Spreadsheets, asset allocation and number crunching will always be a key component of financial planning, but a new generation of planning has industry members broadening their horizons.

Specifically, “life planning” is beginning to replace traditional financial planning as clients seek more comprehensive advice on their financial situation, and how it fits in with their life goals, according to Michael Curtis, president of financial industry software developer Vision Systems Corp. He gave a presentation on life planning at the Independent Financial Brokers Fall Summit in Toronto on Wednesday.

He said the new approach challenges clients’ preconceived notions about financial planning as a process of crunching numbers and buying products.

“Life planning is about your client’s lives. It’s about them creating a satisfying and fulfilling vision of life, and discovering how to achieve it,” Curtis said.

In pursuing life planning, it’s important for financial planners to put more emphasis on relationship building with their clients, rather than simply creating a plan.

“Your goal through the planning process is to position yourself in your client’s mind as their chief financial counselor,” he said.

In doing this, planners should take time to get to know their clients before jumping into their financial details, according to Curtis. He recommends using a first meeting with clients to discuss their values — what he calls a “soft start,” which puts the focus on the client. This helps the client feel understood, and builds the foundation for a strong relationship, he said.

“We want to get away from the perception that clients have that the work we do is financial planning. We want to shift the perception to this whole new life planning, and to do that, we want to put the focus on them.”

With an understanding of their values, financial planners can then turn to more specific wants and goals for a client’s future. Curtis recommends waiting until the end of the first meeting with a client before discussing the details about that person’s finances. When clients see that the planner is interested in their broader life goals, said Curtis, they will be more comfortable providing accurate information about their finances.

Once a planner has more financial details about the client, the second meeting can be used to assess their financial portfolio, and determine where the client stands financially with respect to their future goals.

Specifically, by looking at a client’s net worth and income assets, Curtis said a planner can determine whether that person is facing a financial gap with respect to their goals.

It’s also important for individuals to be aware of any other gaps in their portfolio, such as an estate gap or an insurance gap, Curtis said. While financial planners often fail to address such gaps, he said by taking a broader view of the client’s situation, the planner could help clients prevent shortfalls later in life.

Adding critical care insurance or long-term care insurance, for instance, covers hefty expenses that could arise down the road.

A type of financial planning software offered by Vision Systems, called Vision Works, encompasses these aspects of life planning and allows financial planners to work through them with clients.

Curtis also said the life planning approach allows more flexibility in the planning relationship. Rather than a single annual meeting, for instance, he said clients should simply arrange meetings with their planner anytime a change in their life demands a change to their plans.

“We’re beginning to think in this more everyday, human being way, which I believe you’ll find appeals to clients a lot more,” he said.

IE