As we become increasingly aware of the importance of financial wellness, the demand for holistic financial planning and personalised advice is on the rise.
This new approach combines traditional financial planning and integrates personal values and individual needs into the financial decision-making process.
What is financial wellness? It’s a state of financial well-being where a person is confident in their ability to manage their financial affairs, have control over their finances, and make informed financial decisions that support their long-term financial goals.
It’s not just about having a healthy bank balance; it’s about having a well-rounded financial plan that considers all aspects of your economic life, including your income, expenses, debts, investments, retirement planning, and insurance needs.
Let’s delve into the reasons behind this trend, the benefits of adopting a holistic approach, and the role of financial advisors in facilitating financial wellness for their clients.
The evolution of financial wellness
Financial wellness is a broad financial health perspective, considering cash flow management, debt reduction, retirement planning, insurance, and investments. It’s about achieving a balance between current needs and future goals. But, most importantly, it also focuses on money management’s emotional and psychological aspects.
Some of the benefits of holistic financial planning include:
Customised solutions: A holistic approach to financial planning entails a thorough understanding of a client’s financial situation, needs, and goals. This information enables financial advisors to craft customised solutions that address each client’s unique circumstances, ensuring a more effective and tailored financial strategy.
Better risk management: By examining all aspects of a client’s financial life, advisors can identify potential risks and vulnerabilities. This comprehensive view allows for developing strategies to mitigate risks and protect the client’s economic well-being.
Enhanced financial confidence: Holistic financial planning can empower clients with the knowledge and tools they need to make informed financial decisions. This improved understanding of their financial situation inevitably leads to greater confidence in their ability to manage their finances effectively.
Improved emotional well-being: Financial stress can significantly impact our emotional well-being. By addressing the causes of financial stress and providing solutions to achieve financial stability, holistic financial planning can improve mental health and overall quality of life.
A recent Lincoln Financial study found that consumers seek stability in an uncertain economic environment. With rising inflation and market volatility, 56 per cent of respondents cited protection from risk as the most important. When considering their finances, people said they have the most significant interest in protecting their family (39 per cent), followed by their income (26 per cent).
“Our research reinforced the importance of financial solutions that can help consumers navigate through market cycles and protect their loved ones,” said David Berkowitz, president of the Lincoln Financial Network.
“It’s important to have a well-rounded financial plan to address those risks, protect assets and create positive outcomes for today’s families.”
How financial advisors promote financial wellness
Financial advisors have constantly been evolving to meet the changing needs of their clients. This means adopting a more comprehensive approach to financial planning, incorporating not only traditional financial products and services but also addressing the emotional aspects of money management.
The role of tech: Financial planning tools and platforms are becoming more sophisticated, enabling advisors to offer highly customised advice based on their clients’ specific needs and goals. Robo-advisors and digital platforms are making personalised financial advice more accessible and affordable, driving demand for customised solutions even higher. However, tech cannot take into account the nuances of an individual’s unique financial situation, goals, and risk tolerance.
Emphasising financial education: Financial advisors play a critical role in enhancing their clients’ financial literacy. By providing relevant and timely information, advisors can empower clients to make informed decisions about their financial futures.
Building a trusting relationship: Financial advisors must establish strong rapport with their clients to foster open communication and trust. This relationship is crucial in understanding the client’s unique needs, values, and goals, which are the foundation of a successful holistic financial plan.
Essential considerations for a holistic approach
Suppose you’re looking to adopt a more holistic approach to financial wellness. In that case, you’ll need to define your financial goals by identifying your short-term and long-term objectives and the personal values that should guide your financial decisions. Here are some steps to take:
- Seek professional guidance from a knowledgeable financial advisor who specialises in holistic financial planning and has experience working with clients with similar values and objectives.
- Embrace technology using digital tools and platforms to help you track your financial progress and stay engaged with your financial plan.
- Prioritise financial education to stay informed about changes in the financial landscape and make sound financial decisions. Continuously learn about various financial topics and ask your financial advisor questions when you are uncertain.
As holistic financial planning becomes more mainstream, the financial planning industry must adapt and evolve to meet consumers’ changing needs. By offering solutions that truly address the full spectrum of financial well-being, you can achieve your financial goals and experience the peace of mind that comes with financial wellness.
Have you considered investing in bonds? Saxo CEO Adam Smith talks us through the role of bonds in your portfolio.