Helping you decide between financial planning, financial coaching, financial therapy and financial advising.
For most of us, dealing with the details of our financial lives is not easy or fun. At some point, we may decide to seek outside assistance. And often the process of looking for professional help can often feel just as overwhelming and confusing as dealing with your finances yourself.
If you're thinking you may want some professional guidance around money, this article will help you determine what type of financial professional is best suited to help you.
The article will examine four types of finance professionals: financial therapists, financial coaches, financial advisors and financial planners.
Each of these practitioners have a different role to play. You can employ multiple types of professionals simultaneously, or at different times in your life. It's more a question of what do you need right now; where is the best place for you to begin.
When it comes to finances, I believe there are few, if any, objective matters of right or wrong. It is simply a matter of what is right for you, right now.
Financial professional titles often don’t describe what they actually do.
Unfortunately there is little consistency in title usage across the financial services industry. The titles I describe here are common, but even among practitioners they are used inconsistently. I've used the terms in a way that I think is most descriptive and helpful.
To illustrate the point, I know several self-identified "wealth advisors" who I would classify as holistic financial planners. Similarly, there are self-identified financial planners I would categorize as financial advisors. To make it more confusing, some professionals will span multiple categories: some financial planners offer financial coaching packages (although they may not call them that).
All of the above to say, when looking for help, ask a lot of questions. Ask them what their title means to them. Ask them to describe what it is they do, how they work with clients. Ask them how you compensate them and what their other sources of compensation are. Their answers to your questions will help you understand which of these buckets their services fall in, regardless of which title they use.
Financial Therapy is exactly that: therapy with a particular focus on the financial aspects of your life. Financial therapy is primarily focused on helping you change your relationship to emotions around money. Therapy may often be backward-looking (e.g. examining family of origin experiences and beliefs formed in childhood). If you are experiencing more pronounced distress around money, such as severe anxiety or panic, financial therapy may be the best place for you to start. Also, if you talk or think about your financial situation in terms of absolutes like "I can't", "I'll never", or "it’s impossible", these may suggest therapy is a helpful place to start.
In contrast to Financial Therapy, Financial Coaching and Financial Planning share several defining characteristics. They are both primarily current-to-forward-looking, whereas therapy is primarily current-to-backward looking.
The primary work of coaching is education and behavior change which help clients achieve their financial goals.
The primary work of financial planning is establishing a financial plan which helps clients achieve their financial goals.
Every good financial planner will provide some financial education and facilitate a degree of behavior change. And every good coach will introduce at least a few elements of a comprehensive financial plan. The difference is one of focus, or emphasis.
Because of coaching’s focus on education and behavior change, the frequency of interactions between coach and client is typically higher than those in financial planning. Coaches and clients will often meet on a regular basis, at least monthly and as frequently as weekly. Coaching engagements also tend to be more limited-term, focusing on a specific area or project the client would like to address over a period of months (rather than years).
In the coaching model, the client does the majority (if not the entirety) of the outside-of-meeting work. Take the example of creating a financial plan. In a pure coaching model, the coach would help the client identify how to research the elements of a financial plan, and how to create those elements. The coach would not do that work for the client, but rather would coach the client to perform the work themselves. A financial planner, on the other hand, would do the majority of the plan creation for the client.
Bari Tessler also has some amazing resources and coursework. To my point regarding terminology above, she uses the title Financial Therapist, but based on the services she currently offers, I'm putting her in the Financial Coaching category.
And if you’re looking for financial coaching focused more on your practice (rather than your personal finances), check out the private practice coaches on my Resources Page — or consider if my services might be a good fit.
In my mind there are two defining elements of a financial planner. First, they approach planning from a comprehensive, or holistic, manner. Second, their primary focus is on creating a financial plan. That financial plan will lay out a series of interrelated steps to help clients achieve long-term goals.
Comprehensive financial planning means the planner will examine all the major areas of your financial life, providing guidance and recommendations. These areas include cash flow and budgeting, investing, retirement planning, education planning, tax planning, estate planning, risk management, insurance and employee benefit utilization review, and career planning. The areas addressed, and the depth with which they are addressed, vary by advisor, so be sure to ask for specifics when interviewing planners.
In a financial planning engagement, the focus is on the creation of the plan itself. As a consequence, client-planner meetings will not occur as frequently as in a coaching engagement. A planner might deliver you a written summary plan (a one-time or project engagement). Or you can engage a financial planner in an ongoing, collaborative manner, where they will guide you through the process of planning and executing that plan. Either way, the focus is on the planning, rather than on education and behavior change. Of course, the planning process will still educate you, and on-going financial planning will offer a degree of coaching around behavior change. But neither of these will be the focus of the engagement.
Also in contrast to a coach, the financial planner will do a lot of the outside-of-meeting work. How much work the planner does, and into how much detail they go, varies by practitioner, so be sure to ask. Regardless, engaging a financial planner does not mean you’re entirely outsourcing your financial affairs. You’ll still have elements of the financial plan to execute. However there are elements of the plan which the planner will execute, subject to your guidance and review. These elements commonly include investment management, building a financial model for your life, and researching specific topics to provide you evidence-based recommendations.
The term Financial Advisor is the most ambiguous of those discussed in this article. I would also include the titles investment advisor or wealth advisor in this category.
I'm primarily using this category as a catch all, encompassing any advisor, who is neither a therapist nor coach, and who helps you navigate a particular aspect of your financial life without a comprehensive approach. The particular aspect is often your investments.
Often, people assume the only type of professional out there is one who focuses exclusively on managing your investments. While investment management is an important element of your financial life, hopefully this article clarifies that there are many financial professionals willing to help you address areas beyond just investments.
A word of caution: far too many financial advisors are nothing more than glorified salespeople. As a consumer of financial services I believe it's important to understand how commissions may influence the advice you receive. Two important questions to ask any financial professional before working with them are: first, how do I pay you? And second, what are the other sources of compensation you receive beyond any fee I directly pay you?
That's a Wrap 🎬
That's it for this today's post. I know we covered a lot and yet it is but one small part of navigating the entirety of your financial life.
If this all feels a bit much, give me a shout. I work one-on-one with therapist group practice owners from all over the country and help them address issues just like these. Learn more about how I work with GPOs on my services page.
Turning Point is a registered investment advisor in the state of California. Please visit turningpointhq.com for important information and additional disclosures. This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes financial, legal or tax advice; a recommendation for purchase or sale of any security; or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Read the full Disclaimer here.