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What Is Holistic Financial Planning?

Rebecca Lake
·6 min read
Young couple gets holistic financial advice
Young couple gets holistic financial advice

Working with a financial advisor can help you craft a plan for paying down debt, saving and investing to build wealth. But financial advisors aren’t all alike when it comes to the approach they take for offering advice. Advisors that rely on holistic financial planning use a comprehensive strategy that includes your values, goals and experiences with money. Rather than focusing on planning for individual life stages or using a product-based approach, holistic financial planners take every aspect of your financial life into account.

Holistic Financial Planning, Explained

Generally speaking, financial advisors help their clients to achieve their financial goals by taking a broad approach to managing things like budgeting, saving and investing or focus on one specific area of financial planning. What separates holistic financial planners from other financial advisors is how they view their client journey.

Specifically, holistic financial planning operates using a top-down approach, rather than working from the bottom up. When you work with a holistic financial advisor or planner, it’s usually on a goals-driven basis. In other words, your advisor should be helping you figure out:

  • What your goals are

  • Where you are currently in your pursuit of them

  • What you need to do next to continue moving toward them

An advisor who uses a bottom-up approach, on the other hand, may focus more on how much you can afford to invest or what kind of return you might be able to get from making a particular investment. These advisors may rely on numbers, such as your age or income, to make assumptions about your financial plan and determine how much you need to save or invest to reach a specific goal.

A holistic financial planner or advisor, on the other hand, would look at more than just the numbers to help you come up with a complete money management strategy.

What Holistic Financial Planning Is (and Isn’t)

Holistic financial planning is designed to help you create a plan that covers the individual parts of your financial life while ensuring that they all work together. For example, a holistic financial plan can include:

  • Investment strategy, including investments made through taxable brokerage accounts

  • Retirement planning through a 401(k), Individual Retirement Account or tax-advantaged account

  • Social Security and Medicare benefits planning

  • Discussions around annuities to create a reliable income

  • Long-term care planning, including the use of long-term care insurance

  • End-of-life planning, including the need for advance healthcare directives or power of attorney

  • College planning

  • Insurance planning, including life insurance and disability insurance

  • Estate planning

  • Tax preparation and planning

  • Budgeting

  • Saving for short- and long-term financial goals and needs

  • Business and succession planning

  • Charitable giving

  • Major life changes, such as a divorce, job loss or birth of a child

A holistic plan can cover any and all of these topics, depending on the specifics of your financial situation. The emphasis is on shaping a plan that takes into account what you want to achieve financially, what you value or prioritize most and what options you might have in terms of workable solutions. Holistic advisors try not to leave any stone unturned so that you can have complete confidence in your financial plan.

A financial planner or advisor that doesn’t use a holistic approach may only focus on investments. Or if they earn money on a commission basis, they may be more inclined to shape your financial plan based on the sale of certain investment products. The type of advice you receive regarding your finances or the relationship you have with your advisor may feel less personalized. That doesn’t mean their advice isn’t as good but it does illustrate how different a holistic approach can be.

Benefits of Holistic Financial Planning

Older couple gets financial advice
Older couple gets financial advice

The main advantage of taking a holistic approach to financial planning is that it can put you in a better position to achieve your goals in a way that’s realistic for you. Your advisor can look at every angle of your financial situation to determine what’s working and what’s not so you can make adjustments accordingly. For example, if you haven’t been making the progress that you’d like toward saving for retirement, a holistic advisor might be able to pinpoint missed opportunities or mistakes you’re making.

They can also help with implementing strategies that are designed to further your goals, such as making your portfolio more tax-efficient or creating an estate plan. Tax planning is an important part of financial planning for ensuring that you’re able to keep more of your investment gains. That, in turn, is important for ensuring that your investments and savings are sufficient to help you afford your desired lifestyle in retirement.

You can also benefit from a holistic approach if your financial advisor is a fiduciary. Advisors who are held to a fiduciary standard must act in their clients’ best interests at all times. That means they can’t recommend investment products that would benefit them in the form of a large commission if it wouldn’t further your financial plan. That’s different from broker-dealers, who are only required to follow a suitability standard.

In terms of fees, it’s important to understand whether a financial advisor is fee-only or fee-based. Fee-only advisors only earn money through the fees they charge to you. Fees can be assessed hourly, at a flat rate or on an annual basis, depending on the advisor. Fee-based advisors get paid through commissions based on the products they sell. If you’re working with a holistic financial advisor you’re more likely to pay fees based on the services they render.

The Bottom Line

Jewish family
Jewish family

Holistic financial planning may be right for you if you want to get financial advice that covers every aspect of your life. With holistic planning, you and your advisor can design a plan that’s able to adapt and evolve as you move through life while keeping your goals in sight. Advisors who use holistic financial planning take into consideration your values, goals and experiences with money in putting together a financial plan.

Tips for Financial Planning

  • If you’re interested in working with a financial advisor, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help you connect with professional advisors in your local area. It takes just a few minutes to get your personalized recommendations for advisors online. If you’re ready, get started now.

  • When vetting potential financial advisors, it’s helpful to know what questions to ask. For example, you can start by asking what type of strategy they use when offering financial advice, either holistic or otherwise. You should also ask if an advisory has fiduciary status and how they assess their fees.

Photo credit: ©iStock.com/izusek, ©iStock.com/South_agency, ©iStock.com/kali9

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