I was recently interviewing prospective clients, and one of the gentlemen asked a question about a phrase I used  – “holistic financial planning.” It’s a great concept that everyone should be familiar with and use as the foundation for their interactions with a financial planner. Here’s what you need to know.

What is Holistic Planning?

In short, holistic financial planning involves incorporating all aspects of your life into your financial plan and making sure to address how a change in one area would affect another. For example, your advisor should be able to explain to you how changes to your investment approach will affect your income tax and estate plans.  All of these aspects of your life are intertwined, and your advisor needs to be well versed in all of them.

In addition, holistic planning should take into account life goals such as a desire to retire early and travel, start your own business, or leave a $1 million to your favorite charity. Overall, your financial plan should be a very personalized and tailored to your goals and desires.

The Planning Process

I learned about the holistic planning process while obtaining my Certified Financial Planner certification. Understanding the CFP Board’s financial planning process, will help show you what to expect when an advisor takes a holistic approach.

1.     Establishing and defining the client-advisor relationship – The process starts with the advisor explaining what services he or she provides, as well as your and your advisor’s responsibilities in the relationship. This should also include setting the correct expectations for his or her skill set, as well as how he or she will get paid. This step should be a collaborative effort between you and your advisor.

2.     Gathering client data, including goals – The next step involves an investigation into your financial situation. You and the advisor outline your personal and financial goals and set a realistic time frame for achieving them. This will also include gather supporting documentation such as bank statements, pay stubs, etc. that will need to be analyzed.

3.     Analyzing and evaluating your financial status – Once the advisor has all of your information, he or she will assess your current financial situation. Your advisor will likely use tools such a as a cash flow analysis, balance sheet, or tax comparison.

4.     Developing and presenting financial planning recommendations and/or alternatives– After the analysis is complete, the advisor will give you his or her recommendations and review them with you so that you can make an informed decision. His or her recommendations will address your goals, based on the information you provide. This is also your time to review the recommendations and make changes where you see fit.

5.     Implementing the financial planning recommendations – Arguably the hardest part about the process is implementing the plan. Your planner should give specific recommendations on what steps you need to take to reach your goals. Your recommendations may involve seeing another professional, like an attorney or accountant.

6.     Monitoring the financial planning recommendations. – The last step of the plan involves continuing to monitor your progress. If something occurs during the process, the planner may need to adjust his or her advice and recommendations.

Why This Works

This approach works so well because it gets you, as the client, involved in your planning and helps set the right expectations and goals for the experience. Your financial plan can’t work without your participation, so it’s important that your desires and expectations help mold the final plan.  

In the end, your relationship with your planner should be about more than the numbers or the amount of money you have your investment account. Make sure any advisor you work with takes a holistic approach in developing your plan.