Where do I go for help with my finances?
40% of UK adults say they don’t feel confident about managing their finances and the real figure is probably much higher. There are many reasons why managing our finances is hard – it’s become increasingly complex, our brains aren’t wired for it and very few of us have been shown how. So, if you have a question about your finances, where do you start?
Most financial planners and advisers will offer a free consultation but a lot of us worry about going to see a financial professional. We worry about jargon, costs and being judged about the state of our finances. Asking questions – especially money questions – can feel awkward, and we all avoid situations that make us feel awkward. And, while there is a lot of information available online, it’s not always easy to know what is good advice and what is marketing.
Until recently, financial professionals were the only option available and this meant that most of us didn’t get any help till we really needed it. Over the last couple of years we have seen the emergence of Money Coaching and Financial Coaching and this is a big step forward. But what actually is a money coach? What do they do? Do I need a coach or a planner? More choice can be confusing – so this is my guide to who does what so you so know who you may want to talk to. To help you understand the various options, we’ll start by looking at what constitutes financial advice, financial guidance and coaching.
What is Financial Advice?
You might think that advice is the simple stuff, but it’s the area where there is the most regulation. Planners and advisers need to have professional qualifications, they are licenced and they need to maintain their knowledge through a number of hours of continuous professional development. Currently this is set at 35 hours per year and all firms have to follow strict compliance and suitability procedures. Regulated financial advice is advice that goes beyond the mere provision of information and usually leads to some sort of recommendation. When professionals talk about advice, they are usually referring to regulated advice. This is the technical stuff and includes areas such as investments, pensions, mortgages and insurance, as well trusts and estate planning. In simple terms, if you’re buying any kind of financial product, then it will be regulated. Debt advice is also a regulated activity. So, if you want advice on how to invest a lump sum or build a long-term financial plan, then you need a financial adviser or a planner and they will be giving you financial advice.
Do I need a planner or an adviser? And what’s the difference?
Broadly speaking, planners focus on the longer term and advisers tend to give more specific advice around pensions, investments or insurance. Planners look at goals and advisers tell you what to do with your money. You can find out more here and from Money Saving Expert here. There is plenty of overlap and each firm should be able to clearly articulate the process that they go through with you. There is some great advice on how to choose a financial adviser/planner here, and for a list of the questions you should ask every planner or adviser please click here.
What is Financial Guidance?
Financial guidance is a much broader term than advice and includes general information about financial products and principles to consider when investing or using those services. There should be no product recommendations. ‘How do I invest in the stock market is guidance?’ ‘What stocks should I buy?’ is advice. Financial guidance also covers much broader areas like ‘How much should I save’ or ‘How do I budget’ or ‘How do I build long-term savings?’ Guidance may be offered by regulated firms, but you don’t need to be licensed or possess any qualifications. Any organisation or individual can offer guidance and there is no professional body or regulator. Financial guidance is also referred to as Financial Coaching, because it covers the practical side of managing money without going into product sales. Most people have never been shown how to manage their finances and getting some form of guidance is really important. Some people in this space call themselves Financial Coaches and some refer to themselves as Money Coaches. When choosing who to work with, it’s really important that they offer guidance that will work for you. After all, there is plenty of information available, so the coach needs to ensure that they are supporting you on your journey to greater financial resilience and wellbeing.
What is Money Coaching?
Money coaching is primarily concerned with the patterns, behaviours and emotions that people have around money. The principle is that you need to understand and manage your behaviour around money in order to understand and manage the money in your life. ‘How do I budget?’ is a guidance question; ‘Why can’t I budget?’ or ‘How do I understand my spending?’ is a coaching question. Money coaching will cover the practical aspects of managing money, but it usually starts with looking at what is currently driving your money behaviour. It’s very difficult to change or build a new behaviour if you don’t know why it is that you do what you do. Our money behaviour is based on subconscious patterns and beliefs, so we all need help to understand what is driving it. It’s not just about numbers.
Where should I start
Where you start depends on the issue that you have and the context. Everybody benefits from coaching – all the best performers in the world have coaches – but, if the issue is purely technical in nature and you’re comfortable engaging with the financial system, then you probably need regulated advice. If you have an unhealthy money pattern – e.g. uncontrolled spending or severe money anxiety – then coaching is the best place to start. And without coaching, you can’t build awareness of what’s driving your behaviour. Similarly, if you’ve tried to change and can’t, then you need a coach. If you’d like to understand more about coaching, you can go to my coaching page here or listen to some of my podcasts here.
For everybody else, it depends on whether your main focus is on the practical side, or the behavioural side. Most people are looking for financial guidance and this is fine as long as there are no emotional or behavioural blocks to implementing the guidance. A Financial Coach can help with non-regulated advice and guidance. A good Money Coach will help with practical and behavioural guidance. So if you’re looking to change a behaviour or build a new behaviour, then this is the best place to start. A good Money Coach will also be able to direct you to a network of professionals who can help with technical questions and regulated advice. Some planning firms now offer money coaching services alongside regulated advice, so this is another way to get practical and behavioural support.
This article is intended as a brief introduction and there are many activities that overlap the advice, guidance and coaching buckets. Please feel free to contact me with any money questions.
Please refer to the link below for more details on the difference between advice and guidance.