Having control over your finances provides individuals with increased opportunities. Building a solid financial foundation can enhance the feasibility of retirement and enable annual vacations.
Regrettably, financial security remains elusive for the majority of individuals. According to a study conducted by LendingClub and PYMNTS titled “Facing Reality: Living from Paycheck to Paycheck,” around 60% of employed adults in the United States are reliant on each paycheck. This financial approach often results in heightened stress, particularly when faced with unexpected expenses.
Financial coaches strive to tackle this challenge and other issues encountered by their clients. Unlike financial advisors who primarily advise on investments, financial coaches concentrate on understanding human emotions in relation to money. They assist clients in developing strategies that yield improved financial outcomes and aid in the achievement of long-term financial objectives.
Here’s a breakdown of the responsibilities of financial coaches and the steps to becoming one:
What Does a Financial Coach Do?
Not everyone possesses the skills to effectively manage their finances. Many individuals have inquiries about creating budgets, handling expenses, and making progress toward financial objectives.
Kris Maksimovich, the president of Global Wealth Advisors, elaborates on the role of financial coaches as mentors throughout a client’s journey. He states, “Financial coaches specialize in behavioral finance. They typically offer guidance on budgeting, income management, and debt management, assisting clients in understanding their underlying motivations and fears regarding money. Acting as catalysts, they aid in goal setting and improving financial management skills.”
Financial coaches play a crucial role in helping clients comprehend their emotions and providing practical insights into money management. However, this is only a part of their responsibilities. Rachael Bronstein, an accredited financial counselor and the founder of Life’s Jam, underscores the importance of simplifying concepts and action plans.
“By breaking down complex processes into manageable steps and asking thought-provoking questions, a coach empowers individuals to identify their aspirations and take meaningful steps toward fostering a healthier financial mindset,” she explains.
Financial Coach vs. Financial Advisor: Understanding the Difference
Financial coaches and financial advisors both offer valuable insights to assist clients in managing their finances effectively. Both professionals typically hold certifications and other credentials demonstrating their expertise in finance.
However, their roles differ in scope. Financial advisors have a broader range of services and can provide specific investment recommendations and portfolio management. On the other hand, financial coaches do not offer these services.
“It’s worth noting that while coaches may not be financial advisors, many financial advisors incorporate coaching into their practice,” Maksimovich points out.
Financial coaches can address queries and recommend adjustments to a portfolio based on factors like risk tolerance. Financial advisors, however, delve deeper and offer investment strategies, including specific securities such as funds, stocks, and bonds.
Financial advisors generally incur higher costs compared to financial coaches. Individuals seeking guidance on managing emotions and achieving financial goals may opt to work with a financial coach. However, those seeking extensive assistance with investment ideas and asset allocation would find a financial advisor more suitable. While both professionals help clients reach financial goals, the focus on investments distinguishes their approaches.
Why Choose a Career as a Financial Coach?
The journey to becoming a financial coach presents fewer obstacles compared to pursuing certifications as a certified financial planner (CFP) or financial advisor. This path is more accessible for individuals fresh out of college or those without a well-established financial background.
Moreover, obtaining financial certifications for a career as a financial coach is more cost-effective and faster than pursuing a CFP designation. Beyond the economic advantages, financial coaches derive fulfillment from assisting clients in overcoming behaviors hindering their financial progress.
“Becoming a financial coach offers the gratifying opportunity to positively impact others’ lives while enjoying the flexibility to dictate your work schedule and environment. The profession accommodates various coaching formats, including one-on-one sessions, group coaching, workshops, online courses, and more,” explains Bronstein.
Despite the rewarding aspects, Bronstein acknowledges some challenges inherent in the field. “Potential hurdles include the possibility of income fluctuations, particularly for independent operators. Managing the operational aspects of running a coaching business, such as marketing, systems, compliance, contracts, and sales, can be demanding,” she notes.
Furthermore, working with clients facing financial difficulties can be emotionally taxing, necessitating a high degree of empathy and compassion. Practicing self-care and maintaining a balanced schedule are crucial for effectively navigating these challenges.
As a financial coach, you have the freedom to set your own hours. You can start coaching part-time as a side hustle and gradually transition into a full-time career when ready. Satisfied clients may become repeat customers and refer others, facilitating business growth. While new coaches may experience a slow start, those with effective systems in place can consistently generate leads and build a thriving practice.
Is Full-Time Financial Coaching Achievable?
Becoming a full-time financial coach with a six-figure income is attainable. Financial coaches adopt various pricing models, but with increasing experience, you can potentially charge between $100 to $300 per hour.
However, transitioning to full-time coaching requires filling your calendar with clients. Initially, you may need to offer services at a lower rate to attract your first clients and gather testimonials. As you establish your brand and demand for your services grows, you can gradually raise your prices.
Maintaining a full calendar and pipeline necessitates consistent prospecting efforts. Financial coaches often leverage social media platforms to showcase their expertise, share client success stories, and promote their services. You can begin coaching while working a full-time job, scheduling appointments around your existing work commitments.
Expect fluctuations in income as a financial coach. Consistently prospecting during busier months can help you sustain momentum and supplement your income during slower periods. With dedication and strategic planning, achieving full-time status as a financial coach is within reach.
Steps to Become a Financial Coach
Formally, you don’t require any certifications to venture into financial coaching. Some individuals acquire financial knowledge through personal experiences and by observing others’ money management practices. Nevertheless, consumers have a wide array of options when selecting a financial coach, many of whom hold some form of certification.
“While licensing isn’t obligatory for a career in financial coaching, I consider it a valuable asset,” Bronstein suggests.
A college degree isn’t a prerequisite for obtaining financial certifications. Fincert and the Association for Financial Counseling & Planning Education (AFCPE) offer certification programs accessible to aspiring coaches. These programs typically involve completing an online course and achieving a passing score on an exam to obtain certification.
Upon certification, continuous learning is essential to stay abreast of financial trends. Establishing a niche is also crucial, as it distinguishes you from other coaches and positions you as the expert for your target audience.
Financial coaches employ diverse promotional strategies. They can cultivate personal brands through social media and online content creation. Additionally, participating in local events and establishing a reputation as an expert in a specific region can attract clientele.
