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Financial Coaches vs. Financial Advisors

weekly roundup Jun 26, 2020


What's the difference between a Financial Coach and Financial Advisor? 

Garrett - Most financial advisors tend to focus on implementing financial products and strategies, while financial coaches focus more on the basics of personal money management, behavioral change, and accountability to a client-driven spending plan. And while financial advisors most commonly help to manage wealth that already exists, a financial coach’s job is to provide a client the knowledge, skills, and behaviors that will help them build wealth in the first place.

Another major difference between financial coaching and advising is that coaches typically have no tie-in with products at all; they do not manage investments, nor sell insurance. We might educate our clients on these basic concepts but we never provide specific recommendations - we refer clients out to licensed professionals for this. In many cases I don’t even discuss the above topics with my clients because they aren’t at the point where they have assets to invest; they are more worried about working their way out of debt or building up their emergency fund.

Regulatory Considerations

Walter - Hi, I'm new to this group. (I'm a Financial Advisor 7,66, LH/A) This is an interesting topic. I would highly recommend that anyone giving advice regarding credit cards, debts or anything financially understand the rules FINRA/SEC have put in place. Here is a link to what the SEC defines as an Investment Advisor. I hope this helps. If you have concerns I would advise you to consult an attorney that specializes in SEC/FINRA Law. They can provide you with clarity regarding this topic. I hope this helps. 😀 https://www.sec.gov/about/offices/oia/oia_investman/rplaze-042012.pdf

Licensed vs. Unlicensed 

Ben - I’d define the difference as: you need to be licensed to sell financial products such as insurance, investments, etc. Coaches sell services.

Fundamentals vs. Advanced Finance

Lindsay - IMO coaches should NOT discuss taxes, investments, or insurance. They SHOULD help with mindset, theory, and daily practice.
As a licensed planner I see a brick wall between the two (I only offer coaching services even tho I hold a license.

Options vs Recommendations & Guidance 

Cris - It’s a very fine line. I am a coach and I hold my CFP. When I coach I teach options. I educate on money matters. No recommendations. They make the decision. When I have my planner hat on I make recommendations and guide the plan.

 

Were these answers helpful? What's your answer? Let us know in the comments!

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