advisory services as well as increase client satisfaction and relationships.
While there are many benefits of holistic financial planning, there are a lot of things to keep track of. Asset-Map helps you keep track of each client’s financial life at a glance with intuitive visual maps.
Schedule a demo and see how Asset-Map simplifies your process and your client conversations so you bring them up to speed and get to the heart of the matter in record time while staying secure.