WHICH PROFESSIONAL SERVICE DO YOU NEED?
“What do you do?” I’m often met with a confused look among business mentors, associates at networking events, and friends who don’t quite grasp, at first, exactly what a Personal Finance Coach or Money Coach does.
I have one family member, in full-fledged support, disappointed because he had just gone to a Certified Financial Planner (CFP) for a consult. After two meetings, he had transferred his portfolio of assets through this new financial advisor. Said family member would rather have had me provide this service for him in support of my professional endeavors. I gently explained that my services do not compete with those of his CFP and that I could still help with the coaching aspect of his issue. A win-win-win for us all!
I’ve spent several minutes of a conversation going round and round with one business advisor, explaining what my business model is and what services I actually provide. He could not wrap his mind around the fact that coaching, educating and speaking can be monetized and leveraged.
I’ve even had a well-meaning banker cross his fingers for me and wish me luck getting clients. As a new business owner, this did absolutely zero for my confidence.
The varied reactions of confusion are understandable, considering many of us do not care to pay much attention to our personal finances, invest on a wing and a prayer, and have not received much education in school on personal finance. Yet, there are so many different financial services out there – from professional advisors and lenders for all stages of our lives, to credit cards, banks and investments educators. Even Walmart is a Financial Services provider! Their Customer Service clerks can cash payroll checks, issue money orders and send funds, internationally, for a few dollars.
There is also a plethora of information, educators and advice all over the Internet. Obviously, you don’t want to take money advice from just anyone, or conduct transactions just anywhere. So when considering professional services to nurture your financial wellness, where do you start?
WHAT IS THE DIFFERENCE ANYWAY?
A Certified Financial Advisor (CFA) or Certified Financial Planner (CFP) is a financial services professional who has undergone an apprenticeship to obtain licenses to take personal funds and direct those funds on a client’s behalf into some sort of financial product. It takes years of formal study, sponsorship, testing and ongoing fees to get the degree, certifications and experience to be considered a CFP or Certified Advisor.
As there are many different financial products out there, advice and proposed solutions will vary depending on the situation. The access to products and advice from a CFP will vary as well, according to their resources and experience. In my experience, CFPs are paid a percentage of your portfolio, whether or not it performs. They advise very in-the-box solutions (managed stock market portfolios), and do not provide much coaching or education. A more valuable CFP will provide a retirement strategy, financial updates via newsletter and do-it-yourself money education and management tools. They are also supposed to manage your funds on an ongoing basis. The industry is becoming much more regulated than in the past. These functions require advisors to be very aware of your level of risk and to enroll your money in suitable investments. This involves a lot of paperwork and disclaimers.
A Money Coach or Financial Advisor (uncertified), is also a financial services professional. However, they may or may not have undergone formal training or special certification. There is no regulation on the financial coaching industry. A money coach would not be able to take your assets and invest them on your behalf, nor sell any sort of regulated financial products (i.e. annuities, insurance policies). They should not be doling out investment advice either.
WHEN YOU MAY NEED A MONEY COACH?
Money Coaches are perfect for dealing with short-term issues. They can help you brainstorm ideas, evaluate your options and follow up with you and your plan to get the desired result. For example, you want to learn how to create a budget and stick with it to reach a specific goal, but you have never followed a budget before. A coach could teach you how budgeting works, give you several options to find what may work best for you, and then work with you on implementation. The Coach would also follow up for a length of time to make sure you are staying on track until you have accomplished your goal.
Another great time to refer to a Money Coach is for educational purposes. For example, your reading club picks a financial empowerment book of the month. A coach could present to the group certain concepts to reinforce what you are reading and learning while providing group or one-on-one coaching.
Any group that is in need of financial literacy would be best off reaching out to a money coach, personal finance educator or speaker. The National Financial Educators Council, for example, has a database of speakers and certified teachers on the topic of financial literacy. High school or college-bound students could gain greatly from a Personal Finance or Independent Life Skills course, which often is not offered in high school or Jr. College.
Likewise, a Personal Finance or Money Coach would be well-suited for an employer looking for a Financial Literacy Program Implementer, or Educator to come in and provide classes or workshops to employees as a workplace benefit.
ARE THESE COMPETING SERVICES?
Although both professions are in the financial services field, they are certainly different in their roles and functions. A graduating high school student or college student, for example, that has little to no assets yet, would not need the services of a financial planner; yet, they could benefit greatly from working with a coach to tackle higher education funding, building and managing credit, budgeting and investing basics. If their parents are not skilled in these areas or have not breached the topics for whatever reason (communication can be tense with teenagers), a third neutral party teaching this information would be highly valuable.
Another example: A family heavily in debt, that may otherwise be intimidated by a Financial Planner, could get the intervention and knowledge needed to manage their debt, and eventually start building assets. A Money Coach could teach and coach them through how to do this. A Money Coach could also advise them on choosing a Financial Planner, when the time comes, allowing them to determine a good fit in a qualified professional.
There is a large psychological component associated with money and our relationship to money as well. Our net worth and how we manage money flowing in and out of our lives is very much a reflection of our self-worth. Working through our stories and repairing that relationship to money, or mindset would be a good time to consult a Money Coach. (A CFP, who is more analytical and number-crunching, is not going to be talking you through how to make your ‘money energy’ whole).
WHEN YOU MAY NEED A CERTIFIED FINANCIAL ADVISOR?
Many attorneys and CPAs (Certified Public Accountants) have taken the examinations and met the licensing requirements of a Certified Financial Planner. These professionals can provide in-depth assistance on tax planning and preparation, estate planning and insurance needs.
For example, a CFP could help rollover funds from a former 401k plan or move funds from a 401k to a ROTH IRA to help minimize tax consequences. For large amounts, a longer-term strategy would be needed to avoid going over annual contribution limits and getting bumped into higher tax brackets.
I personally consult a CFP firm when working on complicated financial issues and recommend you do too.
Money Coach and Certified Financial Planner are two very different roles – both valuable. Consult a Money Coach for financial education, budgeting assistance, and daily money management strategies; use the CFP for complicated financial problems.
For information please visit my article on Creating a Sound Financial Foundation.
Michelle Boss is a Personal Finance Coach and Certified Financial Education Instructor. She is certified through the NFEC. As a Professional Money Coach, Michelle helps successful women get smart with money so they can grow their wealth and finally feel financially secure. With Michelle’s Group and One-to-one Coaching Sessions, she helps take the Fear out of Finances.