By Scott Hefty
Financial planning and investment management have historically been used interchangeably. But even though building wealth through investing is undoubtedly important, it’s just one aspect of a more complex financial picture.
Truly holistic financial planning recognizes the inherent connections between financial health and real life, ranging from debt management and estate planning to income and expenses.
I wrote this article to explore the restrictions of investment-only financial planning and the gains obtainable through a broader approach.
The Restrictions of Investment-Centric Financial Planning
Asset allocation, portfolio diversification, and investment returns are typically the exclusive topics of traditional financial planning. Yet while these components are vital, they ignore other important aspects that might have a big impact on your financial health. These other important elements include:
- Tax-mitigation strategies: You can decrease your total tax burden and increase your after-tax income by using effective tax-mitigation strategies.
- Safeguarding assets: Verifying your assets are safeguarded by insurance is crucial to pursuing a stable financial future.
- Legacy planning: Two important factors to consider here are confirming your assets are dispersed in accordance with your wishes and reducing estate taxes.
- Retirement planning: A comprehensive retirement plan includes long-term care planning, income production, healthcare bills, and investment development.
- Tracking income and expenses: Establishing a sustainable financial plan requires a thorough understanding of your income and expenses.
- Debt reduction: Having large amounts of debt can make it harder for you to invest and save. A holistic approach covers debt-reduction strategies.
Holistic Financial Planning Explained
Here’s the truth. The smartest financial planning advisors help their clients answer big-picture questions like “Where am I going?” or “What am I doing?” instead of just tallying generic portfolio portions.
To put it another way, at Networth Advisors we address the question of “What are your goals and how can we reach them?” from the top down, rather than a bottom-up approach that simply asks, “How much can you afford?” The need for this kind of comprehensive strategy is growing as robo-advisors gain popularity.
Let’s look at it from a client’s perspective.
Imagine a potential client visits two financial planning advisors to ask about the appropriate amount to save for retirement. The first advisor enters the client’s age and salary into a financial model, which then extrapolates a monthly figure based on assumptions about other variables. The second advisor, on the other hand, spends time learning about the client’s retirement goals, and then adds up the necessary funds to determine what’s feasible.
The latter scenario illustrates a true holistic approach that prioritizes real-life goals before using generic financial models to guide decision-making. This type of approach not only gets more personalized inputs for a financial model, it also deepens the relationship with the client by gaining a true understanding of their retirement and life goals. It’s understandable why customers prefer this method to automated ones that depend more on averages than on the unique circumstances of each client.
The Perks of a Holistic Approach
Now we can talk about how your financial outlook improves by using a holistic approach to financial planning. Some of the perks of a holistic approach include:
- Better decisions: Comprehending your complete financial situation empowers you to make well-informed decisions.
- Confidence: Knowing that your financial affairs are in order can reduce stress and improve confidence.
- Increased financial safety: A comprehensive plan helps safeguard you from unexpected financial problems and market volatility.
- Realizing your goals: Using a comprehensive plan allows you to track your progress and focus on your long-term goals.
The bottom line is that by taking a holistic approach to financial planning, you can increase the likelihood of reaching your financial goals and build a solid financial future.
We’re Here to Help
Partnering with a professional financial advisor is crucial for developing and carrying out a holistic financial plan. Our team at Networth Advisors has the knowledge and experience to help you pursue your financial dreams with holistic guidance, a comprehensive financial analysis, and a customized strategy tailored to your specific needs.
To schedule a meeting, call (800) 822-3639 or email schedule@networthadvisorsllc.com.
About Scott
Scott Hefty is a registered Investment Adviser Representative and financial advisor at Networth Advisors, LLC, a financial planning and wealth management firm in Canonsburg, PA. The firm is dedicated to helping clients enjoy a successful retirement, specializing in income planning and legacy preservation for pre-retirees and retirees. An integral part of the Networth Advisors team, Scott meets with clients to identify and address their concerns and creates comprehensive financial plans to help guide them to and through a confident retirement. He enjoys being able to help make a real difference in people’s financial lives, easing their burden so they can enjoy retirement without worry.
Scott obtained a finance degree from Waynesburg University (where he also played baseball). In addition to passing the Series 65 Securities exam and is Life, Accident, and Health insurance licensed in the state of Pennsylvania, Scott is also a CERTIFIED FINANCIAL PLANNER™ professional and holds the Chartered Financial Consultant® designation. Some of his favorite activities outside of work are enjoying sports, live music, his family and friends, and, of course, baseball. To learn more about Scott, connect with him on LinkedIn.
