Financial Coach, or Financial Advisor?
What’s the difference?
We financial coaches are often confused with other professionals like investment advisors, credit counselors, and insurance agents. The confusion happens primarily because the field of financial coaching is relatively new.... the last couple of decades at best.
With the field of financial coaching exploding in the last few years, it’s important that people learn what we offer, and how we differ from financial people you may have encountered or utilized in the past.
As a financial coach, I have a pretty extensive network of professional contacts to whom I refer people, and who in turn refer clients to me, because they just don’t deal with the specific personal finance problems that people have. Most of them just want to sell a financial product, not help someone with their monthly budget. And I refer my clients to those professionals as needed, to get specific products that I don’t provide, after I’ve educated them on the products to look for or avoid.
Most often a financial coach (or “money coach”) is confused with a financial advisor. Yes we do “advise” you on what to do with your money, but the term advisor has become associated with someone who helps you with your investments, and even then only your investments like stocks, bonds, and mutual funds....they wouldn’t necessarily advise you on your real estate investments, for example.
A financial coach will help educate you in general about investments, but we aren’t specialists in particular investments, like individual funds or stocks, and we are legally not permitted to advise you on specific investments, anyway (unless a particular coach is also certified as an investment advisor, that is).
We likewise are, generally speaking, not in the business of selling things like insurance. Again there are some coaches who are trained and qualified to do both. And I even know at least one coach who is also an attorney. But we can educate you on what types of insurance to look for or avoid, or when you might need an attorney to guide you.
But a financial coach will look at ALL aspects of your financial life, and in far greater detail than an advisor (even those who are Certified Financial Planners) when it comes to your day-to-day, week-to-week, month-to-month habits that are related to both earning and spending your income.
Financial coaching is FAR more about behavior than it is about numbers.
The simplest way to put it is that a financial advisor looks at your money’s behavior, while a financial coach looks at your behavior with your money.
So a coach will help you learn how to live on less than you make, by learning how to create and live on a budget, so that you can eliminate debt, so that you can build up an emergency fund and other savings, so that you can avoid any further debt. Doing so means you will actually have this thing available, that they call MONEY.
...money to then invest for your future and your family’s future, like for retirement or college (with the help of a qualified investment professional).
...money so that you can not only be comfortable yourself, but can bless other people, in your family and in your community, and even around the world, with the wealth you have created by adopting the personal money habits that a coach teaches.
So what qualifies someone as a financial coach?
There is no officially sanctioned body that does this, but all or nearly all of the financial coaches you find will have been trained by, and should subscribe to the teachings of, the Ramsey Solutions company, founded and led by financial guru Dave Ramsey. This means following the biblically-based financial principles that he has laid out in his “seven baby steps to financial peace”.
The baby steps are principles that our grandparents used to follow naturally. Things like living on a budget, living on less than you make, staying out of debt, and saving for a rainy day. It’s not rocket science, but simple common sense, which these days is unfortunately not so common.
The other qualification to look for in a good financial coach is personal life experience. While anybody who thoroughly understands the Ramsey baby steps can teach them to you, it’s best to have someone who has walked the walk for many years, if not decades, and has both successes and failures to inform their advice. That’s called EXPERIENCE.
Frankly, you don’t want some perfect person as a coach, who has never made a mistake with money. You also don’t want someone who is continuing to make mistakes, either. You want someone who has evidence of having learned from their mistakes, made corrections and now has a track record of success. That’s the kind of person that can help you avoid pitfalls yourself, and mentor you to your own version of financial success.
You can read more about my own story and my path to becoming a financial coach at www.moneycoachbev.com.