What is a financial coach and what do they do?

Coaching can help in many different aspects of life. Whether it’s in sports or just life in general, coaches can help us make the most of our talents and identify areas of improvement. Your financial life is no different. Here’s what to know about financial coaches, including when may be a good time to hire one.

What is a financial coach?

A financial coach helps clients learn money management skills such as budgeting, saving or paying down debt. They might help you create a financial plan, but typically won’t make investment recommendations the way a traditional financial advisor would.

A financial coach can teach the important financial lessons that many people don’t get in school, while also helping you understand why you make the financial decisions that you do and developing good money habits.

What does a financial coach do?

A financial coach regularly meets with clients to improve their overall financial skills or to work toward a specific goal, such as paying down debt or improving spending habits. Here are some of the areas a financial coach might be able to help with.

• Building an emergency fund
• Budgeting skills
• Understanding the emotional and behavioral aspects of money management
• Paying down debt
• Developing a financial plan

A financial coach may be able to educate you on different types of investment options, but they likely won’t be able to offer investment advice or help you build an investment portfolio. You’ll need a financial advisor or robo-advisor for that.

What’s the difference between a financial coach and a financial advisor?

A financial coach provides a more basic understanding of certain financial topics compared to financial advisors. Financial coaches may not have professional certifications such as the CFP or CFA designation.

A major difference between financial coaches and financial advisors is that coaches typically don’t give investment advice, whereas advisors are often registered investment advisors and they help clients with their investment portfolios.

Financial advisors may also require a certain level of assets in order to take you on as a client, while financial coaches typically don’t have asset requirements.

When to get help from a financial coach

You may find it helpful to work with a financial coach as you’re just starting out managing your own finances and then switching to an advisor once you have some basic skills mastered.

You may also benefit from the use of a financial coach if you have a specific financial issue you’re struggling with such as budgeting, credit card debt or building up your savings. These issues are fairly straightforward and you may save some money by getting help from a financial coach instead of a financial advisor.

How much does working with a financial coach cost?

A financial coach typically charges clients on a fee-only basis, meaning you’ll pay an hourly rate for the time they spend with you or a fee for a predetermined number of sessions. Financial coaches don’t manage your money or investments, so they don’t charge a fee based on assets under management (AUM) the way some financial advisors do.

Rates for financial coaches can vary, but hourly rates of $100 to $300 are fairly common. Annual packages with a financial coach may run into the thousands of dollars, so you’ll want to have specific goals in mind when you start working with a coach so that the costs don’t become a financial burden.

How to find a financial coach

One of the best ways to find a financial coach is to ask family and friends for recommendations. If someone has worked with a coach in the past, they can provide insight into how the relationship worked and whether or not they’d recommend them. You can also find an accredited financial counselor through findanafc.org.

Bottom Line

If you’re looking to enhance your money management skills, a financial coach can offer guidance on budgeting, savings and debt. Unlike traditional financial advisors, they don’t provide investment advice, but instead focus on financial literacy and habit development. Financial coaches charge hourly fees that tend to be more affordable than the fees charged by financial advisors. Just make sure to do your research first so you can pick a financial coach who meets your needs and your budget.