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Myths about holistic financial advice

01 June 2016 Nico Coetzee, PPS Financial Planning

The financial services industry is infamous for its own jargon to describe the various products and services it offers. This frequently results in clients not understanding even a basic financial concept, such as compound interest.

While there have been, and continues to be, many attempts by key industry players and the regulator to simplify the terminology used to discuss financial affairs with clients, the industry unfortunately still has a long way to go.

Definition variance

A term that has become popular in recent years is holistic advice.

The definition of this term seems to vary, depending on who you ask. Some say it is the interconnection of short-term and long-term policies which covers a client sufficiently; while others maintain that it is just a combination of various aspects of financial planning such as risk or retirement planning.

Many financial advisers argue that they have always provided holistic advice by offering clients a wide spectrum of products.

What does holistic advice not entail?

In an effort to understand what it in fact should look like, it is necessary to clarify what holistic planning does not entail.

There are currently many misperceptions and mistakes commonly made when defining and providing holistic financial advice. Listed below are the three of the most common misconceptions:

• In an effort to understand what it in fact should look like, it is necessary to clarify what holistic planning does not entail.
There are currently many misperceptions and mistakes commonly made when defining and providing holistic financial advice. Listed below are the three of the most common misconceptions:
• Holistic advice is when a financial planner offers the client access to a wide range of different products;
• Holistic advice is less important than addressing a specific need the client has at that moment; and
• Holistic advice is a packaged service that clients purchase from a financial planner.

What should it entail?

The truth is that all three of the above statements have fundamental flaws; below are three more appropriate statements in this regard:

• Holistic advice is when a financial planner looks at all of the areas of the client’s life, how their financial situation integrates with these areas, and helps to prioritise the client’s financial affairs in order to attain their life goals. This advice should provide the client with a financial plan that may include certain product recommendations, but the products will merely assist in implementing the overall plan;
• Holistic advice is critical to everyone. Most of our financial affairs are linked and by addressing only one need, issues within another area could arise; and
• Holistic financial advice needs to take place throughout a person’s life and cannot be packaged as a once off solution. As clients get older, their situation changes and their financial plan should reflect that. We still see far too many clients with outdated wills, misaligned estate plans or insufficient retirement savings.

Going a step further

Holistic advice should, as the name suggests, look at the client’s whole life, over their entire life span.

How do you know if you are a holistic financial planner? It turns out real holistic financial planners have certain characteristics.

These are:

• They ask the client a lot of good questions; which means that they talk less and listen more;
• They do not try to sell the client something in the first meeting. In fact, a good holistic financial planner may not even ask the client for any figures during the first meeting;
• They do not disappear after they have provided the client with a financial plan. Holistic financial planners maintain contact with the client to check-up and see if they are still on track to achieve their goals. And;
• They value their services. These are professionals who can make a real difference in their client’s life and believe in what they are doing.

I am very pleased to see that we are getting more and more holistic, or lifestyle planners as we like to call them, emerging in the financial services industry. Clients would do well to seek them out.

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