HOLISTIC PLANNING
HOLISTIC PLANNING
What it is, and why it’s worth it
Matthew Drinkwater, Ph.D., is
corporate vice president and director
of retirement research within the
Secure Retirement Institute (SRI). He
leads a team of retirement experts
responsible for developing and
executing SRI’s research agenda,
which covers both institutional and
retail businesses.
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Financial professionals (FPs) offer clients a wide array of planning services. These services can
help clients achieve their near-term objectives, and make them better prepared for the
circumstances, contingencies, and risks associated with later life stages.
Many FPs provide focused planning that goes deep on a few aspects of a client’s financial
situation, such as investment portfolio management or reviewing insurance coverage. While
there are certainly advantages to specialization, and practitioners of this service model can
still provide significant value, Secure Retirement Institute® (SRITM) research finds the most
successful FPs of the future will adopt a holistic planning model.
Holistic planning takes into account a client’s entire financial situation, goals, and preferences.
Increasingly, FPs will be required to perform thorough assessments of their clients as the “best
interest” standards established by federal and state regulators become more widespread. It will
also provide a way to differentiate themselves from digital advice providers. For the millions of
Americans who have recently retired or are approaching retirement, holistic planning will be
critical to ensure they can achieve their financial and lifestyle goals in retirement.
What are the key components of holistic retirement planning? Although investment and asset
management are core elements, other components of holistic retirement planning include:
Retirement income planning.
Retirement expense planning.
Retirement risk perception.
Non-financial planning.
Retirement income planning Retirement expense planning
Investors face critically important, sometimes irreversible
decisions regarding their income sources. Among these are
guaranteed income streams from Social Security, pensions, and
annuities. The optimal claiming strategy for these sources is
not easy to determine, particularly for couples. Income from
interest, dividends, and investment gains must also be managed
effectively. FPs who can provide a client with a comprehensive
income strategy, particularly if it aligns with the client’s priorities
for income features (e.g., income that is guaranteed for life,
income that can grow with market gains, income that is
inflation-adjusted), will thrive. SRI research shows retirement income planning has become
more prevalent in FP’s planning services, with over three
quarters of FPs having increased the time spent in their practices
on this planning. However, expense planning generally hasn’t
been a major component of planning services. Expenses have
sometimes been treated as a single input into the planning
algorithm, determined by calculating a proportion of
pre-retirement income (e.g., 80 percent). But this calculation
often fails to capture the client’s true expenses in retirement. FPs
who take the time to learn their clients’ spending habits will be
in a better position to tailor income planning guidance.
Perspectives
Q2 2020