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A lot of financial service providers and professionals tout the “holistic” approach they take in helping people manage their money. But what does that really mean?
Consult the dictionary and you will find the following definition: relating to or concerned with wholes or with complete systems rather than with the analysis of, treatment of, or dissection into parts. It’s a philosophical approach with application to a variety of areas.
In terms of medicine, for instance, that means not just treating a symptom, like a rash, but also looking at situations and causes behind the symptoms, like an allergy or work-related exposure to toxins.
Holistic financial planning definition
Similarly, in personal finances, a holistic approach means not just aiming for one goal or challenge — buying a house, for instance — but also providing for other needs — like paying the bills or saving for retirement. It means managing your finances for the big picture — short- and long-term goals combined — rather than just going day to day or ignoring distant future needs.
But many people don’t do that, according to MassMutual research.
For instance:
- Almost half (48 percent) of non-retired Americans feel their savings are insufficient to retire by their desired age.
- The greatest source of anxiety for parents is not having enough money to support their family (51 percent).
- Two-thirds (67 percent) of non-retired Americans are working a second job or side hustle.
The data are more than an indication of a worrisome state of finances. They also point to the fact that holistic financial planning can be a challenge for most families. And that can be the case for those trying to manage their finances on their own or with the help of a financial professional.
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“One of the most challenging issues is identifying clients who are prepared to walk this path,” said J. Todd Gentry, a financial professional with Synergy Wealth Solutions in Chesterfield, Missouri. “The good news is that when properly introduced, this approach is what clients want. And it creates a healthy, active relationship designed to drive the result desired: the attainment of short-, medium-, and long-term financial goals.”
Knowledge and psychology gaps
The financial landscape is very complicated. The average family has to consider challenges, including:
This is just to name a few. Keeping on top of the essentials and changes in each topic can be a full-time job. Add in tax considerations and financial demands for unique individual circumstances — an aging parent or special needs child, for example — and the time and study necessary to keep current is greater still.
There are also psychological challenges. While many people and families know they should be doing something about their finances, actually putting a plan into place can seem daunting. That’s especially true when priorities clash with the desire for instant gratification. Dieting and fitness are good analogies. Deciding against dessert and doing sit-ups can be viewed as akin to forgoing nights out in favor of a bigger savings deposit. A certain amount of discipline and reminders about the overriding goal — be it fitness or finance — may be required.
And just like the world of fitness, there’s a variety of help available for those wanting to get their financial house in order. Just as fitness-inclined people can buy their own weights, go to classes, or work with a personal trainer, those looking for financial help can look at do-it-yourself programs to algorithmic investing services to customized advice from a professional.
And here, too, it’s important to understand the value of a holistic approach and thinking about the longer term.
There are moves that can be done relatively quickly — like establishing an emergency fund or budget. But what about goals that take longer, more sustained effort?
Take, for example, retirement planning. Anyone can look at their income and savings, use a calculator, and get an idea of what they need for retirement. And that’s a very good, important start. Knowing what’s ahead and what’s likely to be needed is essential to making a plan.
But what if there are other considerations in addition to retirement, like:
- Saving for your children’s college education.
- Funding a business venture.
- Weathering a disability.
- Helping a parent, child, or other loved one in need.
This doesn’t even consider personal issues that may or may not pop up in the course of life, like paying for a child’s wedding or bracing for a divorce.
That’s where the holistic approach comes in. Instead of making plans for one goal, like retirement, plans are established for a set of goals and aims. And those plans, and the financial vehicles and products necessary to implement them, are designed to work with and support one another.
Take, for example, a life insurance policy.
Yes, many families would agree that it’s necessary for protection, obtain it, and check it off the financial to-do list. Term insurance often meets such a basic protection need.
But a holistic planning approach would examine whether that policy was the appropriate type and how well it fit into their retirement and estate planning goals. For example, in addition to providing death benefit protection, whole life insurance can provide lifetime protection and build cash value over time, as long as premium obligations are met. (Related: Understanding whole life insurance)
This, in turn, can help supplement retirement income needs as they arise or contribute to covering possible costs arising from transferring an estate.1
Professional financial help
Such holistic financial planning can get complicated and challenging. That is why many people turn to financial professionals and teams of professionals who can offer a range of guidance over a variety of financial matters.
“We start by discovering and discussing with families or individuals the ‘why’ behind their goals — what financial well-being means to them,” said Gentry. “Then we work together on tactics and strategies to help achieve those goals. Of course, like any battlefield plan, once boots hit the ground, plans may have to adjust. And that’s part of the approach. Holistic planning demands ongoing discussions, adjustments, and leveraging of the latest and greatest tactics and tools to help enhance the outcomes.”
About two-thirds of U.S. adults were planning on making financial resolutions for the year, according to one survey.
The top goals? There are several, including:
- Saving more money (44 percent).
- Getting out of debt (36 percent).
- Setting up an emergency fund (78 percent).
Holistic planning would be about tackling all those financial goals at once instead of each individually. It just requires knowledge and commitment.
The bottom line: holistic financial planning treats your money as one connected system, so each decision — from life insurance to retirement savings — supports the others.
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Frequently Asked Questions about holistic financial planning
Q. What is holistic financial planning?
A. Holistic financial planning means managing your finances as a complete, interconnected system rather than pursuing one goal at a time. Instead of focusing solely on, say, saving for a house, it means also accounting for retirement savings, debt management, insurance needs, and estate planning — all working together. Think of it as the financial equivalent of treating the whole patient, not just the symptom.
Q. How is holistic financial planning different from regular financial planning?
A. Standard financial planning may address one need — retirement, say, or life insurance — as a standalone item to check off a list. A holistic approach treats each financial decision as part of a broader plan. For example, rather than simply purchasing a life insurance policy for protection, a holistic plan evaluates whether that policy also supports your retirement income strategy and estate planning goals. Every financial vehicle is assessed for how well it works with — not just alongside — the rest of your plan.
Q. Why is holistic financial planning so difficult for most families?
A. Two main barriers get in the way. The first is a knowledge gap: the financial landscape covers budgeting, college savings, investing strategy, retirement planning, protection needs, estate planning, and more — each with its own rules and tax implications. The second is psychological. Prioritizing long-term goals over short-term wants requires real discipline, much like maintaining a fitness regimen. A financial professional can help with both challenges.
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This article was originally published in March 2020. It has been updated.
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