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

Financial coach vs. Financial Advisor. Same, same - right?! Wrong!  We’re different and in a good way. I often get asked, what’s the difference between a financial coach and a financial advisor. I mean if you’ve done the training to be a financial advisor doesn’t that just make you a financial advisor? Answer: no. Today, I want to spend some time talking about the difference between a financial advisor and financial coach, the benefits of both plus explore some scenarios where it makes more sense to see one or the other. Ready? Let’s dive in!

What is a financial advisor?

A financial advisor is a qualified professional who can provide you with general or personalised financial advice. They will spend time getting to know you, your goals and create a detailed & personalised plan on how to get there. Financial advisors primarily focus on helping you to identify what to invest in to grow your money, plan for retirement and manage your superannuation fund. They can also review and set up personal insurances like income protection and life insurance. Some providers may also be able to advise you on taxation and estate planning too. 

Make sure your financial adviser has an Australian financial services (AFS) licence or is an authorised representative. Check their qualifications on the Financial Advisers Register.

What is a financial coach?

A financial coach also wants to understand and help you achieve your goals but their primary purpose is to educate you and help you get your finances organised. Most of us are not taught how to organise and manage our money day to day and we often underestimate the impact of our attitude towards money on our financial outcomes. This is where working with a financial coach can be very beneficial because they help clients take responsibility for their money decisions. They will work with you to understand your financial concerns and goals. They can help you establish a framework to manage your money more effectively with a budget or spending plan to begin to pay down debts and/or build up toward your goals. A good financial coach will also educate you on how things like investing, buying property, superannuation and insurance work.

When should I work with a financial coach and when should I work with a financial advisor?

It makes a lot of sense to work with a Financial Advisor when you have a larger sum of money to invest because you’ve been saving for an extended period or perhaps you’ve come into money through an inheritance or a separation. Financial advisors are also excellent when you’re weighing up a number of options and want to understand the impact of making a particular decision like ‘should I pay down my mortgage faster or build up my superannuation’ or ‘what’s the impact of taking off more time to raise my children’ or ‘when can I begin to transition to retirement and how much do I need to retire comfortably’. 

The thing is, accessing sophisticated and personalised advice does come at a cost because of regulatory burdens and obligations of providing advice.  The cost of seeing a financial planner can range from $2,500 to $3,500 to set up a plan, and then about $3,000 to $3,500 annually if you have an ongoing relationship with the planner, according to the Financial Planning Association (FPA). Of course, if you’re seeking particularly complex advice, the fee can be a lot higher.

If you’re just starting out on your financial journey and have a modest level of savings, are living paycheck to paycheck or struggling to get on top of debt then the fee associated with financial advice may outweigh the benefit of the advice. In which case, consider working with a financial coach instead.

A coach is great for helping you understand your current money situation better. They can help you establish financial goals and steps to get there as well as develop a money management framework that helps you to enjoy today whilst also working toward your future goals. A coach will help you to make sense of your money by understanding the impact of high interest debt, the principles of saving and investing. They can also demystify things like how does one actually buy a property and what makes a strong loan application, how does superannuation work and why should you care about it plus what are the things you can do to protect yourself against life’s curveballs.

I personally think working with a financial coach is also a great way to build financial confidence and allow you to be more informed when working with your accountant or financial advisor down the track. 

Perhaps you’re a high income earner but with every pay rise your lifestyle expenses have increased too and you just can’t seem to get ahead in your savings, maybe you’re recently separated from your spouse and are managing your money for the first time, or perhaps you have recently moved out of home and have no idea where to begin when it comes to financially adulting, or maybe you’re a couple who is trying to navigate how to become a financial team. These are just a few scenarios where working with a financial coach can really help.

Are financial coaches regulated like financial advisors are?

Not at this stage. Financial coaching is a relatively new industry and doesn’t usually require a coach to have an AFS because they’re not selling tailored financial advice or products to clients.

Some financial advisors will offer coaching services at a reduced rate to advice services. In which case, you know that the person you’re working with is suitably qualified.

Many financial coaches operate independently and if you’re considering working with them take the time to find out what their experience and qualifications are. There’s no minimum qualification required to be a financial coach but you should expect your coach to have some experience and qualifications in the area of finance.

How long should I expect to work with a financial coach?

You should expect to work with a financial coach for a least a couple of months but you may choose to work with them longer than that. Some clients just need a couple of sessions with a coach to get themselves on track whilst other want more regular check ins and to be kept accountable over a longer period of time. It really comes down to you and your needs. A good coach will work with you to find what’s best for you.

How much does a financial coach cost?

The cost of a coaching session will vary from coach to coach but expect to pay between $150 - $300 per session.

Personally, I love being a financial coach but I also believe it’s important that we all engage a good financial advisor at some point in life. I think for most people simply working with a coach who can help you to better understand your money habits and helps to build your confidence when it comes to money goes a long way when it comes to improving your financial wellbeing and creating financial abundance.

If you have any more questions about the difference between financial coaching and financial advice comment below or send me an email at hello@betsywestcott.com.