We have previously talked about what is financial planning in detail. One related term is holistic financial planning. So, let’s try to explore what it stands for and what is taken into consideration when someone opts for a holistic financial plan.
What is Holistic Financial Planning?
The distinguishing feature of a holistic financial plan is that the financial planner takes a full 360 view of the life situation of a client to completely understand long term and short terms goals of a client about money and life.
It is definitely a lot more than just approaching the client with the latest potential opportunities to invest and building the right portfolio.
As part of holistic planning, financial advice will also consider questions like, “where will be in 5 or 10 years?” rather than just looking at securities or financial instruments that can help create the best portfolio.
Holistic financial planners may also be considered as those who give top down advice while looking at financial goals. They will not start with a simple question like, “how much can you afford to invest?” While this question will also be asked but only after they are clear about view of your financial situation and ambitions with a 360 degree view.
But, what does holistic planning really mean?
Lets try to understand meaning of holistic financial planning with an example. If you ask a financial advisor how much you should be saving to live a comfortable retired life.
First advisor will already have a ready financial model, where he will input your age and income and come up with a monthly saving figure you should target.
On the contrary, a holistic financial planner would discuss your goals of a retirement life so that he could get first hand information about how much money will be needed to achieve that kind of retired life and then takes into account your current financial situation and gives you the best proposal.
In case of a holistic plan, the data that will be fed to the financial model will be more complete and meaning.
What’s Included in a Holistic Financial Plan
As the name suggest, a holistic financial plan covers all aspects of your financial goals. By working on and integrating all the individual parts of your life and goals, it ensures that every aspect of your holistic financial plan is in harmony with each other.
For example, a holistic financial plan can include:
- overall investment plan
- retirement plan
- insurance planning
- budgeting
- estate planning
- wealth planning
- succession plan
- major life events planning (marriage, divorce, job loss etc)
- college planning if you have children
- end of life planning etc
Benefits of Holistic Financial Planning
There are several benefits that holistic financial planning approach can provide.
One of the primary goals that people target with financial planning is retirement planning. And this is a vital component of holistic financial planning. The goal is to have a stream of passive income in later years of life so that an individual can keep living a good lifestyle even after retiring.
Another key benefit is that a holistic financial plan is flexible and can be adjusted as people’s lives and goals change. These plans are constantly evaluated in the light of changing situation and adjusted based on that.
A holistic plan is not only about client’s portfolio but it aligns closely with the values that client has and focuses on those investments strategies which are in line with those values.
Another benefit of holistic financial planning is that it also prepares individuals for unexpected life events like sudden job loss, critical illness or loss of a loved one etc.
Keeping in view the short term and long term goals, a holistic financial planning advice prioritizes those strategies which help optimize tax planning. Such strategies are critical for estate and financial planning. Some of the techniques that can be used to achieve this include moving assets to a trust fund, inheritance planning, yearly tax loss harvesting etc.
Difference between holistic financial planning and wealth management
Holistic financial planning process is more comprehensive in nature and considers many other factors alongside wealth management. As explained above, this type of planning takes into account long term and short goals with a view of overall life situation of an individual.
Wealth management’s sole objective is conserving and growing wealth of an individual with personalized investment plan.
Briefly speaking holistic financial planners try to ensure that client’s financial situation remain sound during the course of life; whereas wealth managers develop strategies to increase a person’s wealth over a period of time.
