Name a challenge people face in life, and there’s bound to be a coach for it. Struggling with your weight? Get a fitness coach. Keep missing those promotions? Hire a career coach. Feeling stuck in a rut? Try a life coach. Emotions getting in the way of sound financial decisions? You may need a financial coach.
Unlike financial advisors, who focus on creating investment strategies and financial plans, financial coaches take a close look at the behavioral side of finance.
“Financial coaching is establishing processes and tools for balancing the behavioral and financial needs of the client,” says Eben Burr, New York City-based president of the Behavioral Investing Institute, a behavioral and financial coaching service offered by Toews Corp.
The need for a financial coach is simple: A financial plan, no matter how faultless, is still subject to human behavior and emotion.
“The hard-wired response of many is to get greedy and take on more risk when markets are advancing, to become fearful when they are declining and want to sell, and experience frustration in sideways markets and want to shift into whatever has performed the best as of recent,” Burr says. “A financial advisor can design an individualized financial plan and investment portfolio for their client. But if the client is always wanting to make changes to the investment plan based on soothing a short-term discomfort, then the financial advisor’s efforts may be in vain.”
What Is a Financial Coach?
A financial coach is someone who helps you improve your relationship with money and stay on track to meet your financial goals.
“Think of a financial coach like a personal trainer, whose job is to help you discuss, establish and uphold positive routines,” says Julie Genjac, managing director of applied insights at Hartford Funds. Like a personal trainer who helps you understand your relationship with food and exercise, creates strategies to prevent your natural desires from derailing your efforts and encourages you to stick to your plan, a financial coach does the same for your finances.
“Financial coaches are there to help you establish a positive relationship with money and determine what your natural motivations are toward saving and spending — and then building accountability into your decisions going forward,” Genjac says. “(They) know you and your mindset, and they help keep you on financial track with day-to-day behaviors, thoughts and, most importantly, encouraging small successes.”
Stephanie Vaught, a financial coach and founder of Social Money Finance LLC, says she helps her clients realize that their lifestyle is a direct reflection of their money mindset and habits. “Any changes they wish to make must start with the way they think about and treat their money,” she says.
She helps clients understand the importance of tracking their income and expenses; set real, attainable goals; and create spending plans that hold them accountable. “I specialize in money management because it is a necessary component to building and sustaining wealth,” she says.
Unlike a financial advisor, a financial coach won’t provide investment recommendations. They don’t design investment strategies. Instead, they do the foundational work to prepare clients for the emotional challenges they may face while pursuing their financial goals.
Financial coaches instruct clients “by illustrating what they may feel and actions they may want to take in different kinds of markets and then show them another way to look at a challenge from an instinctual, emotional and historical perspective,” Burr says.
What Does a Financial Coach Do?
A financial coach helps you create healthy financial habits and goals. These can range from day-to-day money management to planning for longer-term goals. He or she can help you identify the problem areas of challenges in your finances and develop strategies to overcome them.
Like therapists, financial coaches often meet with clients on a weekly or biweekly basis. This relationship can last anywhere from a few months to years. It usually starts with helping you evaluate your current financial situation, such as your money habits and where your areas of strength and weakness lie. They help clients establish goals and financial plans to meet those goals that acknowledge the client’s strengths and weaknesses. A financial coach also acts as an accountability partner to help ensure you stay on track to meet your goals and continue to make progress in improving your money management habits.
Why Become a Financial Coach?
Vaught became a financial coach when she realized there was a gap in the marketplace, specifically among Gen Xers. “No one was talking to us about our money,” she says. “You can make all the money in the world, but if you haven’t learned basic money management principles, poor money habits can eventually sabotage your progress.”
Financial coaching and traditional financial planning can be a potent combination. Financial advisors who double as behavioral coaches know how to create a financial plan with behavioral bumpers around predictable behaviors that could derail a client.
Since financial coaching emphasizes the behavioral side of finance, the role may appeal to people who don’t live and breathe the stock market. If you don’t get out of bed every morning and say, “I wonder what the stock market has done,” or don’t have a driving passion for investment vehicles, but still feel strongly that money decisions have a profound impact on people’s lives, becoming a financial coach may be the right path for you, Genjac says.
Likewise, if you’ve had your own experiences where behavior got in the way of your financial goals, this history could make you an even more effective coach. Any time a personal life story can serve as a springboard for a career path, it provides an incredible foundation to tell others why you do what you do, Genjac says. She encourages people considering the field to think about their experiences with money to see if there’s a hidden passion lurking there.
How to Become a Financial Coach
You don’t need to get financial licenses or any certifications to become a financial coach. Simple life experience can be enough. Still, there are certain steps you should take to increase your chances of a successful career as a financial coach.
1. Educate yourself. While there are no educational requirements to become a financial coach, many experts recommend at least looking into getting your Financial Industry Regulatory Authority (FINRA) licenses or a more formal education.
Financial coaches who are not advisors would be limited in what they could offer clients in terms of financial planning and portfolio construction, Burr says. Such an individual may look more like a financial therapist, he says, and may work with a certified financial planner.
Fred Hubler, founder and president of Retainer Based Academy in Pennsylvania, agrees: “If someone wants to help clients and does not have, nor want to have, any financial license, then they should call themselves something different than a financial coach,” he says. “This would protect them from the many laws on the books to protect the public by requiring financial advisors to follow regulations and procedures.”
If you are a licensed financial advisor who doubles as a financial coach, you’ll likely need to get your coaching practice approved by your firm’s compliance department.
Getting a certification or more formal education, such as the accredited financial counselor designation offered by the Association for Financial Counseling and Planning Education, will only improve your knowledge base and ability to market yourself to clients. “Anyone can call themselves a financial coach, but if you are a coach with all the proper licenses and skill sets as a financial advisor, you will be better positioned to help the client,” Hubler says.
2. Find a niche. To become a financial coach, he recommends starting with the value you bring to the table. “These days, a ‘one-size-fits-all’ is not the most successful path and, more importantly, is not what a potential client would be willing to pay for.”
Think about your own relationship and experiences with money. Are there any niche areas of expertise you can home in on? For example, if you were close to bankruptcy but got yourself out, you may choose to focus on cash flow management and getting out of debt. If you’re divorced, consider focusing your financial coaching business around divorce financial planning.
3. Look for partnership opportunities. If you aren’t a financial advisor, you could reach out to local advisors to see if there is a partnership opportunity. “Financial advisors are juggling many moving parts each and every day, and it can oftentimes be difficult to be a day-in-and-day-out accountability partner to their clients,” Genjac says. “A financial coach could be a great supplement to the resources that a financial advisor brings to the table.”
4. Be honest in your marketing. Just remember: “You are not a lawyer unless you are. You are not an accountant unless you are. You are not a compliance expert unless you are,” Burr says. “Be careful with how you present yourself and your expertise.”
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Update 06/03/21: This story was published at an earlier date and has been updated with new information.