What is holistic financial planning?
By Peter “Coach Pete” D’Arruda
Capital Financial Advisory Group, LLC
“Never go to a doctor whose office plants have died.” – Erma Bombeck
One sign I have never seen in the window of a shoe store is, “One size fits all.” The reason is simple. Feet come in all different sizes. When it comes to income planning for retirement, however, some professionals treat all cases with the same formulaic approach. It is insensitive and inefficient at best, and hazardous to one’s wealth at worst, which is why I recommend holistic financial planning instead.
Holistic derives from the Greek word, holos, which means “whole.” As the sound of the word suggests, holism is treating or attending to the whole of a thing, as opposed to its isolated parts. A holistic approach to anything recognizes that all its parts are connected and interrelated.
As a philosophy, holism is becoming a popular approach in education, medicine and the sciences. In medicine, for example, the concept calls for examining all aspects of the patient’s needs, psychological, physical and social, and taking them all into account before any treatment is undertaken. Practically, it is recognizing that stress can cause hypertension. A pill may lower blood pressure, but it is a temporary fix. To get at the real problem, find what’s causing the stress and try to eliminate that.
Holistic financial planning recognizes that money is only green wrinkled paper and numbers on a page until it is translated into what you want the money to do for you and those you love. Holistic financial planning recognizes that you can’t get the most out of your money without first knowing what purpose the money is to serve. A holistic financial planner will spend time, especially during the first interview with a client, listening to the client’s desires, dreams, goals, objectives and passions so the planner’s recommendations are on target with those things. A holistic financial planner will often use a team of professionals, ranging from certified public accountants to estate attorneys, to get the job done.
Every case is different, because every client is different. One client may be passionate about leaving a legacy for his children and grandchildren, whereas another client wants to spend as much as possible living the good life in his sunset years. The holistic financial planner will know this before recommending any course of action that involves the client’s assets.
Holistic financial planning is becoming more and more popular, but not because it is easy for the planner. The fact is, holistic financial planning requires more effort and thought on the part of the planner. Holistic planning is becoming more popular because the baby boom generation, which is more insistent on good service from its professionals in many other fields, seems to insist on it. Knowing what you want
A good doctor will examine a patient more with questions than a stethoscope. A good doctor will listen and analyze the answers in the light of information gathered about the patient. Then, finally, once the information has painted a clear and complete picture of the patient’s health, a treatment or a remedy can be recommended — a well-thought-out strategy aimed at overall healing and well being, not just a feel-good pill. For any of that to happen, however, the patient needs to first answer the doctor’s questions.
When it comes to financial planning, the client must help the financial advisor understand the condition of his wealth by supplying the appropriate financial documents that will acquaint the advisor with the client’s current financial position. In short, after knowing the client’s goals and aspirations regarding his wealth, the holistic financial planner needs to know specifically how much money the client has and how it is positioned before the advisor can help.
Clarifying today’s asset picture helps establish our starting place.
There are choices to be made, too. What do I want my money to do for me? In detail, what lifestyle do I plan to have once I retire? Am I interested in leaving a legacy to my loved ones? If so, who are they, and what form will it take?
One of my favorite Yogi Berra quotations goes like this: “You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” Financial goals have to be meaningful specifics and not wandering generalities. It is imperative to nail down what your income needs will be for the rest of your life in retirement, making sure to account for inflation and contingencies. Be as specific as you possibly can. A holistic financial planner will be able to work backwards from that number and remove the guesswork from the equation. He or she will begin with fact-finding and end with solutions that fit your unique situation, not try to find a convenient cookie-cutter formula that requires the least effort on the advisor’s part.
Holistic planning is tailored to you
Morey Amsterdam, well-known co-star of the Dick Van Dyke Show, was famous for his dry wit. He told the joke about a man who goes into a rip-off clothing store to buy a suit. He tries the suit on, but it’s a terrible fit. The coat is too big, and the pants are way too long.The crafty salesman, eager to move the merchandise, tells him to hike up the trousers with his right hand. He does.
“But the coat is too big,” says the man.
“Take your left hand and pull it tighter,” says the salesman.
“Now the collar doesn’t fit,” complains the shopper.
“Hold it down with your chin,” says the salesman. “Now it fits perfectly!” The man walks out of the store, wearing the ill-fitting suit he has just purchased, his body contorted to hold it in place. Two doctors pass him by on the sidewalk. “What do you think is wrong with that poor guy?” the first one asks. “I don’t know,” says the other, “but doesn’t his suit fit nicely?”
The point is that if the financial plan we have does not fit our needs for the present and our goals for the future, let’s face the facts and get a second opinion. For example, let’s say the proposed financial plan reads like this: “At this projected rate of growth, you can probably expect a projected income of approximately $60,000 per year for approximately 20 years.” Sorry, but that suit just doesn’t fit. There are too many uncertainties.
Programs do exist in today’s financial marketplace that take the “probably” and “projected” off the page and replace it with words like “guaranteed” and “unlimited.” A holistic financial planner will know where to find those financial instruments and determine if they are a good fit for you and your unique circumstances.
Plan with longevity in view
No one knows how many heartbeats he or she is given in this life. There is no computer program that can predict how much sand is in one’s hourglass. Statistically, we are living longer, and we should plan with that in mind. At this writing, the average American’s lifespan is 84. More and more Americans are making it into their 90s and beyond. Any financial plan that has you running out of money prematurely is forcing upon you the idea of forfeiting your independence, and becoming either a ward of the state or a burden upon your family. For most, those alternatives are just not acceptable.
Like the man buying the suit, some do not know that they have many choices available to them when it comes to income planning for retirement. Getting a second opinion from a retirement income specialist usually costs nothing but a little time. It may be time well spent, however, if in the process, you discover a retirement plan that has built in safe money returns that cannot expire.