Financial Friday #75: Advisor, Planner or Coach - Which Financial Expert is Right for You?
Financial planners? financial advisors? financial coaches? There are a few options to help you manage your money, but it isn’t always clear what each one does, and more importantly, which one is right for you?
Financial advisors have the narrowest scope of the three and focus mainly on managing a portfolio of investments (stocks, bonds, ETFs, mutual funds, etc.) Financial planners take a broader view and can certainly advise you on investing, but may also help you with other issues such as tax planning, insurance or retirement planning.
A financial coach uses a holistic approach and takes a deep-dive into all aspects of your situation. It may include budgeting and savings, investing (equities and other passive income opportunities), debt management, building credit, wills and estate planning, insurance, and/or retirement planning. The program is customized to each client's needs and you have the option to go into more detail on any aspects that are particularly relevant to your case.
In addition to the scope of their services, the other primary difference is that a financial coach educates. The focus is on equipping you with the knowledge to make a lifetime of informed financial decisions. A coach teaches you the facts and will provide an impartial opinion – but the decisions are ultimately up to you.
Aside from the education and guidance, there are also intangible benefits of a coach. Many people have trouble shifting from the learning phase (like reading this newsletter) to the action phase (purchasing an index fund online for example). The presence of a coach is highly motivational and the structure and accountability built into the coaching sessions can really help boost confidence and get the action started!
The best way to highlight how coaching helps is to look at an example. "Stacey" and her husband called themselves "middle-class" professionals and they are in their 30's with three kids. They were looking for solutions on how to pay back debt and build funds for their future. Stacey felt she did not have a good understanding of their overall financial picture and was unsure where their money was going every month.
After six months of working with a coach, she felt like they had made some "serious progress" and the results supported her feelings. Their net worth climbed by $16,388.62 and they also paid-off or consolidated a lot of high-interest debt. They saved almost $3400 in interest charges over the 6-month coaching period!
Stacey noted their gains have already covered the initial cost of the program and it will continue to provide positive returns for many years into the future. She also noted that the results were "super motivating" and she is looking forward to seeing how their financial situation changes for the better over the next two to three years.
Coaching is not for everybody and Stacey pointed out that she did spend a fair amount of time studying the self-help resources her coach provided as well as drilling down into the details of their finances. Enriched Academy coaches have access to a huge library of proprietary teaching resources and tools to help their clients learn, but you will need to put in a few hours each month to maximize the effectiveness of the program.
For those who would like to take control of and successfully manage their own finances, coaching is a great way to transition and get started. You get a period of expert support and guidance when you may be lacking the confidence or knowledge you need, and you are steadily preparing yourself for more independent decision making down the road.
Resources
If your full-service broker's fees are getting your down, or your robo-advisor seems to have blown a fuse, you might be eyeing the rock bottom fees, wide selection of products, and 100% control you have with an online brokerage account. Our friends at MoneySense have done a pretty in-depth analysis that will save you a lot of time comparing the options that are out there.
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