Financial Advisor vs Financial/Money Coach
Nov 13, 2024
Financial coaches vs. financial advisors. When would you need a financial coach, also known as a money coach? A money coach works differently from a financial advisor. While most people have a vague idea of what a financial advisor at an established financial institution does, few of us know the role of a financial coach.
I want to clarify the differences between these two roles and their unique approaches to personal finance.
Financial Advisor
- Financial advisors typically work for a financial institution like a bank or brokerage.
- They help you build your assets by recommending products.
- They are usually paid a commission for the products they sell you or a fee based on the value of assets they invest on your behalf.
- You pay this fee regardless of whether you receive advice or whether your investments make or lose money. It's payment for managing your assets.
- They create projections based on numbers — such as how much you need to invest to achieve your retirement goals.
- They typically work with clients who already have assets.
Financial Coach
Financial coaches are usually self-employed.
They offer unbiased advice since they are not representing a financial institution.
They are not solely focused on "the numbers" but address issues  such as creating a wealth mindset and emotional literacy around your finances.
They help you nurture a healthy relationship with money.
They work both with people with or without assets.
They are fee-based as opposed to commission-based.
They don’t recommend products.
They can’t tell you where to invest.
They provide you with strategies — based on modifying your behaviour—to help you achieve your financial goals.
They use esoteric techniques to manage money — such as meditation, to uncover limiting beliefs. Or tapping to release money trauma.
They don’t tend to use as much financial jargon.
You need a financial coach if:
- You have a good income but little to show for it.
- You never seem to be getting ahead.
- You have goals for a different life but don’t have a road map to get you there.
- You’re terrified to look at your financial situation. You wouldn’t even know where to start.
- You’re wondering, “Should I pay off debt or save?”
- You’re in a period of transition — retiring or changing careers but don’t know how to plan for it.
- You are suffering from guilt, shame, and fear regarding money.
Bringing it Together
The most significant advantage to a financial coach is their objectivity when providing suggestions because they don’t work for a financial institution. But that means they are not in a position to invest your investments on your behalf.
But they may be able to recommend a financial advisor who can do that for you. Financial institutions have traditionally taken a numbers approach to money management. A money coach goes beyond the numbers — by looking at your mindset and helping you change behaviours and beliefs blocking you from managing your money effectively.
It's hard to justify paying an advisor 2% annually to manage your assets, regardless of their performance. However, good advisors can help you navigate down markets so you don't respond to these downturns by hastily selling off your investments.
If you can work with a financial coach who can marry both the esoteric ideas of money with sound financial principles, then you are way ahead of the game
