Financial professionals have always played a role in improving their clients’ financial wellness by helping them plan for the future and recent events have shined a spotlight on how important that planning is. A new definition is coming into focus that positions the financial plan as a living document that seeks to elevate and deliver on a client’s desired quality of life.<\/p>\n
In this article, we demystify the three core tenets of financial wellness\u2014control over daily finances, emergency preparedness, and goals for the future. We dissect the planning framework for financial wellness to break it down into digestible pieces that can easily be integrated into your current workflow.<\/p>\n
For most people, financial wellness isn’t a sprint, it’s a marathon. And financial professionals should be helping their clients progress towards financial wellness the same way they would coach a runner for a marathon\u2014first examining day-to-day habits and behaviors and building out a plan from there. Financial professionals should ask their clients hard questions about their daily spending habits and encourage them to evaluate their existing routine through the lens of their life goals.<\/p>\n
For instance, if it comes to light that a client spends a significant portion of their budget each month on fine dining experiences while not meeting their investment milestones, we should ask:<\/p>\n
Not only will these questions help you build a deeper connection with your client and better understand what motivates them, but they will also give your client an opportunity to draw their own conclusions about their financial state and why it’s important to take control of their daily finances, rather than continue to let their daily finances control them.<\/b><\/p>\nFinancial Preparedness for Emergencies<\/h2>\n
Life happens; jobs are made redundant, natural disasters strike, medical emergencies occur when you least expect them. No matter how much we try to avoid the unexpected, there will always be unforeseen obstacles to overcome, and although emergencies come in all shapes and sizes, there is one factor that unites them all\u2014they’re expensive. And on top of that, the general population isn’t prepared to shoulder the expense.<\/p>\n
Last year, Motley Fool surveyed 2,000 American adults1<\/sup>\u00a0on the state of their emergency fund and found:<\/p>\n This tells an interesting story: If the pandemic cost the average person thousands of dollars, 39 percent of the population was not equipped to deal with it, and the 56 percent of people who were prepared depleted their savings by more than half.<\/p>\n As the U.S. emerges from the pandemic, there has never been a better time for financial professionals to revisit the importance of an emergency fund with their clients. After long-lasting uncertainty, clients are ready to tighten up their financial well-being and eliminate the growing financial stress that has taken root over time\u2014stress that 68 percent of our survey respondents report feeling during the pandemic2<\/sup>.<\/p>\n It’s natural to want to place long-term financial goals at the other end of the spectrum from granular financial actions like daily expenditures and emergency funds, but, all three of these pillars should thread fluidly into one another. Your clients’ aspirations for the future should shape their day-to-day behaviors and inform the short-term goals you establish together.<\/p>\n Long-term goals must be flexible, personalized, and omnipresent, rather than static and templated. Every client has their own definition of how life should be lived, and if money is the currency that allows that definition to manifest, the financial plan you create for them should map to that definition as well. Frame long-term goals with your clients as the lifestyle they aspire to.<\/p>\n Say your client has the following desires for the future:<\/p>\n Once these are solidified, you’d then reverse engineer them into tangible, short-term behaviors, such as:<\/p>\n That’s just it\u2014financial wellness does not have a clear start and finish; it’s a collaborative, ever-changing journey where the financial professional, the client, and the client’s finances move in unison. Modern financial professionals don’t view financial planning as a transaction, but rather an ongoing process to take their clients where they want to go, accepting that the destination may change over time and no two journeys are the same.<\/p>\n Ensure your clients’ financial plans evolve as their lives do by implementing action steps like revisiting the plan on an agreed-upon frequency, changing the plan and recommendations as needed, creating projections for reaching future goals, and stress testing the plan to address financial preparedness and keep goals on track.<\/p>\n As you begin to integrate\u00a0the new definition of financial wellness<\/a>\u00a0into your planning process, remember to:<\/p>\n Each one of these questions flows into the next to create an integrated path forward that connects your clients’ hopes, dreams, and physical and mental well-being to their daily, emergency, and future finances.<\/p>\n For too long, financial institutions have neglected the connection between money and the psychological, physical, and spiritual impact of wealth management\u2014but this siloed thinking is coming to an end.<\/p>\n Moving forward, wealth will not only be evolved and evaluated using a holistic framework, but it will also take a fluid form, moving in tandem with the ebb and flow of the human experience to support financial wellness across the totality of our lives.<\/p>\n To learn more about helping your clients with their financial wellness, read our eBook,\u00a0Deepening Client<\/a>\u00a0Engagement Through a Focus on Financial Wellness<\/a>.<\/p>\n DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.<\/p>\n Sources:<\/p>\n 1<\/sup>\u00a0Backman, Maurie. \u201cStudy: Average American’s Savings Account Balance Is $3,500.”\u00a0Motley Fool<\/i>, September, 2020.<\/p>\n 2<\/sup>\u00a0eMoney 2020 Financial Wellness Survey Results: COVID-19 Increases Financial Stress<\/i>. eMoney Advisor, 2021.<\/p>\n","protected":false},"author":44,"featured_media":6663,"template":"","thought_leadership_cat":[95,96],"class_list":["post-6662","thought_leadership","type-thought_leadership","status-publish","has-post-thumbnail","hentry","thought_leadership_cat-advisor-perspectives","thought_leadership_cat-financial-wellness"],"acf":{"left_sidebar_ads":false,"right_sidebar_ads":false},"yoast_head":"\n\n
Financial Goals and Aspirations for the Future<\/h2>\n
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The Financial Wellness Mindset<\/h2>\n
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