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The Advisor Value Add: Holistic Financial Planning

Robo-advisors may manage upwards of $255 billion in assets over the next five years, according to MyPrivateBanking Research, but there are some things that require a human touch. Life and retirement planning is about a lot more than numbers and the most successful financial advisors act as a resource to help make dreams a reality. This holistic value-added approach to financial planning provides a compelling advantage over the competition.

In this article, we will look at the different ways that financial advisors can help clients beyond simply crunching numbers and managing retirement portfolios.

Holistic Planning 101

The best financial advisors help clients answer big questions like, “where am I going?” or “what am I doing?” rather than simply calculating optimal portfolio allocations. In other words, they take a top-down approach to figuring out “what are your goals and how can we reach them?” rather than a bottom-up approach that tells you “how much can you afford?” With the rise of robo-advisors, this kind of holistic approach is becoming increasingly necessary.

But, what does holistic planning really mean?

Suppose that a prospective client goes to two financial advisors and asks them how much they should be saving for retirement. The first advisor plugs the client’s age and income into a financial model that makes assumptions about the other factors and spits out a monthly figure. The second advisor takes the time to discuss the client’s retirement goals to get an idea of how much is needed and then factors in the financial elements to see what’s feasible.

The latter is an example of a holistic approach that focuses on real-life plans and then leverages financial models to make decisions. In addition to getting better inputs for a financial model, the process helps build a closer relationship with the client and truly understand their life and retirement goals. It’s easy to see why clients are likely to prefer this approach over automated systems that rely on averages rather than a client’s individual situation.

Ways Advisors Can Help

A holistic approach to providing financial advice can certainly help craft superior life and retirement plans, but the benefits go well beyond onboarding new clients. There are many times after a client has been onboarded when they may require a financial advisor that understands their individual situation and unique problems. These times present advisors with an opportunity to further build trust and solidify their relationship with clients.

Some examples of major life events where advisors can help include:

  • Divorce.
  • Buying a home.
  • Sudden job loss.
  • Unexpected inheritance.
  • Critical illness.

Holistic financial advisors can play an important role in helping clients understand these issues more completely and craft the ideal financial plan to deal with them. Along the way, advisors can further strengthen their relationship with clients to reduce attrition rates. These value-added services could also help justify fees that may appear higher than do-it-yourself or robo-advisor alternatives.

For example, an advisor might work with a client to determine what kind of house they’d like to purchase and then look at how much they can afford to take out for a down payment. This approach might look at the benefits and drawbacks of purchasing a larger house and the impact that it may have on retirement savings and income down the road. By looking at the complete picture, advisors can help clients make better long-term financial decisions.

The Bottom Line

The most successful financial advisors take a holistic approach when talking with prospective clients or working with existing clients. By starting top-down versus bottom-up, advisors can build better relationships with their clients and deliver better service to reduce attrition rates. This value-added approach also provides a great barrier to robo-advisors that are more focused on mass-market financial advice that uses averages rather than a client’s actual situation.

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