Holistic financial advice from a professional financial planner should give you a big picture of your financial situation. A holistic financial advisor will help you gain focus and share advice on the best way to achieve your short- and long-term financial goals while taking into account all the cost pressures you face.
Every part of your financial situation is interconnected, and holistic financial advice recognizes this. It is not possible to have a successful retirement savings plan or keep your risk cover in place if you haven’t also considered both your personal debt situation and pressing short-term financial goals.
Many people tend to only consult a financial planner for investment or savings advice, but without a holistic financial plan, there is a risk that you will end up neglecting some of your goals. Most people can’t afford to address all their needs, so they make a trade-off between different ones. Finding the right balance for these trade-offs is an essential part of your holistic financial plan.
With any investment plan, there is obviously a financial cost. This is tangible and measurable. With the right tools, it can even be predicted ahead of time. But investment comes with other very real costs as well — costs that can be tied into certain behavioral biases like optimism bias, cost avoidance syndrome, and compartmentalizing different financial needs.
Cost avoidance syndrome refers to someone’s tendency to focus only on the financial costs of a situation. At the same time, they ignore the emotional price of making decisions where a specific reward is the end goal. In a nutshell, you fail to identify the true costs of a situation.
In investment, the emotional cost is volatility and uncertainty. Some will try to tell you that these can be avoided using a range of tricks and "secret" strategies, essentially playing on your optimism bias or "it won’t happen to me" mentality.
This same optimism bias is a major reason why people don’t ensure they have adequate protection for unforeseen events that could have a severe impact on their financial future. And that is directly connected to compartmentalizing financial needs. You’re not aware of a history of serious illness in your family, so why do you need terminal illness coverage?
A holistic financial plan takes a top-down approach when it comes to planning for your financial future. Rather than only calculating what you can afford based on your vital statistics, it is designed to work with you to discover your goals before developing the best strategy to achieve them.
It starts with your end goal and works backward. If you don’t know what you’re aiming for, then you have no framework for making your financial decisions. And this process starts with a financial health check that asks things like:
Only once a holistic financial advisor has all the details about your current financial situation and future goals do they start putting together a personal financial action plan. This plan identifies the best financial solutions to meet your goals, different areas of potential risk, and how the various different pieces of your financial plan fit into the overall puzzle of your financial future.
It is an undeniable fact that financial plans will be influenced by a number of factors — changes in your personal circumstances and/or goals, economic conditions, and even changes in legislation. And so holistic financial advisors will review your financial plan at least once a year so they can ensure that it is still tailored to you while accommodating both new opportunities and threats that may have arisen.
If you're interested in finding out more about how I can help you put together a holistic financial plan, please feel free to contact me today or schedule a consultation.
