What is financial coaching? Is it the same as financial counseling or financial planning? Are those different from financial education?
It’s a pretty basic question of financial terminology, but an important one. After all, these terms – financial coaching, counseling, education and planning – are often used interchangeably. A recent paper on the topic by Dr. J. Michael Collins at The Center for Financial Security helps to set the terms straight.
The field identification guide helps clarify what service an organization or professional is delivering. It also helps potential clients understand what service to seek out. Someone who needs financial coaching but calls a financial planner won’t get the right help – and may only be frustrated by the interaction.
Of course, much of the fault lies in the interchangeability of terms used by organizations and professionals. Also, the paper does not tackle the various certifications, standards, licenses and accrediting organizations that define each role and title. Although the CFP designation is well known and understood, other titles like “financial coach” are used more generically and certification, training and experience can vary widely.
Here’s how Money Habitudes is used in each scenario:
- Used to build rapport; a good way to make a first interaction feel less threatening.
- Helps financial coaches understand clients’ financial habits, attitudes, values, behaviors and emotional triggers.
- Allows clients to pinpoint their own strengths and challenges and identify changes they want to make; goal-setting
- Used one-on-one or with couples.
- Used in financial class settings, often as a first full class or as an ice breaker activity as part of another class (on a topic like budgeting).
- Done individually with class activities or group discussion after.
- Often used as a lead-in to identify issues so people decide on other classes to attend (reducing debt, investing, etc.) or as a foundation for financial counseling or coaching.
- Acts as a hook to get people to engage on the topic of money without the stress of dealing with numbers, how-much-you-make, examining expenses, etc., right away.
- Sets a tone of engagement, fun, conversation and sharing in a class environment.
- Helps identify issues and establish rapport.
- Helps client take ownership; decreases focus on prescriptive solutions to some degree
- Get partners to start a non-threatening dialogue.
- A good, non-threatening way to have a “getting to know you” conversation or as a supplement or other intake and discovery tools.
- Serves as a method to understand investing styles, comfort zone, and to tailor plans to a client.
- Also used to help couples align their financial goals.
Additionally, Money Habitudes is often used to train all of the above professions. It’s typically used to help people understand how different clients see and use money and to help people talk about habits and attitudes as opposed to just talking about skills and facts. It’s also used as a sensitivity training tool: to help people who are, for example, very comfortable with financial plans and numbers and spreadsheets to work with people who are not like them, but who have other strengths.