An exploration of money, mindset and a meaningful life

Financial Coach or Financial Planner – which one do you need?

In Australia, Financial Coaching is a relatively new concept. So, it’s understandable that not everyone understands the difference between a financial coach and a financial planner. I’ve been both, so I’m here to explain a little bit more about what each of us does. Hopefully, it helps you work out which financial professional you might need.

At the end of the day, a financial coach and a financial planner both have the same intention. We want to help you improve your financial situation. However, there are so many different aspects to personal finance it’s hard to know who does what.

General and Personal Advice

Before we get into what each of these roles, I want to clarify the difference between general and personal advice.

General Advice is essentially just information. It’s information about all aspects of personal finance that can help you understand concepts and ideas. For example, on this website I share general advice about concepts such as managing cash flow or how investing works. It might also include ways to increase your income or steps to get out of debt. None of those concepts take into account your specific financial situation or personal objectives and therefore don’t instruct you as to what to do. It is then up to you to decide whether the information is relevant to you and how it may apply to your life.

On the other hand, there is Personal Advice or Specific Financial Advice. This is where someone takes general information, considers your unique circumstances, and applies a directive for how you should act.

It’s important to know the difference between both of these types of advice. Both so you know what kind of advice you want and which financial professional will be able to give it.

Financial Planner

In most circumstances, Financial Planners, also called Financial Advisers (or Advisors) will be engaged to provide you with Personal (Specific) Advice. Essentially you are paying for them not only for their knowledge, but to synthesize it and apply it to your specific circumstances. They need to be licensed to do this. You could think of a financial planner as your GP, who may overlook all aspects of your health, but then may need to refer you to a specialist if there is a particular area of concern. Planners will be able to set a high-level strategic plan and implement some aspects of that plan, but won’t always be able to implement all of it.

If you already have money to invest a financial adviser will recommend how and what to invest in. They will also implement and manage the portfolio on your behalf. They can provide information on strategies for your cashflow, debt management, superannuation and account-based pensions (both of which are especially valuable around the years approaching your retirement when the legislation can be quite complicated). Advisers will also recommend the amount and types of personal insurances you need. This includes cover such as Income Protection, Life Insurance and Total and Permanent Disablement insurance.

As well as providing specific strategic advice, in majority of cases they will recommend specific financial products. There are some advisers who may only provide strategic advice (i.e. no products) but this is quite rare. Mostly they will do this in conjunction with your accountant (i.e. the specialist like in my GP example above). This is useful where you have quite a complicated financial situation (i.e. family trusts, multiple companies, estate planning concerns, etc).

There are also certain things that you need to have in place BEFORE you go to see a financial planner. You need to be able to manage your cash flow, you need to have either a lump sum of money (i.e. an inheritance) or at least a regular surplus cash flow to invest.

Financial Coach

A financial coach offers a different service to a financial planner in a few ways. Firstly, rather than provide you with specific recommendations, a coach will speak to you about your options (i.e. give you relevant general advice) and help you make the right decision for yourself.

Not everyone is taught the basics of financial literacy and money management. So wading into the world of personal finance can be daunting, not to mention overwhelming. There is such a deluge of information out there that it can be difficult to know what information and particular strategy will be right for you. A coach will be able to simplify and speed up the process of learning about money and find an approach that works best for your lifestyle and personality type.

A coach will help you build strong financial knowledge and empower you to make your own decisions around money. This includes learning about budgeting, focusing on increasing your income, debt repayment, savings, and the basics of investing. A coach who (hopefully) has a wealth of knowledge and experience with personal finance will be able to distill all that information into a form that is easy to understand and relevant to you as an individual. Just be

Practical vs Emotional

One benefit that a financial coach has over a financial planner, is that they are able to spend a lot more time getting to know you and what makes you tick. Due to the cost of financial advice these days, that is not always possible some financial advisers.

Having said that, for many time-poor people, another benefit of a financial planner over a coach is the time saved in researching, planning and managing the administrative side of your finances.

If you want to permanently change the way you manage your money, don’t underestimate the value of working on your relationship with money. While not all financial coaches go deep into mindset work, generally a financial coach should be able to help you work through limiting beliefs or mindset blocks. There are the subconscious patterns that are keeping you from achieving your financial goals. Understanding your money stories, and most importantly re-writing them, is key here. Without addressing these it’s going to be difficult to take the action you need to make sustainable changes to your financial life.

The Bottom Line

Even though I am once again a financial adviser, I absolutely love and see the value in coaching for many people. The reputation of financial planners in Australia has been damaged significantly by the royal commission, and the people and practices it highlighted. However, some people still need the help of a good financial planner. The key is in knowing what kind of help you need and finding the right professional to fulfill that role.

So, whether you need a financial coach or financial planner, there is the right support out there for you. Investing in yourself and your financial future is something you won’t regret. Not only because it results in more money but also because it helps create confidence and control around your money and your future.