Money coach in a counseling session

What Is a Money Coach and Do You Need One?

Maybe you need someone who can recommend and sell financial products. Maybe you’re thinking of filing for bankruptcy. There are many financial professionals out there and it can be difficult to choose the best one for your needs. First, we’ll start with what a money coach does and then go on to the other common financial professions. Other professions include financial counselor, financial therapist, financial advisor and financial planner.

All but one of these professions is unregulated. This means that there’s no governmental organization that requires licensing or oversight. Money coaching and financial advising are broad terms. For example, I could call myself a financial advisor but I believe it would mislead clients. Financial advisors in certain capacities hold securities licenses and are known to recommend and sell financial products. I don’t sell or recommend investments.

Although there is no regulation, there are accreditation organzations for financial counseling, financial therapy and financial planners that hold people to a code of conduct. The training and exams are thorough and take care that people in those professions are held to a high standard. In fact, we’re held to a fiduciary standard. This means that although I’m a money coach, I put my clients’ best interests before my own or my business’s.

So long as you know the differences, you’ll be able to hire the right person for your situation. Do you need a money coach for help with budgeting and paying off debt? Or do you need a financial planner to handle large and complicated investments? Let’s get started!

Money Coach

A money coach helps people organize their finances and identify triggers that get in the way of goals. Sometimes we teach people something a great savings vehicle. Some coaches call themselves financial coaches, myself included, but it sounds formal, so I don’t use it often. We teach financial literacy and support you in your financial goals. There is no one-size-fits-all approach. Some people hire a money coach to get their finances in order, such as build credit or pay off debt. Then they transition to someone who can handle their investments, like a financial planner. We like to help people get into a place where they are building wealth, saving for goals and learning to manage their money with confidence.

Money coaching is an unregulated industry. Many of us may train to be financial educators or use our own experience in helping people manage their money. Coaches must carry securities licenses if they’re going to sell or recommend financial products.

We can teach you the difference between stocks and bonds, ETFs and index funds. We can tell you which brokerage firm we use. But we can’t tell you which stock to buy or where to invest your money. I have most of my investments with Fidelity, but I’ll tell you to find a brokerage firm for YOUR needs.

Financial Counselor

Karen Murrell and J. Michael Collins, from the Center for Financial Security at the University of Wisconsin-Madison differentiate coaching and sounseling like this

Coaching is differentiated from counseling in that coaches provide advice and encouragement, and do so in a process largely driven by the client. Coaching is not designed to be a therapeutic relationship or to aid clients in a more acute crisis resolution.

As with coaching, financial counseling is unregulated. However, there are organizations that provide training and accreditation. The largest and most respected of these is the Association for Financial Counseling & Planning Education®. (Disclaimer: I’m in the process of obtaining my AFC® (Accredited Financial Counselor) certification.) The AFCPE® describes its mission as one that promotes the financial well-being of all people. The association encourages people from all backgrounds to become financial counselors.

A financial counselor using the AFC® designation has to pass a test and complete 1000 hours in areas that cover core competencies. Financial counselors must take continuing education courses every two years and must also sign an ethics code. Check here to verify accreditation.

Financial Therapist

Financial therapy delves deep into the person’s behavior around money. Therapists use evicence-based practices to help people who need deeper assistance. This could be helpful if you’re dealing with bankruptcy or going through a divorce. Fiancial therapists are trained to look at multiple factors that influence how we handle money.

When we think of a therapist, usually we think of someone to talk to about a mental health problem. But many people in financial spaces believe (and studies show) a link between finances and mental health. Stressed over whether you can pay off debt? Or are you thinking that bankruptcy is your only way out? Then maybe it’s time to talk to a financial therapist.

Requirements for a Financial Therapist

My therapist has a Master’s Degree in Counseling. Other therapists have a Master’s Degree in Social Work. A financial therapist may or may not have a master’s degree, though many of them do. The minimum requirement is a bachelor’s degree to participate in the program. If you have certain qualification that qualify for a special review from the Financial Therapy Association. The program to become a Certified Financial Therapist is rigorous.

Financial therapy as a service or profession is unregulated. However, there are standards that must be met in order to earn a certification from the Financial Therapy Association. Many of these fall in line with standards from other financial services.

Financial Advisor

A financial advisor is someone who gives advice about money. Easy enough, right? Well, no. Anyone can call themselves a financial advisor. Some money coaches call themselves financial advisors (I’m not one of them!). If you’re looking for a financial advisor, you may be looking for someone to tell you if you’re on the right financial path. Your financial institution may offer the services of a financial advisor.

Do you need a financial advisor? That depends on your emotions, your money, the size of your assets and a few other factors. Are you REALLY uncomfortable even thinking about your money? Are you confused about the options? Do you need someone to put your fears at rest? Financial advisors can help you plan for the future, help create an estate plan (although I STRONGLY recommend an estate planning lawyer to work with the FA).

Financial Advisor Fees

Does the advisor charge a flat fee or a percentage of your portfolio? Flat fee is best because you pay the same, no matter the size of your portfolio. And you won’t be paying commissions on investments you purchase. Here are some good terms to know from NerdWallet (emphasis added):

  • A fee-only advisor doesn’t earn any commissions from investments. These advisors face the fewest conflicts of interest when offering advice. They may still piece together more than one fee type — for example, charging an AUM fee for investment management and a flat fee for financial planning.
  • A fee-based advisor charges a fee but may also accept commissions from investments. Many advisors combine commissions with an AUM fee.
  • A commission-only advisor earns their income from commissions on the investments bought and sold on your behalf.

Is this person licensed to sell financial products? Anyone who sells investments must be licensed. Confirm at these sites that their license is current and whether the person has had disciplinary action taken against them. Check out the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or your state securities or insurance regulator.

Certified Financial Planner®

A Certified Financial Planner®, or CFP® is one type of financial advisor. This designation is unregulated. However, there are financial planners that can sell investments. You’ll need to check out their license and accreditation. Financial planners may refer a potential client to first work with a money coach. For example, a money coaching client may have completed a debt repayment plan and now needs advice on estate planning. That would be an example of the two working together.

A CFP® can help you with managing your money, growing your wealth and planning for the future. Depending on their services, they may manage your portfolio and sell investments. As with a financial advisor, you want to ask this person if they charge a flat fee or a percentage of your portfolio.

A CFP® undergoes a thorough exam and must have a bachelor’s degree, in addition to the coursework and adherence to an ethics requirement. I’ve read that the exam for the CFP® is harder than any exam taken in college!

Find a financial planner here.

Finding the right person to work with will help you feel financial security!

Final Words

Before hiring anyone to help you with your money situation, do your research, and follow these tips as appropriate:

  • Do help people with my situation (debt, estate planning, financial stress, etc.)?
  • Do you charge a flat fee or are you commission-based?
  • What is your investment philosophy? You want to be sure there’s a match.
  • If the person has a credential, confirm that the credential is current on the appropriate accreditation website.
  • If the person sells financial products, confirm that their license is current and there are no complaints lodged against them.
  • Do you abide by a fiduciary duty? This means putting the client first.
  • Do you have a list of all your fees?
  • How will we communicate?
  • How do you protect my privacy online? This is if you have to send or upload documents.
  • How do you protect client confidentiality?

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