Advisors Differentiate with Holistic Financial Planning

Financial wellness is increasingly on the mind of American adults—and with good reason. According to Bankrate’s 2023 emergency savings report:¹

• 57% are uncomfortable with the amount of emergency savings they currently have
• 22% have no emergency savings at all—the second lowest percentage in 13 years of polling
• 36% have more credit card debt than emergency savings—a record high since 2011
• 74% say economic factors are causing them to save less right now, including 68% who say inflation is to blame and 44% who say changes in income and employment are holding them back. 

As a financial advisor, you can help investors overcome these challenges with holistic financial planning. 

The Evolution of Financial Planning

Financial planning is on the rise. According to Aneri Jambusaria, CFP®, managing director of LPL Services Group, “Financial planning provides advisors with an opportunity to deepen their relationships with clients, and clients are increasingly interested in a wide-ranging view of their goals and progress. With 150,000 advisors currently offering financial planning services to their clients and more than 200,000 expected to offer financial planning services within the next three years², it’s an increasingly important part of our advisors’ value proposition.”

While traditional financial planning focuses on helping investors pursue a specific goal for a particular life stage, holistic financial planning takes into consideration an investor’s values, short- and long-term goals, and experiences with money to create a plan that coordinates each individual aspect of their financial life. 

For example, you may have a client who’s looking to purchase a new home. A holistic approach would involve working together to determine their price range and how much they can afford for a down payment, as well as weighing the benefits and drawbacks of purchasing a larger house against the impact to their retirement savings and income down the road. By considering the full picture, you can help the client make a sound long-term financial decision. 

Many advisors also find this value-added approach helps them build better relationships with their clients, deliver better service, and reduce attrition rates. It also distinguishes advisors from do-it-yourself and robo models that focus more on mass-market financial advice that uses averages rather than a client’s actual situation. 

Creating a Holistic Financial Plan

In a recent study of how 175 of LPL Financial’s top 10% of advisors³ build, scale, and grow their businesses, we discovered four common strategies: 

• Operate like a CEO: Focus on the growth, design, and future of your organization.
• Optimize your time: Be efficient and resilient by outsourcing or delegating to ensure your teams are trained and processes are automated when possible.
• Offer comprehensive advice: Provide holistic wealth services to your clients for every stage of their financial lives.
• Build a values-based practice: Infuse your personal values into your business. 

From our research, top advisors help clients prepare for each stage of their financial lives by supporting broad advice needs. This could include areas of financial planning such as: 

• Budgeting for short- and long-term financial goals and major life changes
• Charitable giving
• College planning
• Insurance planning, including life insurance and disability insurance
• Investment strategy
• Tax preparation and planning
• Retirement planning
• Social Security and Medicare benefits planning
• Long-term care and end-of-life planning, including advance healthcare directives or power of attorney
• Estate planning 

Many advisors offer either investment management or financial planning; however, top advisors were 53% more likely to offer estate planning, 41% more likely to offer tax planning and strategy, 28% more likely to offer retirement plan consulting, and 17% more likely to offer insurance. These additional services can help grow existing client AUM over time, because advisors who offer them are equipped to provide advice as clients’ needs change. 

From Financial Planning to Life Planning 

Although many advisors see the benefit of holistic financial planning, only 58% of those surveyed said they feel very or extremely knowledgeable about their clients’ nonfinancial goals. In addition, for 42% of advisors, only a quarter or fewer of their conversations cover nonfinancial issues. On the other end of the spectrum, more than 20% of advisors said broader life topics make up at least half of their client conversations.⁴

The wide variation in the frequency of these conversations suggests that having more discussions about broad life issues could be a competitive differentiator. If these conversations don’t naturally occur with your clients, consider using a checklist or discussion guide. The top advisors in our study use repeatable processes built on good data to capture their clients’ hobbies, goals, and interests. 

For example, when onboarding new clients, make sure you have a detailed, comprehensive discovery process to gather all necessary data as well as an equally thorough process to update that data throughout the client relationship. Discovery doesn’t end at onboarding, but continues throughout the course of the ongoing relationship. As you know, clients’ goals and priorities often shift—embed yourself into every pivotal milestone of your clients’ lives so you don’t miss an opportunity to serve them. 

Take it from advisor Mike Makonnen of Makonnen Financial Group in Alexandria, Virginia, who’s built his entire practice around offering comprehensive financial advice. “Planning is everything,” said Makonnen. “We focus on the client’s overall life goals, what they want to be remembered for, who they want to share their life with, and where they want to spend time.” 

His approach is unique—and trademarked. “I divide my clients into four groups based on their financial planning needs for their life stages. I call this ‘Life Planning’ around their ‘Go-Go, Slow-Go, No-Go, and Gone Years™.’” In each group, Makonnen incorporates specific investment management strategies aligned to clients’ needs. 

How LPL Financial Can Help

Perhaps you’re interested in adopting a more comprehensive financial planning model, but you’re not sure how to find the time or resources to support it. With the right strategic partner in your corner, you don’t have to. Contact LPL to explore how we can help you implement and scale holistic financial planning in your business. 

Footnotes:

¹ Bankrate’s 2023 Annual Emergency Savings Report, June 2023

² Cerulli Associates, Wealth Institute, FPA

³ The top 10% of LPL advisors was determined in terms of Gross Dealer Concessions (GDC) taken from commission data in 2022.

⁴ InvestmentNews, Beyond Finances: Holistic Life Planning Trends Among Advisors, 2020