Blog

So you’re serious about building wealth.

Remember you don’t have to do this alone! Even the best intentions and resolutions can be impeded by knowledge gaps. In many instances, bringing on a professional mentor can make all the difference in both the speed and success of your plan.

As Napoleon Hill (author of Think and Grow Rich) describes, the “mastermind” group is the power that drives you well ahead of where you could go on your own.

This can be the start of that mastermind.

The question is: do you work with a financial coach or a financial advisor?

The Difference Between a Financial Coach and Advisor

Although the names sound similar, there is actually a significant difference between a financial coach and a financial advisor.

But both offer important services which complement the other.

Financial Coach

Think of a financial coach as an educator. It’s their job to bring you, the client, to a level of knowledge and understanding where you can better manage your own finances independently.

While each financial coach will differ in their degree of expertise on these subjects, they will often assist with such areas as:

• Budgeting
• Saving
• Debt Management
• Understanding financial products
• Investment theory / strategy
• Financial planning

A financial coach will not sell investment products or make investment recommendations. For making such recommendations, this requires certain financial licenses such as the Series 7 or 65 which are usually held by a financial advisor.

A financial coach can be an ideal choice for those with both beginner and advanced knowledge of finance and the markets.

You may find a financial coach helpful if you want:

• To learn investment strategies without being advised what you should do.
• To not be sold investment products.
• Help with goal setting, tracking and accountability.
• Help with identifying costly behavioral patterns so that you can work to develop positive habits in their place.
• The voice of a third party to help rally members of your household toward a united goal and vision.
• A customized financial plan that fits your situation and acts as a blueprint along your wealth journey.

Financial Advisor

The main differentiator of an advisor is that they are licensed to actually sell investment products and can make specific investment recommendations. They can recommend a specific stock, mutual fund, bond, ETF, etc.

By being a licensed financial advisor, they are bound to the duties outlined in the Investment Advisers Act of 1940, which requires them to act as fiduciaries to their clients.

In short, they must make recommendations and act in the best interest of their clients, prioritizing their clients’ interests over their own.

A financial advisor will often provide advice on the following subjects:

• Cash flow
• Asset allocation
• Risk management (including insurance)
• Specific investments
• Business financial planning
• Tax strategy (including charitable giving)
• Education planning
• Retirement planning
• Estate planning

You may find a financial advisor helpful if you want:

• Specific advice on how you should invest your money.
• A professional to actually open the proper accounts, make the trades and regularly monitor the performance of your investments.
• A professional to regularly review your investment performance with you, guiding you whether it’s prudent to change strategies or stick to the course.
• You have a more complex financial situation that requires business planning, advanced tax strategy, or estate planning.

A financial advisor can also address all of the subjects mentioned above under financial coach; however, the main difference is the advice component.

The other difference is the way in which they earn their living. A financial advisor’s business often depends on charging a percentage of assets under management. While they do often charge separately for constructing a financial plan, the assets under management usually constitute the biggest driver of earnings.

Alternatively, the financial coach does not have the option to charge a percentage of assets, since they aren’t actually doing your investing. They can choose among such fee structures as a flat one-time or recurring fee, an hourly rate, a package price, or something else.

Should I Use A Financial Coach or Financial Advisor?

This answer boils down to your specific needs and wants.

While not always the case, a financial coach is generally the expert on cash flow, and a financial advisor is the expert on investments.

However, there are always exceptions!

Is a financial advisor’s knowledge broader or deeper than a financial coach? Not necessarily.

Someone can act as a financial advisor, and even have additional certifications from further education (CFP, CFA, CPA, CIMA, etc.), and then let their licenses expire after they no longer work in the role of advisor. They could even go on to become a financial coach if they decided to do so.

And vice versa, a financial coach could always choose to get the licenses and go on to become a financial advisor.

It also depends on how much influence you want them to wield over your investment decisions. If you’re more of a DIY kind of person, you may simply want the education of investment and cash flow strategies that financial coaches can provide. If you want someone to strongly influence your specific decisions, and even monitor the day-to-day performance of investments, then you may prefer to go the route of financial advisor.

In my case, I have been both. I spent a decade as a financial advisor and decided afterward to expand my influence by transitioning to the role of financial coach as I aim to teach others across the nation, and perhaps the world, what I’ve learned along the way.

Conclusion

Bringing on a financial coach or advisor as a team member on your journey can offer peace of mind knowing that you’re not alone.

Even if you’re already well-versed in financial markets and concepts, the value of having a second opinion from a professional who offers customized solutions can make a significant difference over a long period of time.

As the renowned Solomon so concisely summarized: “Two are better than one, because they have a good reward for their toil.”

That team mentality can accelerate your knowledge and skill beyond what you might be able to accomplish on your own.

No matter where you are on your road to riches, both a coach and an advisor can offer services which prompt ideas, strategies and new vision that drive you toward a bright future.