Recently a marketing consultant we work with here at Yield Financial Planning referred his parents to us. Besides feeling like it was a vote of confidence in what we are doing, the consultant could clearly see, what we were providing through our financial planning services is what his parents were not receiving through the current financial advisor that was largely acting as an investment advisor.
After this insight I wanted to take the time to share my experience of what the difference is between holistic financial planning advice and investment advice.
If we look back in history briefly, to where Financial Planning began, you can trace its roots back to insurance agents working for the big insurers. In the 80’s, it was typical for the big insurers like AMP for example, to employ insurance agents in house, who’s role it was to provide the financial advice necessary to help their customers understand the products they offered.
Back then there were not many options available and a common product used was Whole of Life and Endowment policies. These products were designed to provide the dual purpose of both life insurance and investment benefit.
Compared to options available now, these products neither achieved insurance or investment objectives very well and for this reason they have been superseded. The 90’s was the early beginnings of the more diverse product suite of investment and insurance options we now have available to us (literally 1000’s) and financial planners emerged as a means of assisting to delineate the options available.
Since then the industry has evolved further, though not uniformly and this is a challenge that consumers face. Namely, is the financial planner you go to see an investment or insurance advisor or a holistic financial planner?
An investment advisor or insurance advisor, will help their clients to filter the market to find a particular investment or insurance product and should help them manage this ongoing, to keep up with changes in the market.
The objective of a holistic financial planner though is to work with their clients on clarifying and documenting what their life and financial goals are, along with what they personally value, so they can create a plan to achieve them.
An important part of this is ensuring clients are adequately protected with insurance and that their savings are invested such that they meet their risk profile and are well selected for performance, but should be balanced with the timeline they would like to retire or need access to funds.
This balance is important so they get to enjoy their lives right now, but at the same time understanding the impact on the longer term goal.
This may involve compromises but a financial planner is there to assist to ensure clients achieve what matters to them most. A Holistic financial planner's role includes managing the plan with clients over time to ensure that they can measure their progress towards their goals. If their priorities change over time, as they so often do, the financial plan is adjusted to reflect those changes.
I think a good analogy is that a holistic financial planner is like buying a family home compared to an investment advisor, which is like buying an investment property.
In your family home there are many more priorities beyond just what return you can make on the property. Considerations like are you close to schools and is there enough space for the children to visit with the grand kids over the summer. Holistic financial planners understand that you need to live the financial plan just like your family home and it's not just about the return of investments after 20 years.
If you would like a financial plan that is built and maintained for you based on your evolving needs, call Yield Financial Planning.