Financial coaching: What is it and why may you need it?

Jane Walters is a former financial planner turned financial coach and believes transforming people’s financial lives starts with their mindset. “After years of providing detailed and complex financial strategies for clients who didn’t go on to implement them, I realised that what stops people becoming wealthy is about more than just knowing what to do, and all about why they do it – and that’s determined by their relationship with money,” she says.

What kind of qualifications do finance coaches have?

While many financial advisers like Waters are repositioning themselves as financial coaches,

unlike traditional financial advice, wealth coaching doesn’t necessarily require an Australian Financial Services Licence (AFSL) because it doesn’t involve selling tailored financial advice or products. While there may be an expectation that a financial coach will have some background in finance, there’s no regulations to say that must be the case.

Why have a financial coach?

The main reason someone reaches out to a financial coach according to Waters, is often because they’re overwhelmed by their financial situation and they don’t know who to talk to. “They may feel that they don’t have enough assets to talk to a financial planner, and they feel the cost it’s going to take them to get the advice in relation to these assets, is too expensive,” she says. Waters, who works exclusively with women, believes there’s also a trust factor. “Women seek out financial advice less than men do, as they find it intimidating. They feel more comfortable with the concept of coaching.”

Financial coaching for high net worth clients

While financial coaches often work with people who are struggling to save and are on low income, they also have clients with a high net worth. “I have clients who actually earn a lot of money, but their spending is out of control, so we look at cash flow, getting out of debt and living within their means,” says Waters.

“I was working with a woman who was in her late 30s and her credit card debt was around $48,000. She earned very good money, but every time she got a pay rise, it was overtaken by lifestyle creep. We worked through six sessions and, since then, she’s paid out all her credit cards and is now saving for her first property. She’s also changed her spending habits. Often, she overspent because she was stressed. It was important to look at how she used spending to numb her feelings. Then we worked through the triggers that happened when she was under pressure and put new coping strategies in place. I helped, but she was the one who put the work in. She’s cut up her credit cards completely and is now in control of her finances.”

Another common scenario that Waters sees, are women who are recently separated or divorced, often after years of being a wife and mother and may have got a lot of money in a settlement but need to create a new life for themselves. “I can help them create intentionality about how they want to live their lives and work with them to create goals. I sit somewhere between a therapist – working out what kind of life they want to live, [and a coach] and how they are going to fund that.”

Financial therapy

The therapeutic aspect of financial coaching is taken one step further with financial therapy.

Jane Monica-Jones, a psychotherapist and author, works as a financial therapist who looks at the behavioural and psychological issues that are behind people who struggle to save or manage money, or who are risk adverse, miserly or overly stressed about their finances.

“We all have some issue about money. Most of us never received any financial education growing up. We don’t learn about investments and financial strategies and we don’t get any understanding of how our individual psychology, behaviour and history is going to affect our relationship with money,” she says.

“Clients who come to me may be experiencing financial trauma, such as divorce or bankruptcy, or a business going under, so it’s about resilience and how to recover from these kinds of events. But I also see people who are sabotaging their financial situation through overspending or who just don’t feel confident to make great fiscal choices for themselves. Often, I have clients who are retirees who feel stressed about retirement and that stress is making them feel less capable to make sound long-term financial decisions.

I had a 60-year-old gentleman come to me. He was a teacher and wasn’t a great money manager. We worked together and came across a belief that he’d had since an event in childhood, that he didn’t deserve to have wealth. After bringing it to the surface, things started to change. He got a promotion, his income increased, and he started to actively manage his pathway to retirement. Within five years he had $100,000 more in super than before and was feeling much more confident about life after work.

What you can expect to get out of working with a financial coach

For Waters, there are two main things that she wants people to get out of working with her: “One, the skills for managing their own finances and two, the confidence for creating the future for themselves. A financial planner tells people what to do, where I say, let’s work out what you want to do, and I will give you the information to achieve that. So, it’s about knowledge and empowerment.”

Taking a more holistic approach to finance freedom

Lea Schodel an award-winning financial adviser who recently dropped her licence to focus on wealth coaching through her business Mindful Wealth believes that “wealth coaching is a new offering that will broaden the current services of advisers, but not replace them”. “Traditionally advisers have never really looked at the behavioural side of things when it comes to people and money,” she says.

Waters agrees that advice is still important: “I still do believe in financial advice and when financial advice is good, it’s usually at the high end of the market. However, there’s a huge part of society that either doesn’t trust advice or can’t afford it, and they’re the ones who really need the help. I love helping these people.”

Learn more about financial advice in the following SuperGuide articles: