Lifestyle financial planning: It’s personal

Financial planning as an industry has evolved and advanced significantly over the past decade, with one of the most notable entrants being lifestyle financial planning. Turning traditional advice on its head, lifestyle planning incorporates a fresh, holistic approach to personal financial planning which looks beyond the traditional view of wealth to something more human, aspirational and values based.

While previous iterations of advice tended to be product focussed, lifestyle planning places the client front and centre of the planning process with a view to first understanding in vibrant detail the client’s goals for her life – whether financial or otherwise. In fact, discussions around financial products or solutions do not form part of the initial client engagement process. This is because the client-advisor engagement process is designed to look beyond the perceived financial ‘needs’ of the client in order for deeper conversations about money, emotions, family relationships, value systems and personal goals to be held. The intended outcome of these discussions is for the planner to arrive at a more intimate understanding of what the client envisages for her life and how appropriately structured financial advice can help her achieve it.

The conventional approach to advice more often than not involved chasing the highest investment returns for one’s client, following which the client would then ‘cut her cloth’ accordingly and hope to not run out of money. This somewhat reactive approach to planning was supported by a one-dimensional view of wealth, income and net worth. Conversely, one of lifestyle financial planning’s primary aims is to help the client paint a picture of the life she envisages for herself and then structure a financial plan that can realistically help her to achieve that lifestyle. As such, while investment returns are a factor when it comes to investing for one’s future lifestyle, they are not the overriding consideration. Understanding a client’s emotional connection to money, propensity for investment risk, cognitive biases, and fears about the future are just some factors used in the development of a lifestyle financial plan with a view to ensuring that investment risk is matched with both the client’s appetite for risk and the returns needed to achieve her goals – the so-called ‘eat well-sleep well’ test. Whereas conventional advice was primarily focused on quantity (net worth), lifestyle planning places more emphasis on quality: quality of life, mental and physical well-being, and of course financial security.

Whereas traditional advice was often designed to address a specific need in a client’s portfolio – generally in the form of a commission-based product sale – lifestyle planning takes a holistic view of the portfolio to identify shortfalls or areas of risk exposure, followed by a set of recommendations designed to ensure that every aspect of the client’s portfolio is geared towards achieving her goals. Conventional advice driven by product sales generally results in a client being left with a disparate range of products that have accumulated over the years, many of which are no longer appropriate for his changed personal circumstances. On the other hand, a lifestyle planner aims to deliver advice, with any recommended financial products or solutions being derivatives of that advice rather than the reason for it. Further, because the client is paying a professional fee for the advice, there is no obligation on her to implement the recommended solution and she is free to appoint another advisor to implement on her behalf.

The career path on which traditional financial planning is based assumes a trajectory that consists of work, save, invest, retire, and spend. Recognising that life is not necessarily linear, lifestyle planning understands the need for each client to have a robust financial plan underpinned by bespoke solutions that are sufficiently malleable to be adjusted as and when life happens. The job of a lifestyle planner is to create customised solutions that are fully aligned with the client’s objectives rather than to sell one-size-fits-all solutions that are very often grudge purchases made in response to a manufactured fear. Lifestyle planners regularly use scenario planning and financial modelling to identify areas of exposure within a client’s portfolio, with these analyses forming the foundation for the advice and recommended solutions.

Earning a professional fee in exchange for independent financial advice, lifestyle planners are appropriately incentivised to ensure the success of their clients and, as such, the establishment of a trusted, long-term client-advisor relationship is critical. As touchstone for all a client’s financial decisions, a lifestyle planner plays a pivotal role in providing a client with strategic guidance throughout her lifetime and beyond – a role that also requires a deep personal understanding of a client’s personal relationships, the legacy she wishes to create for her loved ones, and her intentions for transferring her wealth. In this regard, generational wealth planning is a hallmark of lifestyle planning, ensuring that sustainable wealth is not only created but protected and distributed as part of a broader plan to establish a financial legacy for future generations.

If you’re planning to meet with a lifestyle financial planner, be prepared for a series of deep questioning which could include the likes of the following:

  • What keeps you awake at night?
  • What are your main concerns about money and finance?
  • What is your earliest memory of money? What emotions do you feel when recalling that memory?
  • How do you feel about debt?
  • If money was not an issue, what would be your dream job?
  • How will your expenses change over time?
  • What are the things you enjoy doing that make you really happy?
  • Do you feel as though you are in control of your finances? If not, what areas of your finances would you consider to be priority areas that need addressing?
  • What do you picture your retirement to look like? When answering, give special consideration to where you would like to live, what activities you would like to engage in and what a happy retirement would look like to you.
  • If you only had five years left to live, what would you want to accomplish in life?
  • What is one audacious goal you have for your life?
  • What charities, Churches or organisations do you enjoy supporting?
  • How much is enough?
  • What does financial freedom look like for you?
  • Beyond leaving a financial legacy, how do you want to be remembered?

When engaging with a lifestyle financial planner, any recommended solutions are likely to be bespoke rather than turn-key – custom-made to address your specific objectives and tailor-made to meet your lifestyle goals. This Financial Planning Week, make planning your finances and your lifestyle dreams a priority.

Have a wonderful day.


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