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What Is Holistic Financial Planning?

For more than twenty years, we’ve proudly been holistic financial planners. Although the approach has been around for a while, it’s still a pretty new idea to many people. When we’re asked what we do, and we say we’re holistic financial planners, we almost always hear, “What’s a holistic financial planner?”

Our usual response to this question is, “Instead of looking at just your investments or your taxes, we examine every part of your financial situation so our recommendations work together to help you grow and protect your wealth.”  

While that explanation may do for a quick chat, here is a more complete description, explaining why it’s important to seek out a holistic financial planner.

Why Most Clients Need Holistic Financial Planning

Most often, before clients come to us, they’ve constructed their financial plan out of a series of disjointed decisions, made one at a time, whenever they purchase some financial product or service. They get tax advice only when their preparer fills out their tax return. Their insurance advice comes only when they have to buy auto or homeowners coverage or when they have to pick from a menu of employee benefits. Their investment advice is based only on future returns without considering how much will be lost to income taxes, or how their other income sources will change the way the investments are taxed. And so on.

Of course, the consumer has the input of a professional (frequently a salesperson) for every decision. But these experts are usually conversant only with their own field and don’t consult with one another. This leaves the consumer with investments that are bought and sold without regard to taxes, taxes prepared without regard to future tax years, accounts set up without regard to the estate plan, and little or no guidance on cash flow or budgeting. As Ken noted in a paper he co-wrote with fellow planner Kelly Adams, the consumer:

is the only one in a position to see the big picture. Lacking expertise, he seeks out various professionals, but each sees the client only through his or her own lens: to the tax preparer the client is the taxpayer; to the banker, the customer; to the insurance broker, the insured; to the estate planner, a future decedent; and so on. Each of these professionals is conversant with his own field, but not with the other products being recommended to the client. The client, intelligent and educated though he may be, typically isn’t sufficiently conversant with these financial matters to see when one expert’s advice conflicts with another’s.1 

The Holistic Financial Plan

The term holistic refers to entire systems rather than individual or separate parts. Holistic financial planning looks at all aspects of your financial situation as a unified whole.

We believe the advantages of this approach are clear. One of the most obvious and significant advantages recognizes the interconnectedness of investments and income taxes. It’s common for tax advisors to feel frustrated when they see the capital gains generated by changes to a client’s investments. How much better it would be if the investment advisor knew the client’s tax situation in detail and understood the tax implications of their investment recommendations. This often requires a detailed income tax projection for the current year. And the consequences of investment decisions go beyond taxes. For instance, for those who’ve reached age 63, capital gains this year could increase future Medicare premiums by more than $400 each month (that’s per spouse on a joint return). 

 To make sure no one part of the plan breaks any other part, truly holistic financial planning considers how myriad subjects affect one another, commonly including these:

  • Investments
  • Spending Plan
  • Mortgages
  • Education Planning
  • Retirement
  • Estate Planning
  • Pensions, Annuities, and Rollovers
  • Insurance (all types)
  • Employee Benefits
  • Income Tax Planning (multi-year)
  • Financial Habits
  • Financial and Life Goals

Investments in Holistic Financial Planning

Of course, investments are a crucial part of most financial plans. But a mistake we often see is that investments get so much attention that not enough focus is devoted to other crucial aspects of the financial plan.

It’s a mistake to treat our investments as though they’re the answer to every financial problem. We can’t invest our way out of paying more than we have to in taxes, or having inadequate auto insurance, or spending more than we make.

The holistic financial plan looks at the entirety of your situation, focusing the appropriate amount of attention on each subject. You probably won’t need to look at your estate plan as often as you review your investments or taxes. But the holistic approach means that when you make a change to your investments that affects your estate plan, you won’t need to ask your trusted advisor about what else may need attention; they’ll already know.

There are many different kinds of services that have been called financial planning. Many people consider the term synonymous with investment advice. We believe this view is short-sighted, and that consumers benefit from working with someone who understands and acts on how the financial recommendations they make will affect the whole of the client’s situation.

We also believe the point of money is not just to have more money, but to support all those goals in your life that are more important than money is. As holistic financial planners, it’s our job to help you think through your financial decisions so you can make effective choices, allowing you to comfortably put the topic of money out of your mind the rest of the time.

 Want to learn more about holistic financial planning? Give us a call

1 Kelly Adams, CFP®, EA and Ken Robinson, JD, CFP®, The Holistic Financial Plan, pp. 2-3.

This content is developed from sources believed to be providing accurate information and is provided by Practical Financial Planning, Inc. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2021 by Practical Financial Planning, Inc.