What is financial coaching, and why do you need it?

May 27, 2022 - 8 min read

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What is a financial coach?

Are financial coaches the same as financial advisors?

What does a financial coach do (and not do)?

How to find a financial coach

A good coach helps to provide support and accountability in any area of your life. And while there’s nowhere that kind of relationship wouldn’t make a difference, it’s especially useful when it comes to finances.

Handling your financial well-being, after all, can be tricky. It’s a combination of emotions, experiences, and good ol’ fashioned education. Unfortunately, when it comes to money, there are also a lot of blind spots. Many of us have no idea if we’re making the right choices. And if we feel certain that we’re not, there’s not always a clear way to get back on track or even know what questions to ask.

That’s where a financial coach can come into play. Part-expert, part-cheerleader, part-accountability partner, a financial coach can help you build up your bank account, your self-trust, and your peace of mind.

What is a financial coach?

A financial coach is a person who is trained (and trusted) to look at your finances and identify opportunities to better manage your money. Instead of making decisions for you, they’ll focus more on teaching you money management skills to help you become more confident in reaching your financial goals.

Even though most of your conversations with a financial coach will likely revolve around money, that might not be all you talk about. Your coach might want to look at the attitudes you have around money. They may ask what your financial situation was like growing up, your goals for the future, or how you communicate about money with your partner.

Are financial coaches the same as financial advisors?

There are no official licensing requirements to become a financial coach. Anybody can offer financial coaching. That being said, most financial coaches usually have at least some training in finance. They may have professional licenses, a degree, or years of experience in the financial industry. Some even choose to get accredited through an independent agency, like the Association for Financial Counseling and Planning Education (AFCPE).

The Financial Industry Regulatory Authority (FINRA) and state/federal governments restrict the use of certain titles, like ‘certified financial planner’ or ‘investment advisor.’ Financial advisors are typically employed in that role and usually hold a degree in finance. Unlike financial coaches, who provide advice and coaching, financial advisors are usually affiliated with a certain company or product. While they may charge for advice or planning services, they often make their fees from the sale of financial products.

Because of the nature of their work (and the high fees often associated with in-person financial planning), advisement can be costly. You typically have to have a net worth of over $250,000 to work with a financial advisor.

financial-coaching-family-talking-with-coach

What does a financial coach do (and not do)?

If financial advisors advise and financial planners plan, what do financial coaches do?

The answer: a little bit of everything. Financial coaches take a holistic view of your financial situation. From there, the coaching sessions are often tailored to your specific goals. You might want to learn more about personal finance, pay off your credit cards, or save money for retirement.

Goals of financial coaching:

  • Determine your financial goals and create a plan to achieve them
  • Pay off debt, like student loans or credit cards
  • Learn about personal finance and how to make good money decisions
  • Raise your credit score for future financial goals, like buying a house or starting a business
  • Learn what stage of retirement planning you’re in and ensure that you’re on the right path for a financially stable retirement
  • Build an emergency fund for a rainy day or in case you lose your job
  • Understand different financial products and which ones make the most sense for you
  • Drive behavior change by understanding how your money habits and financial life affects other areas of your life
financial-coaching-walking-and-talking-about-money

How to find a financial coach

If you prefer to work with an independently certified financial counselor, the AFCPE’s website is a good place to start. They maintain a directory of people who have earned the Accredited Financial Counselor or Financial Fitness Coach designation. 

An excellent way to find a financial coach is to ask around. If your friends and family are currently working with someone they love, they’ll be more than happy to give you a referral. If you don’t know anyone, you might be able to reach out to local businesses or investment clubs to see who they know.

If you’re looking to purchase a specific product, like life insurance or a retirement plan, people that market these products can also give great advice. Even if they specialize in one area or work with a particular company, they often have a good understanding of how different financial products work together. 

If you trust the company and the person, it’s fine to take advice from someone who is selling a product. Just because someone is selling something doesn’t mean that they’ll just push anything on you. In my experience, anyone that’s trying to sell you a financial product actually wants you to get the most out of it. 

Not only do they benefit from building a strong relationship with you (and hopefully referrals!) but it’s part of their job. Financial professionals have a legal obligation to recommend products and services that are in the best interest of their clients — not themselves or the company.

Final thoughts

Financial coaching is a type of coaching specifically tailored to the client’s individual situation. These professionals are a blend between traditional life coaches and financial advisors.

While they generally don’t give specific financial advice, they can help you improve your overall financial wellness. Financial coaching services often include creating a spending plan, understanding your cash flow, and paying off credit card debt.

Unlike financial advisors, financial coaches help clients understand how their attitudes and beliefs affect their overall financial situation. They help reduce financial stress, which can help improve well-being and resilience.

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Published May 27, 2022

Allaya Cooks-Campbell

BetterUp Staff Writer

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