Start Building your Future Knowledge.

Watch the video here: https://www.youtube.com/watch?v=fbo_NXo3yqA

Lifestyle financial planning is gaining increasing relevance in the financial industry.

Financial planning has always incorporated lifestyle considerations. Historically, the primary focus was on objective metrics such as risk tolerance, asset allocation, and returns. However, in recent years, individuals have shifted their interactions with financial services providers and advisors. They seek to understand how their personal values, circumstances, and overall well-being can be integrated into the traditional planning framework.

Traditional financial planning entails a comprehensive analysis of a client’s financial position, encompassing their portfolio, assets, liabilities, income, and other financial metrics.

In contrast, lifestyle financial planning employs more flexible inquiries, such as whether a client can maintain economic activity until the age of 75, potentially supplementing their retirement with coaching, mentoring, or continuing to work.

This approach can also involve distributing retirement needs across various investment vehicles, such as a combination of retirement annuities and investments with immediate access (liquid) options. An isolated traditional perspective might limit consideration

to a retirement annuity due to time constraints or affordability considerations. However, a broader perspective that incorporates lifestyle aspects, such as working longer, presents more possibilities.

Risk planning can be viewed from a more practical lens rather than solely relying on the recommendations of planning tools. Consider the potential consequences of experiencing a severe loss of health or the inability to perform one’s occupation, whether temporary or permanent. This could result in income loss, but it may also entail additional responsibilities. These factors can be accommodated according to individual lifestyle preferences and insurability levels.

This “lifestyle” approach facilitates open discussions and introduces greater creativity and options. It effectively reduces impulsive purchasing behaviour, as clients gain greater control over their financial outcomes. This is achieved through the more nuanced approach of lifestyle planning, which is less directive and emphasises practical realities rather than idealistic outcomes.

Lifestyle financial planning holds significant relevance in the current market. Historically, insurance companies, investment firms, and other financial services providers have heavily relied on traditional metrics to provide advice and distribute products. However, increasingly informed consumers are seeking to understand how these services and products align with their lifestyles and preferences.

While traditional planning forms the foundation of a sound financial plan and necessitates numerical analysis, lifestyle planning is equally crucial. Effective lifestyle planning within a portfolio enhances the likelihood of client adherence, which is arguably the most critical aspect of financial planning.

~ Warren Wessels - 1.618 Executive Financial Planner ~