6 Types of Financial Planning You Should Be Doing

A person’s financial life isn’t one-dimensional—so the planning approach shouldn’t be either. The most impactful strategies evolve with each stage of life. As a financial advisor, you play the critical role of helping clients achieve their (realistic) financial dreams. From budgeting and saving to investing and retirement planning, each consideration requires a tailored approach. 

Financial planning is the dynamic process of setting, planning, and managing finances to help clients achieve their long-term and short-term financial goals, ensuring the security of their financial future. This involves analyzing your client’s current financial state, conducting research and forecasting, creating a financial plan, and then implementing and monitoring it.

This article will explore the diverse types of financial planning, detailing their core objectives, interconnections, and how to apply them to create robust, client-centric plans. 

The Key Types of Financial Planning to Consider

To build a truly comprehensive plan, advisors must incorporate multiple planning disciplines. Let’s take a closer look at each one and how it can support your clients’ evolving needs.

The Core Pillars: Foundational Financial Planning

Foundational financial planning includes non-negotiables that underpin all other planning types. This remains true, even for high-net-worth clients who may overlook these basics. Budgeting and cash flow management play a fundamental role in establishing financial health, encompassing income, expenses, and savings. 

Cash flow plans help your client meet their financial obligations when they’re due while assisting them to take that necessary step to achieve their financial goals. A cash flow plan will help you and your clients identify potential issues, allowing you to take preventive measures before they escalate into a problem. A good cash flow plan should also include emergency funds and help your client navigate unexpected situations.

Debt management is another foundational type of financial planning that helps reduce various kinds of debt, including credit cards, student loans, and mortgages, to free up resources. Lastly, emergency fund planning also falls under this category. Clients must maintain liquid savings as the foundation of their financial security.

Building for the Future: Wealth Accumulation and Growth

Investment planning, retirement planning, and education planning are all interconnected in the context of wealth accumulation and growth. Advisors must strike a balance between growth potential and risk management to help build a strong financial future. 

Investment planning involves setting investment goals, conducting a risk assessment, and determining asset allocation and investment vehicles. You may recommend a mix of stocks, bonds, mutual funds, and real estate to your client, depending on their goals and risk tolerance. 

Retirement planning involves reviewing your clients’ current retirement income, including Social Security benefits, pensions, and other sources of income, as well as savings accounts they can utilize (e.g., 401(k) and Roth IRA). It’s also important to compare them to the client’s goals and expenses in retirement while factoring in risks, such as inflation and market volatility.

If your client’s current income isn’t enough, it’s your job to help them develop strategies to increase their retirement income through investments and other sources. Having a retirement plan in place will also reduce the stress and anxiety a client may feel about their financial future. Knowing that they have a plan in place can give peace of mind and hopefully help them sleep better at night.
Education planning is important for clients with children or grandchildren. You can discuss savings strategies to support higher education costs, such as 529 plans. 

Protecting What You Have: Risk Management and Insurance Planning

Insurance isn’t just an expense, but rather a crucial tool for safeguarding a client’s entire financial plan. It’s critical to ensure your clients have the right insurance coverage. The appropriate insurance can protect your client’s livelihood and financial goals in the event of unforeseen financial losses, providing financial security for them and their loved ones.

To help your clients choose the appropriate insurance, you need to assess the risks that they may face. This analysis will determine the type and amount of coverage your clients need, such as life insurance, health insurance, disability insurance, and property and casualty insurance.

Once you’ve assessed the risks, conduct thorough research to evaluate the available coverage options and compare them.

Ensure that your clients understand the coverage level, costs, and associated risks of the insurance they choose. Additionally, your client will change over time. Health status, asset value, and financial goals and needs change, which means their insurance and coverage needs will also change. It’s essential to review and update your client’s chosen insurance policies regularly to ensure that the policies continue to meet your client’s needs.

Life insurance protects dependents in the case of a client’s death. Disability income insurance protects a client’s income in case of illness or injury. Health insurance and long-term care planning help cover a client’s healthcare costs and long-term care needs. Property and casualty insurance protects physical assets of value in the event of natural disasters, theft, or accidents. 

Strategic Asset Transfer: Estate and Legacy Planning

Estate planning and legacy planning are crucial for strategic asset transfer. Estate planning is the process of organizing and managing your client’s assets to ensure that they are distributed according to their wishes after they pass away. While this may be a grim topic for some due to its subject matter, estate planning is very much necessary.

Without a proper estate plan, in the event of someone’s passing, a significant portion of their assets can be lost to various expenses, such as estate taxes and probate fees, rather than being passed on to their beneficiaries. Estate planning helps minimize those expenses and ensures that beneficiaries get as much as possible.

A comprehensive estate plan should include a will, beneficiary designations, a Durable Power of Attorney, an Advanced Directive, and may also include setting up trust funds. These components can help clients make sure their assets are distributed as they wish and minimize the tax consequences that may be imposed on their heirs.

Legacy planning extends far beyond the transfer of wealth, encompassing values, family governance, and multi-generational financial literacy. It may also include charitable giving or succession planning for business owners. Financial advisors can help clients donate assets to organizations that align with their values while maintaining tax efficiency and maximizing the impact of their donations.

Navigating Unique Financial Journeys: Specialized Planning Areas

There are also specialized planning areas, such as tax planning and divorce financial planning, where a financial planner can provide valuable assistance. Tax planning involves analyzing your client’s current tax situation and identifying strategies and tactics that can minimize the amount of taxes they pay, resulting in significant savings and easing their financial burden.

It involves anticipating and managing taxes to maximize the benefits of deductions, credits, and other tax-saving opportunities while minimizing the risk of an audit or other penalties. To take advantage of tax-saving opportunities, tax planning should be conducted throughout the year, not just at the end of the year or during tax-filing season.

It’s essential to stay up-to-date with tax laws and regulations so you can identify strategies that are best suited to your client’s situation. This can include finding tax-advantaged investments, maximizing deductions and exemptions, or taking advantage of tax credits to reduce the amount of taxes paid.

Cash flow and debt management for high-net-worth individuals is another unique type of financial planning. Financial advisors can help clients manage significant liquid assets and effectively navigate complex debt structures. 

In the case of a separation or divorce, financial planning services can be incredibly beneficial. Additionally, you may help some clients plan for dependents with special needs, such as assisting them in setting up trusts and understanding government benefits and programs. Lastly, advisors and Certified Financial Planners (CFPs) can help small business owners with business financial planning to integrate personal and business finances.  

Integrating Planning Types for a Holistic View

As a financial advisor, it’s important to take a holistic approach to financial planning. You shouldn’t view the types of financial planning as silos, but as interconnected components of a single, comprehensive strategy. Use the client discovery stage to determine which planning types are most relevant to a client’s current life stage and goals. 

Visual integration can enhance a client’s understanding of a comprehensive financial plan. Visualization tools like Asset-Map represent all planning types on a single, intuitive map, showing clients their complete financial picture. Visual maps help clients identify connections, gaps, and priorities across different planning areas. 

A financial plan is a living document that should be continuously reviewed and adapted as a client’s life and goals evolve.  

Orchestrating Financial Wellness for Your Clients

Financial planning types, ranging from foundational to specialized areas, are individually important, but are more beneficial when combined. To provide clients with the best advice, integrate the different types of planning into a comprehensive financial plan. An advisor must continuously manage and adapt planning areas to a client’s diverse goals and needs. True financial well-being comes from a holistic approach that incorporates all relevant planning areas. 

Platforms like Asset-Map provide unparalleled clarity and peace of mind for clients by combining distinct planning types into a unified and actionable visual overview. Asset-Map empowers financial advisors to engage in more in-depth client conversations, leading to more collaborative financial planning. 

Learn more about Asset-Map by scheduling a free demo today.