What is Total Wealth Planning (TWP) ?

While Lifestyle Financial Planning (LFP) has been marketed as a total solution it still focusses on financial aspects of “wealth”. It does not bring out the “total needs” of an individual and then plan the financial aspects accordingly. With a range of choices available for investments, insurance and retirement planning, a broader approach to understanding the clients’ needs is even more important.

Let’s look at the extreme. Take, for example, a person who has worked all his life in trying circumstances to accumulate wealth at the cost of family, health or even marriage. Are these uncommon scenarios? Not at all.

As one of the most successful financial planners confided “My high net worth clients do not need pure financial planning really, because they have enough to retire on for this generation and, in some cases, for the next as well. What they really need is what you call Total Wealth Planning. I have to be more than a financial planner to satisfy these clients.”

The Bancassurance and Wealth Management sales propositions are often flawed due to the lack of understanding of clients. They do not or cannot articulate the non-financial aspects of their needs. But the non-financial aspects are also wealth. At times, they do matter more than the financial needs. The same applies to risk. Non-financial risks eg. risk of divorce, risk of health problems etc. are difficult to articulate but ultimately they can affect wealth including financial wealth. These are the areas Total Wealth Planning address so well.

Total Wealth Quadrant (TWQ)™ places the different types of wealth in a neat framework. Then, we develop a range of metrics to measure the “balance” of different drivers of Total Wealth. Only when you press the non-financial buttons people come up with the total picture. Two different scores are calculated using a computer-based calculator. Very soon financial planners and insurance advisors will have to wear the hat of a life coach and what really matters is where the client wants to be in Total Wealth terms.

Even risk management is different with Total Wealth Planning. The risks are inherent in all four sections of the TWQ but we often do risk profiling based on financial wealth. Traditional risk profiling does not take into account the health and family risks. Spiritual or “inner wealth” may also have risks. Life is not all about “financials”. Life is also about relationships and living and the scarce resource for most of us is time. We have to optimise everything around time. When insurance advisors and financial planners do the above effectively it will assist in Total Wealth accumulation, investment, de-accumulation and transfer. And, from the insurance advisors’ viewpoint Total Wealth means more products per customer and deeper understanding of the customer resulting in high revenue per customer and potentially higher referrals.

This is a new approach to wealth management. It is more robust not only in Total Wealth terms but also in financial wealth terms. It brings all the key drivers of life under the umbrella of Total Wealth. Once you learn how to view wealth through the prism of Total Wealth it helps you to embrace a more balanced and fulfilling approach to wealth management including financial wealth management.

The approach is agile and flexible. Some can use it as a sales tool or as a “getting to know the client” tool. Others can use the approach to develop deeper client relationships and provide a broader service. This in turn is likely to increase the client profitability.

If the Total Wealth approach is implemented with a long term view in mind, then, one could expect exponential marginal returns.