Original Article: https://www.moneyweb.co.za/financial-advisor-views/lifestyle-financial-planning-its-personal/
Troy’s comments:
As a South African financial advisor, I appreciate the evolution of the financial planning industry, particularly the emergence of lifestyle financial planning. This approach takes a fresh and holistic view of personal financial planning, going beyond traditional wealth-focused strategies and incorporating the client’s goals, aspirations, and values.
Unlike the product-focused approach of the past, lifestyle planning places the client at the centre of the planning process. It begins by understanding the client’s life goals in great detail, whether they are financial or otherwise. The initial discussions revolve around topics such as emotions, family relationships, personal values, and aspirations, rather than immediately delving into financial products or solutions. This approach allows for deeper conversations that help the planner gain an intimate understanding of what the client envisions for their life and how financial advice can assist them in achieving their goals.
Unlike the previous reactive approach to planning, lifestyle financial planning aims to help clients paint a picture of their desired lifestyle and then structure a financial plan that can realistically support it. While investment returns are considered, they are not the sole focus. Lifestyle planning recognises the importance of understanding a client’s emotional connection to money, their risk tolerance, cognitive biases, and concerns about the future. This understanding allows for the development of a financial plan that matches investment risk with the client’s risk appetite and the returns needed to achieve their goals.
Moreover, lifestyle planning emphasises the quality of life, mental and physical well-being, and financial security, rather than solely focusing on net worth. It takes a holistic view of the client’s portfolio to identify any shortfalls or areas of risk exposure. Recommendations are then made to ensure that every aspect of the client’s portfolio aligns with their goals.
Traditional financial planning often resulted in a collection of disparate products accumulated over time, which may no longer be suitable for the client’s evolving circumstances. In contrast, lifestyle planning aims to provide advice first, with any recommended financial products or solutions being derived from that advice. The client has the freedom to implement or seek another advisor to implement the recommended solutions, as they are paying for professional advice rather than being tied to specific products.
Recognising that life is not linear, lifestyle planning acknowledges the need for flexibility and adjustment as life unfolds. Scenario planning and financial modelling are used to identify areas of exposure and form the foundation for advice and recommended solutions. This approach ensures that the client’s financial plan remains robust and adaptable to life’s changes.
In the realm of lifestyle planning, establishing a long-term client-advisor relationship is crucial. Lifestyle planners are incentivised through professional fees to ensure their clients’ success. They play a pivotal role in providing strategic guidance throughout the client’s lifetime, understanding their personal relationships, legacy intentions, and wealth transfer goals. Generational wealth planning is a hallmark of lifestyle planning, creating a sustainable financial legacy for future generations.
When engaging with a lifestyle financial planner, clients should be prepared for in-depth questioning that goes beyond numbers and finances. These questions explore emotions, personal goals, dreams, and values. The recommended solutions are customised to address specific objectives and tailored to meet lifestyle goals.
In conclusion, lifestyle financial planning offers a refreshing and personalised approach that aligns with clients’ life aspirations. It goes beyond the traditional wealth-focused strategies and takes into account the holistic well-being of individuals and their families. This Financial Planning Week, I encourage you to prioritise planning for your finances and lifestyle dreams with a lifestyle financial planner who can provide tailored guidance to help you achieve your goals.
