What is a Personal Finance Coach?

Financial coaching is a confidential, judgment-free relationship with a personal finance expert to help you address current and immediate issues and then map out actions needed to accomplish your financial goals. As a personal finance coach, I will help you clarify your goals and values and help you align your priorities to achieve those goals. While my main focus surrounds your financial condition, I can also support you on career, real estate, estate planning, insurance, and other topics.

Just as athletes, entertainers, and entrepreneurs often utilize coaches to improve themselves and their ventures, a financial coach will help individuals and families improve their personal financial situation through education, guidance, and accountability.

What is the difference between a financial coach and a financial advisor?

For a traditional financial advisor and its commission-based roots, to the Assets Under Management model, and more recently the hourly/retainer models, the challenge is that the focus is on the FINANCIAL ADVISOR EITHER SELLING YOU A PRODUCT OR REAPING A COMMISSION from managing your assets.

The reality is that for most people, their needs for financial advice are focused on issues like credit card debt, building an emergency fund, or just understanding their income and expense for the first time. The challenges are divided between financial literacy and forming good financial habits around spending. Neither of these subjects are part of the typical engagement with a financial advisor.

Another important difference is that financial coaches are not licensed to provide financial advice like financial advisors (I gave up my series 7 and 66 when I left Merrill Lynch), and therefore cannot provide specific product recommendations. Financial coaches can provide conceptual advice on investing, but they cannot recommend how to allocate your assets. They can suggest saving money in a high-interest savings account, but they can’t recommend a particular account.

Financial coaching also differs from advising in that financial coaching tends to be a limited time arrangement, with the goal of helping the client to achieve financial literacy and learn to manage their own finances. A financial advisor is incentivised in keeping the relationship and continually selling financial products or managing your assets.

Ultimately, the key point is to recognize that financial coaching is emerging as a distinct service from traditional financial advisors, and one that reaches a distinct clientele who have been grossly underserved by the financial advisor marketplace.

What makes a good financial coach?

A financial coach has the best interests of the client at the center of the engagement.

A financial coach takes the time to understand the clients’ specific situation, works with them to clarify concerns, goals, and dreams, and then makes sure all discussions are in the context of the client’s personal priorities and values.

A financial coach should not sell any third-party products like investments or insurance. There is nothing wrong with those products, but your financial coach should have no financial incentive to recommend any specific financial and provide unbiased guidance.

A financial coach has life experiences that he/she has specifically learned from, and corrected, past mistakes. No one is perfect and challenges in the past can make a financial coach more understanding and compassionate. A financial coach should be a model for clients and have their own financial house in order.

You don’t need to $250,000 in investable assets to work with a financial coach. In fact, most clients are in debt, have little in savings and have poor spending habits.

Perhaps you’ve tried to make a budget, but just can’t stick to it…. maybe you make enough money, but can’t figure out how to build an emergency savings fund…. or maybe you have so much debt between credit cards and loans that you don’t know the best way to pay it off.

A financial coach can help you structure your budget, build a financial plan and hold you accountable throughout the process. Often, clients have deep-seated emotions around money. Financial coaches help their clients to identify, understand and work through those emotions and ultimately create a plan around your success.

If you feel that some or any of these challenges may be a part of your relationship with money, then it may be beneficial for you to engage with a financial coach so that you can more effectively move forward.

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