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Do you feel on top of your finances? Confident that you’re on the right track and making good financial decisions? According to a report from the 2020 Consumer Literacy Survey by the NFCC, nearly half of Americans (47%) are following a budget and 57% give themselves an A or B rating in financial literacy. There is a large gap of people that don’t have the proper tools or education on how to be successful with money.

This is where a Financial Coach comes into play. A financial coach will come alongside you on your life’s journey to help guide you towards your financial goals. They will assess your situation, lifestyle, needs, goals, and personality to deliver recommendations and training in a way to kick start your success.

How Is a Financial Coach Different from a Financial Advisor?

First, let’s discuss what a financial advisor is. The Oxford dictionary states that a financial advisor is “a person whose job is to provide financial advice to clients” and adding in Wikipedia’s definition of “a professional who suggests and renders financial services to clients based on their financial situation”. Advisors will typically help you with deciding which insurance products to get, investment strategies, along with planning for the future. Certified Financial Planners (CFP) are advisors that have gone through extended training on financial strategies and planning for retirement. A lot of times, we associate financial advisors with managing our money for us and will look for their assistance when we have wealth.

A financial coach is not certified nor legally allowed to give you advice on specific investment purchases. They’re merely here to be your teacher and cheerleader through empowering you to reach financial wellness. Most financial advisors are certified and have a fiduciary responsibility to help you make specific investment purchases and professionally plan for your future.

You may be familiar with gym coaches, health coaches, and life coaches, but a financial coach is similar in that they will teach you the basics of personal finance. Like other types of coaches, they will guide you through implementing best practices in your life along with building a plan and holding you accountable to it. They’ll know when you’re ready for the next step and may recommend Financial Advisors or Planners, Insurance Agents, or Counselors within their professional network.

The abilities of a financial coach can be looked at as a subset of what a financial advisor would be able to provide. As such, you would seek out a coach to help with the basics of personal finance before seeking an advisor once you’ve built your wealth. This is also based on cost of service and need. Financial advisors charge in one of three ways:

  • Fee-only: The advisor would charge you by the hour for their time, a flat fee, and/or by the assets they manage for you. Typically, this is 1%. So, for example, if they manage $100,000 of assets for you, it would cost you $1,000 a year for their services. This goes up as your assets grow in value. These are all called “advisory fees”.
  • Commission-based: The advisor would make commissions from the investment providers based on what you buy from them. While the third party pays the advisor, the fee ultimately comes from your account. This could range between 3-6%. These are commonly referred to as “account fees”.
  • Both: An advisor could charge you a fee while also making commissions off your investments.

Notice

Be wary of Non-Fiduciary financial advisors. They may try to sell you investments that benefit themselves through commissions rather than being concerned with if it is the best investment vehicle for you. Look for designations such as CFP®.

A way to look at the two, is also that a financial coach is there to help you reach the starting line of having a healthy financial life. Along the way, you grow your wealth and complete some of your starting goals. Then, you would seek out a financial advisor to help with the rest. You’ll have money to invest or save for retirement, and an advisor would help develop that long term plan.

When Should I Seek Out A Financial Coach?

You should seek out a financial coach when you feel like your debts are getting out of hand, you just can’t get your budget to work for you, or you want someone to help teach you more about personal finance. Financial coaches are great at helping when forming a budget, building a plan to getting out of debt, preparing for emergencies, saving for the future, and building new habits.

A pro about a financial coach over a financial advisor is that it’s usually cheaper to seek the help of a coach than an advisor. As stated above, a coach has less overhead and requirements making them more affordable. A coach will charge per an hourly (session) or have a package of sessions for purchase. They will also be used for a limited time, as much as you need to become stable or as needed, whereas an advisor would be with you for years to come.

What Should I Look for in a Financial Coach?

Just like any other type of coach or counselor, you want to make sure you can feel comfortable and open with them. When meeting with a financial coach ask yourself these questions:

  • Can I get along with this person?
  • Can they provide the help and guidance I need?
  • Can they get the information across in a way that I can relate to and understand?
  • Do they see me as a person, or do they just want to fix my problem?

When requesting a session with a financial coach it will be prefaced with a pre-consultation call. This will give both parties the opportunity to get acquainted and the above question answered. Once you are ready to move forward, the coach with provide you with some materials to complete before the first coaching session.

I Think I Might Need a Coach

If you think you need a financial coach or want more information, reach out to us! Click on our Contact page to send us a message and we’ll be in touch with you. We have heard all the complaints about our school systems not teaching us budgeting or taxes and that our parents before us never talked about money. It’s never too late to start taking charge of your finances.

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