Managing your finances is one of the most notoriously difficult things to do in life. It may start with a piggy bank in childhood but even then, there is that feeling of not having quite enough, as we realize those nickels and dimes are not worth as much as we thought. It only gets worse with time, as the avalanche of the day-to-day makes thinking about complicated terms, interest rates, and all the other difficult decisions that much harder.
As a result, you may have thought about engaging the services of a financial expert for financial coaching or to help you make sense of all the jargon and to assist you in making decisions that are right for you.
If this describes you, then it’s highly likely you’ll have come across the term “financial coaching” during your search.
Financial coaching is a popular choice for many people seeking financial help. However, the term itself is somewhat ambiguous, and so you may be wondering exactly what is involved in this coaching.
So, what is financial coaching? Americans in their millions are choosing to employ the services of a financial coach, so find out everything you need to know about what a financial coach does, and whether it could also work for you.
How does financial coaching work?
Essentially, a financial coach is a money coach. Think of them as your own personal trainer when it comes to cash. Their job is to help you achieve what you want with your money by offering guidance and support to help you with managing your finances.
Financial coaches can help you improve your financial health by taking a holistic look at your finances.
Throughout a session, though this is more likely to be across multiple sessions, a financial coach will try to help you establish what your current financial situation is and, just as importantly, where you want your finances to be in the future.
Your coach may also try to help you understand some of the psychology behind your own financial decisions, with the ultimate goal being to give you a sense of purpose and empowerment over your relationship with money.
Financial coaches have access to a range of resources and often have experience working with people from all walks of life, having built up a network of their own clients over a number of years.
In combination, this allows them to make suggestions to help you gain greater knowledge and a better overall understanding of your finances and your entire financial situation.
A personal trainer for your money
As I already mentioned, it can be helpful to think of a financial coach as a personal trainer for your money.
So, just like a personal trainer can help you in accomplishing your fitness goals, a financial coach is there to help you achieve your financial goals and maximize the potential of your money.
They’ll help you put together a “training program” for your money so that you can start actively working towards your financial goals.
As with a fitness plan, it is often the case that the more effort and time you put in when working with your coach, the better your ultimate results. A motivational quote that you may find in a gym is just as relevant to the world of finance: “If you want something you’ve never had, you must be willing to do something you’ve never done.”
A more accessible choice
The reason that many people choose financial coaches over the more traditional option of a financial advisor is that they tend to be more accessible and personal in their approach with clients.
Advisors tend to charge more than coaches for their advice, meaning it can sometimes be more suitable for those who already have assets.
By contrast, coaches offer a more accessible service, working with people of all levels of wealth. This means, if you don’t yet have a large amount of money, a coach may be more suitable for you.
As well as being more affordable in comparison to a financial advisor, the more hands-on approach of a financial coach puts a greater emphasis on accountability. Your financial coach will be there with you to help track your progress and hold you responsible.
Financial coaches are generally not regulated
It’s important to note that financial coaches, their firms, and the financial coaching industry as a whole are typically not regulated by the Securities and Exchange Commission (SEC). As a relatively new industry, the legislation is not as rigorous as with financial advisors and planners, and the qualifications and skills between different coaches can vary immensely.
This means that while a coach can make suggestions and help you in a non-specific way with guidance and support, what they tell you is not technically professional financial advice.
A financial coach is also unable to recommend specific financial products, such as choosing investments for you or telling you to use a certain pension scheme.
Who can become a financial coach?
There are no formal requirements for those who want to become a financial coach.
Even so, it can often be sensible to choose a financial coach who is certified or has a level of formal education or qualifications that prove that they’re knowledgeable and able to help you. That way, you can be confident that they have the skills, know-how, and experience required to assist you.
For example, some financial coaches are former independent financial advisors or planners.
Some coaching firms also have strict requirements for the level of knowledge that their coaches must have before they’re allowed to start helping clients.
What services do financial coaches offer?
Financial coaching services offer support and guidance across the spectrum of money management.
Provide guidance around money
The first step that coaches often take is providing guidance and support about finance in general, so you can start taking control of your money.
This might be as simple as explaining how to achieve a sufficient retirement income or assessing what sorts of financial products you already have.
Improve your relationship with money
One of the key services a coach offers, and in my opinion, the most important, is to try and help you build a better relationship with your money.
You might want to understand your own money habits a little bit better. Perhaps you want to find strategies that help you improve your relationship with risk. Or you may simply be feeling overwhelmed and a little afraid when it comes to making financial decisions.
Whatever it is that you want to do, a coach can provide guidance and suggestions that help you improve your understanding of, and relationship with, your money.
Another important service that coaches offer is helping people to manage debt.
Debt is one of the biggest barriers to financial security as it can quickly make your financial situation worse if you don’t keep on top of it.
A coach can help you to understand the debt you have and help you find strategies that allow you to manage it best.
They might also offer support on how to avoid debt in the first place, such as effectively budgeting with the money you have.
Job and career decisions
Changing jobs or making decisions when you’re running a business can have a serious financial impact.
A coach can walk you through the various financial considerations that come with such decisions and how they will impact you, such as how to prepare yourself financially for a new role and what sort of options you need to look at to achieve this.
Investing and pensions
Investments and pensions are widely known as being highly complex and difficult to understand.
A coach can explain the pros and cons of various investment and pension options and provide guidance around the areas in general.
However, it’s important to remember that financial coaches are not authorized or regulated by the SEC. As a result, while they can provide guidance on investments or pensions, they cannot recommend specific products to you.
Home loans, aka mortgages, are one of the most common financial products as plenty of people rely on them, and yet there may be some concepts that you’re not quite sure of.
A coach can take you through and explain important terms related to home loans, such as loan-to-value, equity release, repayment versus interest-only, and Closing Costs.
They can also help you consider what’s most important to you when choosing a home loan and explain the differences between fixed or variable-rate mortgages.
Bear in mind that coaches are not mortgage brokers and so cannot find or recommend specific deals for you.
How much does a financial coach charge?
The costs of working with a financial coach will vary depending on whom you work with and how much time you spend with them.
Typically, you’ll only pay a financial coach for their time, rather than the kind of advice they give you. This is usually charged by the hour.
There are various estimates available for how much financial coaches charge. On average, however, a financial coach will cost anywhere between $150 and $250 per one-hour session.
Financial coaching vs financial advice: Should I work with a coach or an advisor?
Considering the range of services that a coach can offer, you may be wondering why you would work with a financial advisor or planner instead.
The main difference between financial coaches and financial advisors or planners is the focus on how they offer their advice.
A financial advisor can take a look at your entire financial situation and advise you personally on what you could do to reach the targets you have for your money.
The aim of planning your finances alongside an advisor in this way is to develop a financial plan that helps you achieve your future goals, no matter what they may be.
Crucially, most financial advisors are regulated by the SEC. This means that you can rest easy knowing that not only is a financial advisor authorized and subject to oversight for the services they provide, but they also have the technical knowledge to recommend specific products that can help you reach your goals.
Knowing that your advisor is an authorized professional can give you greater confidence that the full extent of your needs as a client will be met.
- The key points to know about financial coaching are:
- A financial coach can help you improve your relationship with your money.
- They can support and guide you on a range of financial matters.
- Your coach will be able to explain complicated financial concepts in detail, allowing you to have a greater understanding of your financial products and the broader situation.
- Coaches tend to be cheaper than financial advisors, meaning they are a more accessible option for many people.
- Financial coaches are not regulated by the SEC and their services do not constitute financial advice.
- If you’re in need of personalized financial advice, you should find an independent financial advisor to help you.