While anyone can be a financial coach, not everyone can be a financial advisor—you must pass exams and register with the Financial Conduct Authority, which regulates the financial services industries. However, it is worth noting that not all financial planners are certified or chartered and may only have the basic level of exams needed to trade.
I am both.
Coaches often work with people with moderate or even low incomes and help people deal with financial issues in retirement. Because coaches and consultants try to help people develop a basic understanding of healthy budgeting practices, their business relationships tend to last for a shorter period of time, such as a year or less. Financial coaches spend more time helping clients understand financial fundamentals than investment advice, analysis of a client's tax situation, succession planning, or portfolio management. These professionals can help clients pay down debt, set up an emergency savings fund, stabilize their finances, and develop a general plan to achieve their financial goals. More importantly, they can help a client understand their past behaviours and blockages which ultimately lead to huge gains in well-being and mental health as clients modify limiting beliefs or change established patterns of behaviours.
While financial advisors may target first-time investors, financial coaches may face deep-rooted issues. Whether you need help planning your retirement, understanding your tax situation, or even saving money, both financial coaches and financial advisors can help. Financial coaches can help financial coach clients get rid of unhealthy money management habits and replace them with positive patterns and routines.
If you have short-term money goals, such as saving up for a big purchase or simply learning to be better with money, a financial coach can help you achieve your short-term money goals by working with you to create a plan and hold you accountable. You will typically start sharing your financial goals with them and start tracking your overall income and expenses so that the coach can begin to understand your financial position, such as balance sheet and income/expenses statements. A coach can help you understand what drives your financial decisions so you can create a healthier attitude that will lead to better financial habits.
The keys to working with a coach are building an emergency fund, managing debt, and developing an effective spending plan. The value of a personal finance coach is that they can help you plan and stay motivated throughout the process. A financial coach will help the client develop a plan to achieve their goals and then act as an accountability partner as the client puts the plan into action. Financial coaching takes more effort, holding clients accountable, and developing ways to help them learn new habits that will help them achieve their financial goals.
Coaching also differs from counseling in that coaching is usually limited in time, with the goal of helping the client achieve financial literacy and learn how to manage their finances. Accountability is usually built into the full coaching process, so instead of managing a client's finances, a financial coach provides clients with tools to help them make informed and responsible financial decisions.
While financial advisors most often help manage existing wealth, the job of a financial coach is to provide the client with the knowledge, skills, and behaviors that will help create wealth in the first place. Financial advisors tend to focus on implementing financial products and strategies, while financial coaches focus more on the basics of personal money management, behavior change, and accountability in line with a client-focused spending plan. Financial coaches provide guidance and advice to help people kick unhealthy habits and implement best practices in budgeting; but before getting started, financial coaches need to take some time to understand the unique habits and aspirations of their clients. My job as a financial coach is to teach you how to manage your money properly so you can recover from debt, save for important financial goals, and live a lifestyle where you are in control of your finances, not the other way around.
Coaches can provide much-needed self-control and flexibility to change strategies as the client's financial situation changes. Coaches are suitable for asset building programs because clients often need encouragement and support to maintain positive financial behavior.
Most financial coaching clients have never set aside money for 3-6 months at once, so it's both a practical problem how to set aside money each month and a behavioral challenge (because they don't have it, it can seem overwhelming, intimidating, and unattainable). For example, instead of setting a goal of saving 6 months on living expenses, which might seem impossible for someone with an average income, a coach will help a client understand how they can start saving £25 a week. More than 70% of their customers report low energy or insomnia, according to the charity StepChange, while the N26 Mobile Bank study found that 9.5 million adults in the UK suffer from mental health problems due to financial anxiety.
Get in touch if you are feeling anxious about your money situation for a free chat over Zoom or Teams.