Creating a holistic plan


There are many financial professionals who call themselves financial planners. Everyone from insurance salespeople, investment brokers and managers or CPAs who dabble with planning call themselves financial planners. For better or worse, all of the aforementioned professionals have helped to shape our clients’ minds and expectations of financial professionals. And as a result, many clients think they have holistic financial plans, but they actually do not.

The clients of many CPA firms often lack someone who acts as their financial head coach, steering them through the inevitable twists and turns to be encountered in their financial and personal lives. Most of these twists and turns have a multitude of possible consequences and actions. Ultimately, the choices that feel best for your clients will often come from a holistic analysis of all the financial and personal consequences.

As a client’s accountant, you have good insight to their personal financial affairs. You see their sources of income, their deductions, learn about their family and can easily get a glimpse into some areas that need attention. From college savings to the ownership of rental or business property, the CPA viewpoint may be the broadest and deepest view that any of the clients’ other professionals have. For the accountant looking to build deeper relationships with fewer, better clients, recognizing open issues in the financial lives of your clients is a good start. The relationship strengthens even further when you are a part of the solution to help get these issues solved, rather than barking out orders and shipping them off to someone else to get the job done.

Accountants have chosen to serve clients in two ways regarding their financial plan. Some choose not to directly provide holistic planning services and serve as an overseer and spring into action when requested. These practitioners may refer their clients to other advisors and the client gets a team of professionals who may or may not really coordinate their advice to result in a holistic plan. To those who prefer this less active role, the balance of this article will demonstrate what type of services your clients should be getting. It will allow you to be a better resource for them as you contribute needed expertise to the planning process for the family.

All the moving parts

Holistic planning takes a lot more time than simply running numbers and doing retirement forecasts. Holistic planning involves full consideration of all the moving parts in your clients’ lives. It starts with cash flow today and in the future. Some clients have a clear vision for their future income or investments and others are still in the building phase where income and their future portfolio value are not certain. Some may need hands-on help with saving, budgeting and spending, especially on the qualitative side.

Helping a client to visualize their ideal retirement in terms of how they’ll spend their 168 hours per week can be a magical experience for them. Clients get so hung up on the money issues that many never really take the time to imagine their ideal day(s). The knowledge of the planning professional can then help quantify the cost of these visions and understand what it will take financially to make that happen under a wide range of possibilities and scenarios, and then communicate that effectively to the planning team and the clients. All decisions have measurable consequences, but it is the qualitative discussions that often drive most quantitative decisions.

Holistic financial planning concept
personal financial planning concept – napkin doodle with cup of espresso coffee – stock.ado

Beyond cash flow and incorporating a client’s vision into the planning, a holistic plan must include analysis and guidance on some specific financial areas. These areas are specifically risk management, investment advice, tax planning, retirement planning and estate planning, family governance, and business and succession planning. Beyond these mandatory cornerstones of the holistic planning process, client-specific subject matters may also need attention. These issues may include education planning, special needs planning, assisting with elder parent issues or any issue that will hamper or assist a client to accomplish a goal and live their vision.

Risk management, in my opinion, may be one of the largest gaps in many a client’s financial picture. Unless a planner is committed to holistic planning, the risk management area frequently gets a fairly light review service from advisors. A holistic approach to risk management would ask the general question: What can happen to mess up this picture?

A holistic risk management approach would start by examining the areas of risk in your clients’ lives. Most people have homes and cars, and it is not enough for a financial planner to suggest that a client speak with their property and casualty agent to see if their coverage is adequate. The holistic planner must review these contracts and ascertain if the coverage is adequate, too much or too little, and that it is supplemented with necessary add-ons for catastrophic liability or special assets.

A similar risk analysis should be performed on the business side of the client’s life. This area is one where some planners don’t have the education or experience to perform at the highest level, but it still needs to be done. A mature ensemble practice probably has that expertise in-house. If not, that doesn’t mean that you can ignore the topic; a holistic planner must find the expertise to be sure that the client is not exposed to unknown or unprotected risks.

A holistic risk analysis gets beyond the insurance and addresses retention and mitigation strategies as well. This would include a discussion of how the property (personal or business) is owned and if there are partners or other owners who may materially add to your client’s risks due to history or experience.

Beyond investments

Because of the investment-only mentality of many financial professionals over the decades, many clients think that investing is wealth management. Of course, investing is one part of the many moving parts to a holistic plan, but hardly the most significant. A holistic plan for your client’s portfolio includes understanding the destination, an analysis of their current holdings and then a recommendation to bring their portfolio to a more optimal place if needed. This plan should address time, risk tolerance and the other resources available to a client. But beyond the basics of portfolio design, the holistic planner must pay attention to tax consequences, ownership issues and beneficiary elections to the extent that the investment is held in a trust, retirement plan or an insurance product.

Accountants know better than anyone that tax planning is a year-round endeavor, and not some magic wand that you wave on tax day. Especially in light of recent tax changes and the higher marginal brackets for high-income taxpayers, taxation is beginning to help drive decisions again in the minds of your clients. The holistic planner will have a good understanding of a client’s tax situation, yet offer proactive ways to reduce that bill going forward. The reductions may come as a result of the timing of income and deductions, creating deductions or simply adding some tax alpha or asset location analysis to the investment process.

Retirement planning involves more than letting the client know how much money they’ll need to enjoy a comfortable retirement. It would entail going back to the client’s vision for their future lifestyle and helping to get there or assisting with what needs to be done to get there. Sometimes, the answer requires tough love and you’ll have to let the client know that their objectives are unrealistic, and that they may need to make more or spend less. At a minimum, retirement planning needs to include a forecast under a few different scenarios, and analysis of retirement income options from Social Security and/or pensions, and regular monitoring to see that spending, investing and earnings haven’t strayed too far from the original forecast.

For clients who own a business, the holistic advisor will coordinate a plan for helping to design the appropriate retirement plan for a business owner that can meet their accumulation goals and provide effective tax planning.

Where there’s a will …

I’m always surprised by the number of people walking around with an outdated or no estate plan. It’s easy to see why this area is so problematic. Few people really want to step up and talk about their demise. This subject matter turns many clients off. Some clients think that an old will is better than no will and their current cast of professionals doesn’t seem to be too concerned about the lack of quality documents.

Many planners do a cursory job telling clients that they need new wills and that they should consider trusts, durable powers of attorney and health care directives. With all due respect, a client doesn’t need to pay a planning fee to learn that. What a holistic planner does for an estate plan is discuss the options, from simple wills to trusts and protected entities. The holistic planner has the opportunity to invest the time with a client to be sure that they understand their estate plan and make decisions that will suit their needs today and the needs of their heirs that may span for generations. These discussions get very personal and should be specific enough to find out more than simply who gets what after they pass. Your discussions will be about the maturity and lifestyle of heirs (yes, even adult children), how assets are held for any surviving spouses, asset protection, beneficiary elections, choice of trustees, and how to deal with the potential remarriage of a spouse.

When an estate is complicated with second marriages, children from more than one marriage or special needs situations, the conversations get very interesting. For many clients, this may be the first time in their lives that they’ve been asked about how to accommodate and plan for these nuances.

Holistic planning is not the service delivered by many who call themselves financial planners. Some are too lazy. Others lack the knowledge or the commitment to their clients. But as mentioned before, clients’ perceptions of the planning process may be limited to what they’ve seen and heard before. It is up to you to alert them about the benefits of addressing these issues on a comprehensive basis.

The good news is that I believe the marketplace is changing. People are sick of getting sold stuff and getting sold a bill of goods about the comprehensive or holistic services that a certain planner claims to deliver. As the accountant, you are in a good place to see that their needs are met or that you introduce them to a planner who is interested and capable of delivering that holistic plan.

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