Financial planning reaches far beyond investments. It’s more than paperwork and numbers on a balance sheet; it’s about understanding and optimizing the full scope of a client’s financial horizon.
We at ACP know financial planning to be a rich field with great depth and reach, but that isn’t the case for every client who walks through your doors. Sometimes the financial world can seem segmented to them, with a professional dedicated to just one area of their plan: insurance, investment, estate planning, taxes, etc.
While each area is important individually, how they inform, complement, and function together is the best way to get a comprehensive look at a financial picture.
Financial planning means something different to every advisor, and for our community of advisors it means analyzing and considering all aspects of a financial and personal plan for clients.
This inclusive process which takes into account not only the client’s financial needs but also their personal dreams, goals, aspirations, and priorities is called holistic financial planning. What is holistic financial planning and how can it impact your business? Let’s find out!
What is holistic financial planning?
Holistic financial planning seeks to optimize each and every aspect of a person’s financial plan and understand how those pieces work together to help someone reach their goals.
A holistic financial plan paints a complete picture of a client’s financial life and works to make each part complementary to the others. You may run into clients who do not fully understand what this means because they have so many different financial professionals who operate independently.
In order to better understand what holistic financial planning is, let’s take a closer look at what it isn’t. Holistic financial planning doesn’t:
- Only look at investments
- Ignore a larger tax planning strategy
- Sell insurance or annuities without understanding the full scope of a client’s needs
- Look at a financial plan from just one perspective
For many people, financial planning becomes intrinsically linked and associated with investments, and while financial planners can and do manage investments they also do so much more than that. But that isn’t always the case.
Some advisors focus solely on investments and just look at the client’s portfolio within their care without asking about other assets that may be held elsewhere before making financial recommendations.
The same thing can happen with tax advice. When clients work with their CPA, it is often done once or twice a year, leaving the advisor with only a snapshot of their financial life. Proactive tax planning isn’t a part of this conversation but is a valuable asset to any strong financial plan.
In our industry, we see many clients struggle with insurance pitches and annuity sales. This can be a tricky position for them, and it is important that you help guide them to think about their financial plan from a broader perspective.
In order for a financial plan to be holistic, an advisor needs a complete view of a person’s financial holdings, as well as their goals and vision, in order to make recommendations that will meet the client’s needs both in the short and long term.
What topics are covered in a holistic financial plan?
Now that we have spent some time talking about what a holistic financial plan isn’t, let’s take a closer look at what it is.
We have talked a lot about how a holistic financial plan looks at a person’s entire financial landscape, here are a few examples of what that might look like for your clients:
- Investments (portfolio, brokerage accounts, ETFs, mutual funds, etc.)
- Retirement accounts (401k, 403b, IRA)
- Insurance needs (home, auto, life, long-term care, liability, etc.)
- Tax planning
- Tax preparation
- Retirement planning (finances and lifestyle)
- Estate planning
- College planning
- Budgeting and saving
Any topic that touches a person’s financial life is on the table here. This doesn’t mean that one advisor can perform all of these tasks alone. A holistic plan calls for collaboration between professionals to enhance the client’s experience. That might mean reaching out to the insurance agent or working with the estate planning attorney, or any other professional who can execute the financial plan you and the client create.
A holistic financial plan looks at the completeness of a client’s financial life. It looks at their ideal lifestyle, goals, values, and priorities to create something that works best for them. Coordinating those lifestyle needs with financial needs only enhances the client’s experience.
Holistic planning takes a client’s finances to the next level. It doesn’t just look at investments, for example. It looks at asset location and asset allocation to streamline a tax plan and takes into account their risk tolerance along with present and future needs to maximize the efficiency of their plan. It is so important to consider each smaller piece and how it works with the others around it because that is how to deliver optimum value.
A tax focus can help
One way to add depth to your client’s financial plan is by offering proactive tax planning and preparation services. Taxes can be a wonderful way to connect with clients as taxes touch every aspect of financial planning: investments, insurance, estate planning, retirement planning, debt, and cash flow.
Approaching a financial plan from a tax lens can also add tax efficiency and employ proactive tax measures into the plan. Let’s take a look at an example.
A married couple in their early 80s were seeking financial advice on their portfolio. Their advisor wanted to liquidate the common stocks in their portfolio and diversify the client in annuities and other products. The tax consequence alone for this route would have been $60,000 in capital gains. The investment advisor said nothing about this hefty tax bill and given their age, the product recommendations weren’t appropriate.
This example from our podcast illustrates not only the value of a tax-focused practice but also the value of a fee-only fiduciary business.
Fee structure and holistic planning
Here at ACP, we are passionate about the flexibility, freedom, and value that a fee-only practice can provide to clients. This structure operates on a retainer business with advisors not taking commissions from the sale of financial products.
Fee-only advisors have a wonderful opportunity to help clients where they are and give them advice as things change. You are able to have real conversations to connect with clients and look at them as people, not accounts.
This model gives you the flexibility to provide clients with the advice they need when they need it, like buying a new car, purchasing a home, re-thinking their investment strategy, how to increase charitable giving, and so much more.
As a fee-only advisor, you can provide your clients with education, including core concepts and key terms to help them understand their whole financial picture even better.
How ACP can get you started
Holistic financial planning is a different type of financial planning. Instead of focusing on one specific area, a holistic planner evaluates the entire scope of their client’s finances in order to make recommendations that make sense not only financially but also personally.
Whether you are a seasoned holistic planner or are new to the process, ACP has the tools and resources you need to build a successful practice.
If you are interested in hearing more about this topic, check out our podcast episode that delves into the basics of holistic financial planning.
Ready to learn more about how ACP can help you and your practice? Get in touch with us today. We can’t wait to hear from you.