Financial Coach vs Financial Advisor: Which Do You Need? (2024)

“Personal finance is personal” is a popular adage – and it’s true. We all have our unique set of knowledge, goals, and experience when it comes to our finances. When it comes to money, most of us need help in one form or another eventually. Still, we are all unique when it comes to the exact kind of help we need.

One personal choice is deciding which type of professional help to get. Two popular options are financial coaches and financial advisors. Each serves a unique role, and choosing which you go with is an important decision — so it is equally important to be educated on what each profession does.

Financial Coach Definition

Financial coaches help their clients understand the basics of personal finance. Hence, clients may need help with topics such as building a budget, saving money, or getting out of debt. This is often someone who is just getting started. That means they may have little to no assets but are interested in improving their finances.

However, financial coaches are the new kid on the block, and they aren’t currently required to hold any particular certification or license. They are also not allowed to sell financial products like stocks and bonds, nor can they give specific investment advice. Financial advisors often work independently or as part of a small practice.

Financial Advisor Definition

The more traditional advisor usually helps clients that already have some amount of savings or investments. However, they may want help managing their investments long-term. Financial advisors have more of a wealth-building focus and will sometimes require new clients have a certain net worth before the advisor will meet with them. They may help clients manage their investments and also with taxes, healthcare, and estate planning.

Financial Coach vs Financial Advisor: How They Compare

Financial coaches and financial advisors have some things in common, but they are more different than similar. Understanding how they compare will help you make the best decision.

What They Do

You may see financial coaches compared to coaches in other capacities, such as in sports. This is because sports coaches not only help athletes get better at their respective games, but they may guide them in other ways, too.

In high school and college sports especially, coaches often take a holistic, hands-on approach. They may help their athletes think more positively about the game and even become better people, and they guide their team every step of the way.

Financial coaches have a similar, hands-on role, and often help their clients develop a more positive relationship with money. They communicate with clients regularly and work to break bad money habits. Then, they put you on the right track to start building wealth. They usually have a short-term relationship with clients and help get them to the next phase in their financial journey.

The ways in which financial advisors function is different. Since their clients usually understand the basics, they cut to the chase and start the wealth-building process right away. In their initial meeting, they may ask clients questions about their income and risk tolerance, then set up an investment plan that helps them meet their goals. That portfolio may include a number of assets such as stocks, bonds, and real estate.

Unlike with financial coaches, though, you likely won’t be in communication with a financial advisor every day or even every week. Since their role is usually focused on building wealth, they may only send you quarterly or annual updates on how your portfolio is doing. Their focus is typically a long-term strategy. Financial advisors can help you with other aspects of personal finance, but investments tend to be the common theme.

Qualifications

There is a big difference in the qualifications when comparing financial coaches and financial advisors. Neither is technically required to have a college degree, but financial advisors may be more like to have at least a bachelor’s. Financial advisors are part of a heavily regulated industry and may work for a large financial firm that requires its advisors to have a college degree.

Perhaps more importantly, financial advisors must be registered with the Financial Industry Regulatory Authority (FINRA). And if they sell investment products, they must be registered with the Securities and Exchange Commission (SEC). Financial Advisors may also have to pass certain exams, such as Series 6 and Series 7.

Financial coaches, on the other hand, have no specific training or education requirements. They may decide to pursue formal education on their own, and that could make it easier for them to find new clients. However, they are not required to do so, which means you must do your own due diligence before deciding to work with a financial coach.

Fees

The way advisors and coaches charge for their services will be different in many cases. Financial advisors may receive a fee as a percentage of their clients’ assets under management (AUM). They can also be paid on commission, or receive a combination of fees and commissions.

Financial coaches can’t sell investment products, so how they charge for their services is simpler – usually by the hour or by the session. They may also offer package deals to lower the per-session cost.

Financial Advisor vs. Financial Coach: Which Do You Need?

Which of these professionals you need depends largely on what you want to accomplish.

If you’re looking for someone to take a holistic look at your finances and help you make decisions related to all aspects of financial planning – including but not limited to investments, retirement planning, estate planning and education savings – you’ll want to go with a financial advisor. They will be able to help you make decisions that will set up up for the future and, in some cases, can even do things like buy mutual funds and insurance products for you.

If, though, you’re looking for someone to help you with only more basic elements of financial planning like making a budget or setting up a savings plan, a financial coach could be sufficient.

The Bottom Line

Managing your money isn’t always easy, and we all have our own set of knowledge, skills, and goals. If you are starting from square one, a financial coach is often the right choice, as they will help you learn about the basics and establish good money habits. But if you already have a solid foundation and are looking to build wealth in the long term, a financial advisor will help you set up an investment portfolio to meet your goals.

However, you don’t have to commit to one or the other forever. In fact, recall that financial coaches tend to have a short-term relationship with clients. It’s entirely possible to hire the right one for your needs at the time, then switch to the other later. It all depends on where you are in your personal finance journey.

Tips for Choosing a Financial Coach or Financial Advisor

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