Financial Coach Definition

What Is a Financial Coach?

Financial coach is a relatively new term for someone who offers their services to help others with money-related issues. Unlike certain other financial professionals, financial coaches are not licensed and may vary widely in their expertise. Financial coaches can also be known as financial wellness coaches, money coaches, and similar titles.

Key Takeaways

  • Financial coaches help people with everyday money matters, such as opening a bank account, paying off debt, and saving for the future.
  • Financial coaches are not licensed and anyone can call themselves one, although some may have received professional training and certification.
  • Coaching services are often available through local nonprofit organizations and some employers. You can also hire a financial coach on your own.

Understanding Financial Coaches

While anyone call can themselves a financial coach, the Consumer Financial Protection Bureau (CFPB) in 2017 published a list of skills and knowledge most experts consider important in financial coaching. The top three were: 

  • Coaching and motivational skills.
  • Financial content knowledge “with breadth and depth… to address varying consumer needs.”
  • Cultural responsiveness and systemic understanding.

The CFPB had launched its own financial coaching initiative two years earlier to provide advice to military veterans making the transition to civilian life as well as to economically vulnerable consumers. As the CFPB noted, “These populations can face complex financial decisions that have far-reaching impacts on their lives. However, they often lack access to unbiased financial information or to experienced, professional financial mentors.”

Today, some financial coaches continue to serve those populations while others target more affluent consumers with different needs. 

What Training Do Financial Coaches Have?

There are no specific education or training requirements for becoming a financial coach. In fact, the CFPB acknowledged that, “setting too high a standard could create a barrier to entry into the coaching field. More specifically, the expenses that typically accompany certifications could prevent people from poorly-served communities from serving their neighborhoods as financial coaches.”

For would-be financial coaches who can afford the expense, however, there are certification programs that can provide them with training and credentials.

For example, the Association for Financial Counseling & Planning Education (AFCPE) offers the Accredited Financial Counselor (AFC) certification. According to the association, counselors learn how to “educate clients in sound financial principles,” assist them in overcoming indebtedness, and “identify and modify ineffective money management behaviors,” among other training.

One program leading to AFC certification is designed for people who already hold credentials as a Certified Financial Planner (CFP), Certified Public Accountant (CPA), Chartered Financial Consultant (ChFC), or Chartered Financial Analyst (CFA).

The cost of obtaining the certification ranges from $780 to $2,130, depending on the program.

The AFC designation is accredited by the National Commission for Certifying Agencies (NCCA).

Financial coaches may also receive training from local nonprofit organizations and then serve as volunteers in their community. The Community Service Society of New York, for example, trains volunteers age 55 and up to join its Financial Coaching Corps. Members are embedded with community organizations in low-income areas that are underserved by conventional banks. Coaches will, for example, advise clients on opening a bank account and avoiding fringe banking services such as check-cashing stores and payday loans.

What Can and Can’t Financial Coaches Do?

The role of a financial coach is to provide information and motivation. Unless they have additional credentials, they cannot perform the same roles as certain other financial professionals. For example, financial planners, if they have the appropriate securities licenses, can recommend and, in some cases, sell financial products, such as mutual funds or other investments. 

It’s worth noting, however, that not all financial planners are certified or licensed and that, just like coaches, anyone can confer the title upon themselves. Similarly, anyone can call themselves a financial advisor, although to legally use the title investment advisor they must be registered with either the Securities and Exchange Commission or a state securities regulator.

How to Find a Financial Coach

There is no central resource for finding a financial coach, so you’ll need to ask around. If you have a lawyer or accountant, they may be able to refer you to one in your area. 

A local community group, particularly one serving low-income consumers, may provide coaching services. Online and in-person coaching, particularly for matters relating to debt, is also available through the National Foundation for Credit Counseling; the organization says that fees vary by member agency.

Your employer, if you have one, may also offer free financial coaching as part of its employee assistance program.  

You can find a coach with Accredited Financial Counselor certification through the Association for Financial Counseling & Planning Education’s website. At time of this writing, the organization is making free virtual coaching sessions available to “individuals and families who are struggling with the financial implications of COVID-19.”

What Do Financial Coaches Charge?

Financial coaching is offered free of charge by some organizations that work with low-income families.

Otherwise, the cost of coaching varies widely, depending on the locale, the coach’s background and credentials, and other factors. A review by the National Financial Educators Council found coaches who charged on an hourly basis received from $75 to $600 an hour, with $257 being the national average.

What Is the Difference Between a Financial Coach and a Financial Planner?

Financial coaches provide basic advice about everyday money matters such as bill paying, getting out of credit card debt, saving, and investing for retirement. Financial planners provide more comprehensive advice and, if they’re licensed to do so, may also recommend and sell investment products.

How Are Financial Coaches Paid?

Some financial coaches are volunteers, such as retirees with other sources of income. Some may work for organizations that pay them to provide coaching services. If you plan to hire a financial coach to work with you, you’ll likely pay them either an hourly rate or a flat rate for a package of services.

How Do I Know I’m Getting Good Advice From My Financial Coach?

If you have any doubts about the advice a financial coach gives you, you can easily get a second opinion by reading up on the topic at a reliable website such as Investopedia or the U.S. Financial Literacy and Education Commission’s MyMoney.gov.

The Bottom Line

Financial coaches help advise people on everyday money matters. Because they are not licensed, they are limited in the services they can provide. They may also vary widely in their expertise, although there are certification programs that indicate a coach has received certain training and passed a required test.

Leave a Reply

Your email address will not be published.