What is financial coaching?

How does financial coaching work?

Essentially, a financial coach is a money coach, someone who can help you achieve what you want with your money by offering guidance and support when you’re managing your finances.

Financial coaches can help you improve your financial health by taking a holistic look at your finances.

Throughout a session, or perhaps even across multiple sessions, a financial coach will try to help you establish what your current financial situation is, and where you want to be in the future.

Your coach may also try to help you understand some of the psychology behind your own financial decisions, with the ultimate goal being to give you a sense of purpose and empowerment over your relationship with money.

Financial coaches have access to a range of resources and often have experience working with people from all walks of life, having built up a network of their own clients over a number of years.

In combination, this allows them to make suggestions to help you gain greater knowledge and a better overall understanding of your finances and your entire financial situation.

A personal trainer for your money

It can be helpful to think of a financial coach as a personal trainer for your money.

Much like a personal trainer will do when setting fitness goals, a financial coach will ask you what it is that you want to achieve with your money.

They’ll then help you put together a “training programme” for your money so that you can start actively working towards your financial goals.

As with a fitness plan, it is often the case that the more time and energy you put in when working with your coach, the better your ultimate outcome.

A more accessible choice

The reason that many people choose financial coaches over the more traditional option of a financial advisor is that they tend to be more accessible.

Advisors tend to charge more than coaches for their advice, meaning it can sometimes be more suitable for those who already have assets.

By contrast, coaches offer a more accessible service, working with people of all levels of wealth. This means, if you don’t yet have a large amount of money, a coach may be more suitable for you.

Financial coaches are generally not regulated

It’s important to note that financial coaches, their firms, and the financial coaching industry as a whole are typically not regulated by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority.

This means that while a coach can make suggestions and help you in a non-specific way with guidance and support, what they tell you is not technically professional financial advice.

A financial coach is also unable to recommend specific financial products, such as choosing investments for you or telling you to use a certain pension scheme.

Who can become a financial coach?

There are no formal requirements for those who want to become a financial coach.

Even so, it can often be sensible to choose a financial coach who is certified or has a level of formal education to prove that they’re knowledgeable and able to help you. That way, you can be confident that they have the skills required to assist you.

For example, some financial coaches are former independent financial advisors or planners.

Some coaching firms also have strict requirements for the level of knowledge that their coaches must have before they’re allowed to start helping clients.

What services do financial coaches offer?

Financial coaching services offer support and guidance across the spectrum of money management.

Provide guidance around money

The first step coaches often take is providing guidance and support about finance in general so you can start taking control of your money.

This might be as simple as explaining how a pension works or assessing what sorts of financial products you already have.

Improve your relationship with money

One of the key services a coach offers is to try and help you build a better relationship with your money.

You might want to understand your own money habits a little bit better. Or perhaps you want to find strategies that help you improve your relationship with risk.

Whatever it is that you want to do, a coach can provide guidance and suggestions that help you improve your understanding of and relationship with your money.

Debt management

Another important service that coaches offer is helping people to manage debt.

Debt is one of the biggest barriers to financial security as it can quickly make your financial situation worse if you don’t keep on top of it.

A coach can help you to understand the debt you have, and help you find strategies that best allow you to manage it.

They might also offer support on how to avoid debt in the first place, such as effectively budgeting with the money you have.

Job and career decisions

Changing jobs or making a decision when you’re running a business can have a serious financial impact.

A coach can walk you through the various financial considerations that come with changing to a new role, such as how to prepare yourself financially for a new role and what sort of options you need to look at to achieve this.

Investing and pensions

Investments and pensions are widely known as being highly complex and difficult to understand.

A coach can explain the pros and cons of various investment and pension options, and provide guidance around the areas in general.

However, it’s important to remember here, that financial coaches are not authorised or regulated by the FCA. As a result, while they can provide guidance on investments or pensions, they cannot recommend specific products to you.

Mortgages

Mortgages are one of the most common financial products as plenty of people rely on them, and yet there may be some concepts that you’re not quite sure of.

A coach can take you through and explain important terms related to mortgages, such as loan-to-value, equity release, repayment versus interest-only, and Stamp Duty.

They can also help you consider what’s most important to you when choosing a mortgage, and explain the differences between fixed-, variable-, and tracker-rate mortgage deals.

Bear in mind that coaches are not mortgage brokers and so cannot find or recommend specific deals for you.

How much does a financial coach charge?

The costs of working with a financial coach will vary depending on who you work with and how much time you spend with them.

Typically, you’ll only pay a financial coach for their time, rather than the kind of advice they give you. This is usually charged by the hour.

There are various estimates available for how much financial coaches charge, ranging from around £75 up to £350 an hour.

Financial coaching vs Financial Advice: Should I work with a coach or an advisor?

Considering the range of services that a coach can offer, you may be wondering why you would work with a financial advisor or planner instead.

The main difference between financial coaches and financial advisors or planners is the focus on how they offer their advice.

A financial advisor can take a look at your entire financial situation and advise you personally on what you could do to reach the targets you have for your money.

The aim of financial planning alongside an advisor in this way is to develop a financial plan that helps you achieve your future goals, no matter what they may be.

Regulated advice

Crucially, most financial advisors are regulated by the FCA. That means they have both the authorisation and the technical knowledge to recommend specific products that can help you reach your goals.

Knowing that your advisor is an authorised professional can give you greater confidence that the full extent of your needs as a client will be met.

In summary

The key points to know about financial coaching are:

• A financial coach can help you improve your relationship with your money.
• They can support and guide you on a range of financial matters.
• Your coach will be able to explain complicated financial concepts in detail, allowing you to have a greater understanding of your financial products and broader situation.
• Coaches tend to be cheaper than financial advisors, meaning they are a more accessible option for many people.
• Financial coaches are not regulated by the FCA, and their services do not constitute financial advice.
• If you’re in need of personalised financial advice, you should find an independent financial advisor to help you.

Please note

This article is for information only and does not constitute financial advice.

Please do not act based solely on anything you might read in this article. All contents are based on my understanding of HMRC legislation, which is subject to change.