Financial coaching is still a relatively new concept in the UK, yet working with a competent financial coach could seriously boost your financial wellbeing. It’s estimated that less than 10% of the UK population have a financial adviser, so for millions of people, financial coaching could be a powerful solution to a brighter future.
It should not be seen as a low cost alternative to financial advice, but rather, a collaborative process that can transform the financial outlook for whole families. To get a clearer idea of how financial coaching could help you, it may be helpful to understand, first of all, what not to expect.
Don’t expect ‘advice’ from a competent financial coach
Financial advice is when regulated professionals provide recommendations on specific financial products. In the past, this often revolved around a culture of sales commissions and that probably contributes to a degree of scepticism around financial advice.
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 advice involves a detailed fact find to gather all your financial information and your goals for the future. Based on this, 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 incorrect advice. It can, however, be expensive due to the regulatory overheads. As a result, most financial advisers tend to focus on clients who have already accumulated wealth. For example, many will only take you on if you have at least £100,000 of savings, or 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. There are no sales, no commissions, no percentage fees and no targets. This removes conflicts of interest.
- Financial coaching empowers you to make your own decisions and choose your own path. A competent financial 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 enjoy the benefits.
Financial coaching is not therapy
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 issue 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 should be a deeply engaging experience that inspires, motivates and generates 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”.
It doesn’t matter how much (or how little) money you have
One of the difficulties with financial advice is that most 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.
When working with a competent financial coach, you pay for their time and skill. Often, this can take on more of a mentoring style relationship, where you can draw on the knowledge and experience of your coach.
Generally speaking, the absence of regulatory overheads means that financial coaching will be less expensive than advice, but remember, it’s not a like for like comparison. Depending on who you work with, it can still be a significant investment and not just a ‘cheap alternative’ to advice. In fact, there can be huge benefits to working with both a financial adviser and a financial coach.
For some, a tremendous benefit of financial coaching is that, over time, it can help you build wealth. For others, who may already be wealthy, it can help build a sense of confidence and empowerment to feel more financially free.
Individual coaches may specialise in particular areas, such as budgeting, accumulation of wealth, repayment of debt or relationships with money. They may also work with particular types of clients, for example, couples, female only, younger or older clients or even those working in a specific profession.
In general, though, financial coaching is wealth agnostic.
If you want someone else to make decisions about money on your behalf, then financial coaching may not be for you. Similarly, if you have deeply held trauma from the past that needs to be resolved, a therapist or counsellor may be a better option.
If, however, you want to feel empowered, confident and financially free, then financial coaching could be transformational.
At GroWiser, we define financial coaching as:
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.
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