Financial Coach

What is a financial coach?

A financial coach is a professional who will work directly with a client to help them reach their financial goals. They primarily work with people who are undergoing financial trauma, have undergone a meaningful financial transition, or are at the beginning of their financial journeys. Their clients usually have not yet built up any wealth and so is unlikely to seek a financial advisor or planner. 

Financial coaches are a good source of information and guidance at the beginning stages of financial improvement. They can help do a financial assessment, create a budget, create a debt reduction schedule, help improve a credit score, evaluate employment benefits packages, motivate you to stay on your plan, keep you accountable to your goals, and set a plan for the next step in their financial progress. Financial coaches are not regulated as a financial advisor, so they are not allowed to provide investment advice or sell investment products.

Are financial coaches worth the cost?

Financial coaches can play an important role in a person’s financial improvement. They can help provide clarity, answer questions, and work with people to establish a plan that meets their goals. An effective financial coach can help a client identify and take steps toward making significant improvements to their financial situation. A good financial coach, like a good sports coach, doesn’t actually do the actions. They guide people to understand what changes need to be made in order to improve their performance. 

What makes a financial coach effective?

Both hard skills and soft skills are essential for a financial coach to be effective. The hard skills of understanding finances and the particular nature of financial products is perhaps the easier of the two skills necessary for success. Far more important are the soft skills necessary for working with clients and helping them find success.

Financial coaches don’t just tell the client what to do and walk away. They work with their clients to find success much the same way a sports coach works closely with an athlete to hone their behavior to optimize their performance. Financial coaches need to be master communicators. They need to understand what’s being said and what’s not being said. They need to have a very high emotional quotient and to be able to have deep empathy for the people they are working with. Financial coaching is not a numbers game, it’s about understanding people. 

The the following are absolute essential for a financial coach to be successful:

  • Deep knowledge of the subject matter
  • Attention to detail 
  • The ability to empathize 
  • Strong active listening skills 
  • Effective communication 
  • Ability to build and maintain trust 
  • The ability to motivate 
  • The ability to help people imagine a different future

Who should be using a financial coach?

Almost anybody can benefit from good financial coaching. One of the best things about them is that they stand outside of your particular circumstances. They can give you a point of view about what you could do better. They also have expertise having seen a lot of different situations and can give you advice. Most of us go through our lives living only our own personal financial journeys. Financial coaches see a great deal more and can give you feedback on where you are and the best way to get to where you want to be. 

Financial coaching isn’t about having money to manage. It’s about making the best financial decisions. They can help particularly well in the following situations:

Benefits people in financial crisis

When someone is in a financial crisis, they often don’t know what to do to get out of their situation. They’re treading water–or sinking!–and need an outside perspective on the best path forward. They may not understand their options or the most effective decisions that they can make. They might be overwhelmed with the day-to-day challenge of making ends meet. Or they may be avoiding their finances altogether because they feel like they are a lost cause. Financial coaches can help give emotional ballast, practical advice, and social support.

Helps people start building wealth

Some people are financially stable, but don’t have any assets or wealth. They would like to do better than they are right now, but aren’t sure the best way forward. Some may (correctly) assume that a financial advisor or a financial planner isn’t interested in them since they don’t have any assets to manage. They may not know where to turn for professional financial advice and guidance.

Helps people figure out their next steps when their income goes up

A new job, a promotion or a spouse working for the first time may infuse a household with new income. What should a household do with that financial situation? Many may increase their spending, but others may seek out advice from a financial coach on the best way to set up for long-term financial success in life. They may be able to give them options they didn’t know existed for them.

Help someone to start their financial life out on the right foot

One of the most important transitions that people make in life is when they first become full-time employees. It may be the first time in their lives that they have significant income but it may also be the first time in their lives that they have significant expenses. Consulting with a financial coach can help establish good habits and long-term plans that can benefit them as they begin their financial lives.

Does financial coaching work?

Financial coaching can be one of the most effective ways of improving one’s financial trajectory. This is because they work directly with you, using the details of your current situation. One-on-one financial coaching gives you the opportunity to ask questions, get specific answers, and benefit from the experience of someone who has seen a lot of different household budgets. 

In fact, the Consumer Financial Protection Bureau, a government agency assigned to protect consumers, conducted a detailed study of financial coaching. One of its many findings was that in some cases even a single coaching session was beneficial for some clients. (You can access the full report here.)

Are financial coaches affordable?

It’s easy to assume that you need money in order to be able to pay for good financial advice. If you are currently struggling with a significant amount of debt, living paycheck to paycheck, or just don’t want to free up a little extra money on something you aren’t sure will produce results, it can be easy to think you’d be better off not paying for a financial coach and putting that money toward your debts or savings. 

A financial coach can help provide long-term benefits by setting you on the right path for financial stability. Most will cost you between $200 and $400 a month. You can sign up for an initial 3-month engagement before you commit to a longer-term engagement. That can feel like a lot of money, but if it can help you put your financial life on a better foundation, that will be money well spent. 

What if I can’t afford a financial coach?

There are circumstances where financial coaching is subsidized or provided for free to those who need it. Researching local options, especially from non-profit organizations, can be a great way to find a financial coach if you have a particular need.

You will want to search for “financial counseling” or “debt counseling” in your area to find organizations that might be able to help.

What is it like using a financial coach?

You might wonder what it’s like to have a financial coach. The process is actually quite simple. The following gives a description of what a typical engagement might look like:

  1. “I want guidance”: A person might come to the conclusion that they could use some financial guidance either because they are trying to get through a financial crisis or they just want to make better decisions. 
  2. Finding the right fit: Finding a financial coach might be the most challenging step in the whole process because there is no single register where you can go to find one.
  3. Making contact: Many financial coaches offer free consultations so you get a sense whether there is a good fit with them and their expertise. 
  4. Initial assessment: In your initial meeting with a financial coach, you’ll undergo an assessment covering goals, cash flow, credit report, debts, income, and more. It’s crucial for the coach to understand your relationship with money, fostering trust in the early sessions. 
  5. Setting the plan: It could be the end of the first visit or the next visit, but soon you will have a plan. It will include things you can do. It will also establish what you can expect from the financial coach and how your working relationship will work. 
  6. Monitoring: Subsequent meetings focus on tracking progress, reviewing actions taken, and addressing new concerns. The coach ensures your commitment to the plan—it’s yours, not theirs. They prioritize your choices and avoid pushing unwanted actions. 
  7. Course correct: Things change. It will be important to adjust the plan when needed and making sure there is always a path towards progress. 

How do you find a financial coach?

The biggest challenge of dealing with a financial coach can be finding one in the first place. There is no list of financial coaches. Even worse, searching the internet almost always leads to financial advisors or financial planners. Many people find a coach through word of mouth and referrals, but that only works if you know someone who has used or is currently working with one.

What information should I have when I am meeting with a financial coach for the first time?

Complete financial disclosure is crucial to the success of any financial coaching engagement. They can’t help guide your progress toward your goals unless they fully understand where you currently are. This is difficult because people don’t like to reveal the details of their financial lives, especially if those details are less than perfect. This is why finding a financial coach you can trust is so important. 

A financial coach is going to want to map out your cash flows, look at (or help you build) a monthly budget, get a complete picture of your debts and expenses, and look at anything that might be opportunities for optimization.

At the very least, you should bring the following things your initial assessment:

  • Income documents
  • Bank accounts, including transaction data
  • Debts: balances and payment schedule
  • Credit report
  • Employment benefits package (especially if open enrollment is coming up, when you can make changes to your elections)
  • Investments, including 401K, IRA’s, and other investments

What can a financial coach help me with?

Most financial coaches are generalists which means they are there to help you structure your finances for success. They are designed to help you work through your financial behavior issues and answer questions about complicated financial situations so that you can make the best decisions and make improvements. Ultimately, they are working to help you achieve your financial goals. 

Some financial coaches specialize in very particular financial situations, for instance improving one’s credit score or transitioning into retirement. 

The one thing you should never expect from a financial coach is investment advice. They will not sell you investment opportunities or tell you where to put your money. To do that they would have to become a certified financial advisor.

Financial coaches might help you navigate the following: 

  • Cash flow management: Help you better understand how your money flows and what you can do to manage it better. 
  • Budgeting: Help you establish a workable monthly budget and understand the implications of that budget.
  • Debt reduction: Creating a debt schedule can be one of the most valuable things a financial coach can help you with.
  • Choose benefits: The benefits options an employer gives you can be dizzying. A financial coach can help you work through the options so you make the decisions that make the most sense for your situation. 
  • Retirement planning: While financial coaches won’t tell you how to invest for retirement, they can help you manage the transition into retirement and what that will mean to your situation. 
  • Education planning: The options for funding a child’s education can be confusing, especially years before the child is even in high school. A financial coach can help you understand the options and the best way to plan for your child’s education in your situation. 
  • Risk management: Do you have the right medical insurance? Do you need life insurance? Do you have adequate property / casualty insurance? A financial coach can give you a perspective on managing risk that you might not have considered before. 
  • Taxes: A financial coach isn’t an accountant and won’t give you specific tax advice, but they can help you understand the implications of some of your current decisions. 

Financial coaches can even specialize in very unique niches that can help you navigate specific life events: for instance, managing the financial implications of divorce, navigating the death of a bread-winner, and assessing executive compensation packages.

How much do financial coaches cost?

Most financial coaches sell packages of a certain number of months. After reviewing your material, they may suggest an initial three or six month engagement. These packages often stipulate a certain number of sessions per month. They usually charge between $200 and $400 per month.  

It is much less common for them to charge by the hour or with a retainer that might have a fixed fee for total access. 

How quickly should I see results when working with a financial coach?

Within a couple of financial coaching sessions, you should have a plan that you can execute to work towards your goals. In more complicated cases, it may take as many as three sessions before you and your financial coach settle on the best plan forward. Those first couple of sessions are all about pulling together the right material, getting to know each other, and understanding the issues that need to be resolved. 

Once you have a plan, your financial coach should work with you over time to make sure that you are staying on course or helping you to adjust when necessary. 

The length of the engagement will depend on the goals you are trying to achieve. If you are working through current financial trauma or a crisis, you might be able to find stable ground within three to six months. That is not to say that all of your financial problems are solved or all of your financial goals will be achieved within six months. It’s more likely that you have found new, solid financial footing.

If you are looking to pay off debt and begin the path to building wealth, you might need longer financial coaching engagements.

What is the difference between a financial advisor and a financial coach?

FINRA, the governing body over financial advisors, currently tracks 233 different designations for financial advisors. There is a broad range of specializations within the space. However, “financial coach” is not one of the designations since it is part of an unregulated space. 

The primary difference between a financial advisor and a financial coach is that a financial coach cannot give investment advice. A financial coach sits alongside a client helping them improve their financial behavior and achieve their goals. The following table shows some key differences.

Financial advisorFinancial coach
Regulation Regulated by the Investment Advisor Act 1940Unregulated
OversightFINRA / SEC / State securities boardNone
Provide financial directionInvestment, coaching, adviceCoaching
Certification neededSeries 6/63 or Series 7/66 or 65None
Alternate certificationCFP, CFA, PFS, C2FCNone
Table shows some key differences between financial advisors and financial coaches.

Is financial coaching regulated?

While financial advisors are regulated by the Investment Advice Act of 1940, financial coaches do not traditionally fall under the statutes of that law. The act of coaching people on financial matters can be done by any financial advisor, but only certified financial advisors are allowed to give investment advice or guidance. Financial coaches are currently not subject to any legal regulation. 

Who trains financial coaches?

Legal regulation in the United States controls and monitors the performance of financial advisors. A financial advisor is anyone who brokers investments or gives investment advice. Financial coaches would need to be regulated and certified as a financial advisor if they give investment advice. However, most financial coaches do not give investment advice and therefore do not fall under these regulations. In fact, there are more regulations to become a beautician than there are to become a financial coach. There are currently no designations, certifications, or licenses that are legally necessary to be able to call yourself a coach. There is no government oversight of the financial coaching industry. 

Although there are no government bodies responsible for the oversight of the financial coaching industry, there are organizations that are effectively training financial coaches. They issue designations that the coaches have met their qualifications. The following are the organizations that are currently training and certifying financial coaches:

AFCPE (The Association for Financial Counseling & Planning Education)

The AFCPE was the first organization that created a designation for financial coaches and it is probably still the largest. They provide the training and oversight for the Accredited Financial Counselor (AFC) designation. The process includes coursework, experience, passing an exam, and continuing education. 

Sage Financial Solutions 

To obtain the Financial Fitness Coach (FFC) designation from the non-profit Sage Financial Solutions, a coach must first hold a separate certification:

  • AFCPE’s Money Management Essentials course (MME) 
  • AFC® 
  • CFP® 
  • ChFC® 
  • CFA® 
  • CPA®

With the baseline of the separate certification, the FFC will require between 70 and 145 hours of a combination of coursework and experience. 

National Financial Educators Council

The National Financial Educators Council provides the Certified Personal Financial Wellness Consultant℠ (CPFWC) designation. Additional expertise can earn an expert designation which requires the completion of a 2-year post-graduate program. NFEC Financial Coach program requires 180 hours of training and practice prior to showing mastery by passing an exam. After completion, NFEC Financial Coaches will be required to do continuing education to maintain the designation. 

Ramsey Solutions

The company of radio personality Dave Ramsey, Ramsey Solutions, provides financial coaching training. What makes Ramsey Solutions different from the other organizations that train financial coaches is that it is a for-profit organization that has a very specific ethos and program that they are taught to implement. The Ramsey method is a very rigid philosophy.

Government organizations

Government organizations, often at the local and state level, often provide financial coaching guidance and instruction for non-profit and employees who work closely with the community. These organizations do not issue designations or certifications. Their mission is largely to help citizens understand what they need to do to qualify for government programs. 

Jonathan Walker

Jonathan Walker