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Case studies: The importance of holistic advice

Holistic

Our goal is to inspire people to adopt a holistic approach when making financial decisions. That’s because financial decisions often include several interrelated considerations and consequences, including financial planning, cash flow, taxation, borrowing and so on. Also, taking a holistic approach ensures no opportunities or risks slip between the gaps.

Often, the best way to make a point is to tell relatable, real-life stories. Therefore, to demonstrate how valuable a holistic approach is, I have shared six client stories below.

What is a holistic approach?

Traditionally, financial services have been very siloed. If you have a tax question, you ask your accountant. If you have a mortgage structuring question, you ask your mortgage broker. If you have a question about super, you ask your financial advisor. You get the point.

However, the problem with this approach is that financial matters tend to be interrelated. What seems like a basic mortgage question could have tax and/or financial planning consequences, which a mortgage broker cannot be expected to have the necessary experience and knowledge to address.

A holistic approach recognises that many financial decisions require a multidisciplinary approach. At ProSolution Private Clients, we ensure that our team provides a collaborative response to help clients make fully informed financial decisions.

Case studies

Below is a selection of six case studies explaining how our clients have benefited from our holistic approach. Whilst these case studies are based on actual events, we have avoided including names or financial information to preserve confidentiality.

(1) Business plan integrated with personal financial plan

Our client recently established his own professional services business. He was achieving some excellent financial results (in a relatively short period of time) and was able to share a business plan with us. We used this business plan to formulate advice regarding a few important matters.

Firstly, we ensured that he had flexible business income structures to help minimise tax.

Secondly, we developed a long-term financial strategy which addresses how he was going to achieve business and personal goals. Upgrading the family home was a priority.  

And finally, and perhaps most importantly, we developed a financing (borrowing) strategy to ensure these plans could be implemented with the banks help.

This approach ensured all interrelated matters (i.e., tax, borrowing and building wealth) were optimised.

(2) Tax planning whilst maximising borrowing capacity

In some situations, safely maximising a clients’ borrowing capacity can be the most important goal, as without the ability to borrow, their financial plans cannot be implemented. Unfortunately, many accountants do not appreciate how important this can be. In addition, because they don’t understand how banks assess loans (which isn’t always logical or predictable), they often structure a clients taxation arrangements in a way that inadvertently limits their borrowing capacity. This prevents them from investing and consequently jeopardises their long-term goals.

We had a client that was self-employed, and his plan included several property acquisitions, including a family home upgrade. Our accountants and mortgage brokers worked closely together to develop a solution that minimised tax and maximised the client’s borrowing capacity. Doing so required the mortgage broker to select the right lender/s which then allowed the accountant to accommodate its credit policies.

Magic happens when your mortgage broker works closely with your accountant.

(3) Getting the client ready for financial advice

When we initially met our client who practised as a dentist in Adelaide, he was interested in obtaining a financial plan. However, there were several matters that needed to be addressed before he was ready for that. He was navigating a change in working arrangements, which required taxation advice and services. His lack of personal insurances left his young family exposed. And he needed to borrow money to constructing a new family home, which was complicated by the fact that he was about to become self-employed.

Our team worked together to deliver a solution so that his taxation matters were optimised and streamlined. We obtained a loan approval to construct his home and ensured his insurance cover adequately protected his family given his change in employment and debt levels.

Our accountants needed to work with our mortgage brokers to achieve the required loan approval. Our insurance advisor worked with our accountant and mortgage broker to better understand what cover was necessary and how to structure it. All this work could be completed without the client’s involvement.

Now that this preparatory work has been completed, we are currently working on developing a long-term financial plan for this client.

(4) Marrying up career and financial plans

We have worked with this client over the past 8 years. Initially, as she just started her dental career, we helped her purchase an investment-grade property. After a few years it became obvious to her that she wanted to eventually own and operate her own dental practice.

Whilst she was looking for a suitable dental practice to buy, we continued to invest in super and property, whilst at the same time, ensuring we had sufficient financial resources to allow her to purchase a dental practise.

She recently purchased a dental practise, and we were able to help her negotiate the acquisition, complete financial due-diligence, structure the purchase, obtain funding (loan), whilst ensuring it fits perfectly with her existing plan and investments.

This multidisciplinary and holistic approach gave our client the comfort that she has optimised career and personal financial objectives over the past 8 years. She is now in a very strong financial position.  

(5) Best use of existing assets

After retiring as a partner of a global professional services firm, this client required advice on how to best utilise his property and superannuation assets to enjoy a comfortable retirement. This strategy included the downsizing of his family home and potentially sub-dividing another property. We needed to consider several taxation matters including structuring intercompany loans (Div. 7A), minimising CGT, land tax, etc., so it was critical that our accounting and financial advisory teams worked closely together.

We were able to develop a strategy that minimised taxation and fees as well as allowing the client to enjoy spending a large amount on travel whilst he’s fit and healthy to do so.

(6) Optimising ownership structures

It is a common complaint of accountants that they do not offer proactive advice. Whilst there are many reasons for this, one impediment is that they do not have a full understanding of their client’s situation and plans.

Our accounting team identified this client owned a substantial parcel of shares in a non-trading company. Consequently, the client wasn’t getting the full benefit of the imputation (franking) credits. After discussing this with the client’s financial planner, it was decided that these shares should be transferred into the clients SMSF, which would be substantially more tax effective.

This was an easy opportunity to identify and implement because all that was required was a simple conversation between two professionals (accountant and financial planner) in the same office. This collaboration is what drives value. The client didn’t need to facilitate this.

Working in the same office is not enough

Ensuring that our team continue to adopt a holistic approach to their work takes continual effort, training, coaching and systemisation. It is not enough to work in the same office together and expect collaboration to “just happen”. Unfortunately, it is too easy to become too focused on the work at hand without seeing the big picture.

Therefore, if you are looking to engage a holistic firm, it is important to understand what actions they take to ensure this happens. A firm’s culture and leadership will have a big influence on this.

Perceived downside to using the same firm

Some people feel more comfortable using different firms for accounting and financial planning, as they feel that each firm might keep an eye on each-others work. Whilst this might be true at the extremes (e.g., an accounting firm might identify if a financial planning firm was making highly speculative investments), it is unlikely that each firm will have sufficient information, experience and time to review the other firm’s work. Spreading your work across multiple firms provides no benefit and circumvents your ability to enjoy holistic advice.

This is not a sales pitch

I did not share the above client stories to convince you how wonderful we are. I shared them solely because they demonstrate that many financial transactions and decisions involve several interrelated considerations.

In the absence of having a holistic firm look after all your financial matters, it is your responsibility to:

  • identify any all risks and opportunities; and
  • determine what information is relevant, which advisors need to be informed and when.

Unfortunately, most people don’t have the skill and experience to do, which means opportunities and risks get missed.

You maximise your financial opportunities when you have one team looking after you that has deep experience in all matters including super, shares, property, tax, insurance, borrowing and so on.

Your financial complexity will dictate how important a holistic approach is for you. For example, if you are self-employed with complex business income structures, then you would be mad to not ensure your advisors adopt a holistic approach. However, if you’re an individual employee with very few investments, a holistic approach is probably not that important.