- Although their titles sound similar, financial planners and financial coaches play different roles in helping clients make informed decisions about their money, says financial coach Katie Oelker.
- Financial coaches help their clients take control of their finances based on their current situation and their goals.
- Financial planners, on the other hand, take an investment route that may not always be advantageous depending on the financial situation.
- This article is part of a series called Master your Money.
Most people have heard of financial planners, but few have heard of financial coaches. Naturally, because financial coaching is a newer industry that is mostly unregulated at this point. That being said, there are huge benefits to working with financial coaches, but it’s important to understand who they serve and when to use their expertise versus working with a financial planner.
Meeting with a financial planner can be completely overwhelming for many people. Many are embarrassed to talk about their situation, especially if they’re struggling with debt or living paycheck to paycheck.
Financial planners also focus on the investment side of personal finance, as they are usually reimbursed for fees on investments (unless they are fee-paying financial planners). Most are also licensed to sell insurance products, so individuals can also purchase life insurance, disability and individual retirement account products from financial planners.
But what if you’re struggling to manage debt, live paycheck to paycheck, or save enough money to start investing or get the insurance you need. need ?
This is where financial coaches come in.
While there are financial planners out there who can help you with these things, many do so in the hope that you will end up investing with them or buying insurance products in the meantime.
Financial coaches specialize in helping their clients organize their finances, create budgets, and develop a plan to pay off debt and save more. They generally only work with individuals on a fee-based advisory model and do not sell insurance or investment products.
Here is an example of the steps financial coaches have their clients follow:
- Meet with the client(s) to assess their current financial situation and understand their concerns and financial goals.
- Gather the action steps needed to achieve those goals.
- Develop an action plan indicating when the action steps will be completed and what type of support/accountability will be needed.
- If they don’t already have one, set up a tracking/budgeting system for the client(s) so they can figure out where their money is going and how to free up more to pay off debt and save money .
- Check in with clients several times a month to assess progress and adjust plan as needed.
Clients typically work with financial coaches for several months to a year, although there are certainly instances where they work together for longer or shorter periods of time. If, after working together, they need more advice on topics like specific investments to choose from, college savings, or advanced tax planning strategies, then it would make sense for them to meet. a financial planner who can then guide them through the next step in their goals.
Financial coaching and financial planning are two completely different industries that each bring unique value to their clients. If you’re struggling to organize your finances and achieve your short-term financial goals, financial coaching is a great place to start.
Katie Oelker is a money coach, personal finance writer, and member of BI’s Money Council.