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A financial coach is a type of life coach who helps and provides encouragement to clients to attain their financial goals. This can differ greatly from a financial advisor, counselor, or other legally recognized finance expert. Likewise, financial coaches' fees may also differ, as they often charge a flat fee per session or month. There are potential drawbacks to hiring such a coach over a financial educator. For instance, the coach may not have actually having studied finance, and there is a lack of scientific proof that financial coaching actually works.
At their most basic level, financial coaches help people realize their financial goals, set benchmarks, and offer encouragement in attaining those goals. Having a financial coach also means having someone to hold a person accountable for his or her lack of progress, if necessary. The rationale behind a one-on-one relationship with a coach is that people are more likely follow through with their tasks if monitored. When relying on self-discipline alone, they tend to procrastinate and fall behind.
A financial coach usually does not have the same educational background as a financial counselor or advisor. In fact, while the vast majority of them offer financial advice, some do not. Instead, they concentrate on setting goals, keeping the client on track with check-ins, and reevaluating those goals if the client fails to meet them on time. Often, a financial coach’s primary goal is simply to keep the client motivated to reach her pre-determined goals.
The cost of a financial coach varies greatly, but it is often a flat fee rather than a fee based on the client’s income. This fee might be charged for every one-on-one session the client has with his coach or on a monthly basis. Many financial coaches demand payment upfront and in full before beginning to coach, while others set up a payment plan.
While studies show that people are more likely to complete a task when monitored rather than left alone, little research has been conducted on financial coaching specifically. In addition, there are no official degrees or accreditations in financial coaching or any type of professional coaching. Many coaches take on the job because they feel knowledgeable about the subject and capable of steering clients in the right direction, but some coaches are bound to be unsuited for the job and ineffective at what they do. This kind of coaching should therefore be approached with a healthy level of skepticism.