Need a Financial coach? Only if I knew what it is!

Financial Coaching is still a relatively new space in Australia and it’s not surprising that many people have no idea what Financial Coach (or Money Coach) does.

Let’s start with the basics and talk about the other professionals you have probably heard of when it comes to personal finance.

Financial Counsellors and Financial Advisers

Most of you know about Financial Counsellors who can help people struggling with their debts and facing hardship: they prioritise debts, create basic budgets and renegotiate rates and terms with the lenders.

Their advice is free of charge and these professionals would be on one end of the spectrum.

On the opposite end of the spectrum there are Financial Advisers ready to help people to invest their wealth, plan for retirement and secure their future financially. They also provide advice on tax planning strategies, insurances, developing investment strategies and long-term plans.

You have to “qualify” for financial advice: meaning you need to have a certain level of accumulated assets (including super) or high disposable income. These criteria vary between Financial Advisers: generally you would not qualify for financial advice when the fees you pay do not justify your potential return on investment.

Financial Advisers are usually perceived as being “expensive”: their starting fees range from ~$4,500 to $6,000 AUD for holistic advice which would include various areas of your personal finances (super, assets, investments, tax and etc.). Despite the high cost, they aim to provide high return on your investments (ROI) which you are unlikely to receive without engaging a professional with such a specific knowledge.

What do Financial Coaches (Money Coaches) do?

Financial Coaches help a broad spectrum of clients, including the ones that do not qualify for financial advice. Their costs are more affordable for general population.

They provide a full clarity over clients' income, spending, savings and debt and help clients to understand where they stand financially.

Financial Coaches help to set near-term money goals and bridge the gap between where the clients are and where they want to be by continuously providing guidance and practical ways to improve their financial situation.

Most often Financial Coaches work with clients who are at the PRE financial advice stage: these clients do not qualify for financial advice yet but are determined to build their wealth, save for goals like home deposit, emergency fund or family holiday, or pay off their loans faster.

There are a few scenarios where Financial Coaches help clients to successfully manage life changing events providing guidance to:

• People transitioning into stay-at-home parent status or back to work to plan their income and expenses.

• Divorced people and helping them to get their personal finances in order.

Some Money Coaches work alongside Financial Advisers with the same clients. Adviser manages the client’s wealth while Coach helps the client to better manage their earnings, form good money habits and improve negative behaviours towards money.

Money Coaches do not provide financial advice, or advice on financial products..

What areas of personal finance can Financial Coaches help with?

Current financial situation

• Reviewing client’s current financial situation in detail.

• Providing clarity where the client's money is going.

• Helping navigate challenging financial situations while making clients feel more confident and less stressed about their money.
  

Knowledge and education

• Helping clients better understand the personal finance basics, cash flow, financial goal setting and mindset.

• Showing clients ways to manage their money.

Budget and cash flow

• Helping clients to create and manage their individual cash flow plans based on their goals, values and priorities, optimise their budgets and savings

Money mindset and healthy habits

• Helping clients work on their money mindsets and build healthy money habits to address their behaviours and attitude towards money.

Money Goals

• Guiding clients in setting and achieving their near-term money goals by holding them accountable and tracking their progress.

• Providing encouragement and empowerment along the way.

Pre advice stage

• Helping clients to get on a path to saving, paying off loans or earning more income.

• Getting clients ready for the financial advice stage.

There is clearly a huge need in Financial Coaching in Australia: cost of living crisis and lack of financial education created a perfect storm where people do not clearly understand where their money is going and need some professional help to take their money management to the next level. Financial Coaches will be able to help you with that and navigate you through your financial journey.

Make sure that you do some research before hiring a Money Coach: although it’s not necessary, it is preferable they have a background in Finance and are familiar with financial strategies and analysis. Client testimonials could also assist you in making your decision.