Financial coaching is a relatively new concept in the UK. Although it’s not very well known yet, it could help millions of people. To be clear, it’s not advice, it’s not therapy and it’s not just for the wealthy. But it can transform the financial outlook for whole families. To get a better feel for how it may help you, it’s useful to know, first of all, what financial coaching is not.
Financial Coaching is not advice
Everyone has heard of financial advice. This tends to focus on the recommendation and sale of financial products. In the past, this revolved around a culture of sales commissions and bonuses. Hence the scepticism that many people still have of financial advisers.
This has been changing for several years now, though. The ‘industry’ is moving towards a ‘profession’ and more advisers are beginning to operate on a fixed fee basis.
Financial advisers are authorised to provide investment advice and various other regulated activities. They can set up policies and liaise with providers on your behalf.
The financial advice process involves a detailed fact find to gather all your financial information and your goals for the future. Based on this information, an adviser will make personal recommendations on what they feel is best for you.
Advice is regulated by the Financial Conduct Authority and the Financial Ombudsman Service provides a degree of protection against bad advice. It can, however, be expensive to obtain due to the regulatory overheads. As a result, most financial advisers tend to focus on clients who have already accumulated wealth. For example, most will only take you on if you have at least £100,000 of savings – often much higher.
A financial coach will not make specific product recommendations and cannot intermediate with providers on your behalf. There are two key advantages to this:
- Financial coaching is completely independent of product providers. So there are no sales, no commissions, no percentage fees and no targets. The service is focussed solely on you, with no conflicts of interest.
- Financial coaching empowers you to make your own decisions and choose your own path. A coach will ask powerful questions and give you the space to think and form your own choices. Combined with financial educational and generic guidance, this builds confidence to take charge of your own financial future.
Of course, this means a degree of commitment from you. If you have no time or inclination to improve your knowledge and take action, then you might struggle to see the benefits.
It’s not therapy or counselling
Although the experience of financial coaching can be therapeutic, it is not therapy. Nor is it counselling. These services tend to focus on the remediation of a health problem and are generally focussed on the past.
Coaching is forward looking. It helps you to reflect on your present situation and to create solutions for the future. It can inspire, motivate and generate confidence for you to take action.
That’s not to say your financial past is irrelevant. Often, looking back at past decisions, behaviours and beliefs can inform the best way forward now. Research shows that most of our financial beliefs and habits are formed by age seven. Imagine how insightful it could be, taking time to understand why you feel the way you do about money.
Although coaching may not ‘fix’ issues from your past, there can sometimes be lessons to be learned. It’s not just the practical aspects of money that a coach can help with. Breakthroughs often materialise after looking at your emotional relationship with money.
As one client put it:
“financial coaching has turned my financial future into something exciting with purpose”.
And financial coaching is not just for the wealthy
Most financial advisers charge a percentage of the investments they manage on your behalf. This can often be 0.75% to 1% of ‘assets under management’ each year. This is why, generally, you will need at least £100,000 of savings, just to get started.
As a reminder, not all advisers operate on this basis. Some are moving to a fixed fee model of charging, but they can be difficult to find.
When working with a financial coach, you pay for their time and skill. This will often take on more of a mentoring style relationship, where you can draw on the knowledge and experience of your coach.
That doesn’t mean that financial coaching is just a cheap version of advice. It can still be a significant investment, depending on the qualifications and experience of the coach. And on how much coaching support you need.
One big benefit of financial coaching is that over time, it could help you to become wealthy in the future, if that’s your aim.
If you prefer other people to make decisions about money on your behalf, then financial coaching may not be for you.
If you want to feel empowered to make your own financial decisions, then financial coaching could be transformational.
At GroWiser, we define financial coaching as:
It’s a bit of a mouthful, but the behavioural change part is key. Many people use a personal trainer to improve their physical health and fitness. In the same way, you could use a financial coach to improve your financial health and fitness.
It just takes a couple of clicks to book a 30 minute chat to find out more. What have you got to lose?