15 transformational events: Holistic planning gains wider usage

Helping a client build a financial plan to reach all of life’s goals, instead of just selling investment products, is standard operating procedure for many advisers today. But it wasn’t the case 15 years ago.
Holistic planning, also called life planning, began to grow in popularity in the late 1990s and early 2000s as the giant baby boomer generation began to think seriously about retirement. Financial adviser George Kinder, in his “Seven Stages of Modern Maturity” (Delacorte Press, 1999), offered a practical guide for advisers looking to get into such conversations with clients — even though he wrote the book for consumers.
“The financial planning community was having conversations that were personal in nature, and they didn’t know how to frame it within the work they were doing,” Mr. Kinder said in an interview.

PHOTO GALLERY 15 transformational events

That text has sold 40,000 copies, and Mr. Kinder estimates that more than half were purchased by financial advisers who were hungry for direction about how to get the most from the personal conversations that come up with clients. The book, which has been translated into five languages, recommends that advisers ask three core questions that help establish clients’ core values, such as, “If you had all the money you needed, what would you do with your life?”
“The point of life planning is to get to know who the client is and along the way learn what will really inspire them so they can live an inspired life,” Mr. Kinder said.
With holistic planning, an adviser incorporates client goals such as college savings and retirement with estate and tax considerations, and charitable giving, as well as insurance needs. The adviser often coordinates with the client’s lawyer and other financial professionals.
Rebecca Pomering, chief executive of Moss Adams Wealth Advisors LLC, said holistic planning has taken off within the advising industry because it’s the right thing to do — and it resonates with clients.
“Clients want context behind the decisions being made in their investment portfolio and elsewhere in their financial decisions,” said Ms. Pomering, who was a consultant to advisory firms for 11 years at Moss Adams LLC.
She expects life planners to expand into areas such as health care costs. Moss Adams Wealth Advisors already offers help with elder-care planning, Ms. Pomering said.
Debate about the virtues of holistic planning began even before Mr. Kinder’s book. In 1990, a Journal of Financial Planning article by adviser Dick Wagner spelled out the need for the industry to become a true profession. He wrote: “The essence of financial planning is not finding a product to best fit the client’s needs. The essence is to provide answers and services within the context of the client’s own special situation.”
Mr. Wagner, a lawyer and certified financial planner, created WorthLiving LLC in 2000 to provide holistic planning. He now concentrates on writing for the industry.
“Advisers who aren’t doing life planning are leaving a lot of stuff undone that people are interested in doing with their financial adviser,” Mr. Wagner said in an interview.
He and Mr. Kinder co-founded the Nazrudin Project to develop the intellectual side and values of the financial advice industry further.
Mr. Kinder, who sold his advisory firm 12 years ago and formed the Kinder Institute of Life Planning to work with advisers, wrote a second book in 2006 to show advisers how to take the results of personal client conversations and develop a life plan. The firm also oversees the curriculum for the registered life planner designation, and has trained about 2,000 advisers with a two-day program on life planning.

WHAT TO READ Learn more about George Kinder in ’15 Transformational Advisers’

Even wirehouses talk of moving toward providing comprehensive financial services, though not exactly in the same vein as independent advisers.
John Thiel, head of Merrill Lynch Wealth Management, last month told attendees at the Investment Company Institute conference that the brokerage business has to “shift our focus away from the way we think about our clients’ money, in a technical sense, and we have to start thinking about money the way our clients do — as having a job to do.”
“Clients are tired of our pie charts,” he said. “We owe it to them to focus on their desired outcomes.”
However, Mr. Thiel and other brokerage leaders aren’t ready to throw out their business models just yet. He went on to say that clients should be able to choose between paying per transaction or paying for holistic advice.
Mr. Kinder noted that wirehouses are still predominantly paid on what they sell, but agreed the “public conversation” coming from brokerage firm leaders is a first step.
“Until I see brokers becoming, in droves, registered life planners, I would have some skepticism there,” Mr. Kinder said. “They have to begin to think more holistically now, because nothing that they’re selling is appealing to the client.”
The next major advance for the life planning movement will be a single fiduciary standard for all financial advisers and planners, Mr. Kinder and Mr. Wagner said.
The Dodd-Frank financial reform law directs the Securities and Exchange Commission to determine whether anyone who provides personalized advice to retail clients should be required to follow the more stringent “client interests first” standard that investment advisers follow. But the brokerage industry has lobbied for a new uniform fiduciary standard that would accommodate brokers who now adhere to a less stringent “suitability” standard.
“They are negotiating over the definition of something that’s been around 100 years,” Mr. Wagner said. “There are powerful interests fighting this.”
Despite the fiduciary battle under way, Mr. Kinder predicts tremendous growth in life planning over the next five years.
“These 15 years have been about getting to launch,” he said. “In the next five years, its growth will be astronomical — and 15 years from now, the consumer won’t not even considering doing their finances another way.”