The reason why Would You Go to a Financial Coach Rather than Financial Adviser?

Some thing greater than financial advice

Earlier this year and shortly before I surrendered my Financial Services Authority permission to provide economic advice I met Bruce and Theresa, my long standing clients of some thirty years. The particular meeting was arranged to say farewell and to close our professional (but not social) relationship, and to finalise their plans for their retirement.

The particular meeting lasted for most of the day, and whilst their finances were in the agenda and were dealt with, a lot of the meeting revolved around how they were going to live in retirement, what they could and should do, how they had been going to maintain family ties, choices about their house and nearly all aspects of life in retirement. We also covered their relationship with money, dealing in particular with how to change their working life attitude of saving and prudence to finding the courage to spend their time and money upon making the most of their lives in retirement. While I was able to demonstrate mathematically that will their income and assets were more than sufficient to allow them to live a good fulfilled life in retirement, we had to deal with some deep emotional blocks to spending, in particular the fear they would run out of money.

This is far more than financial advice. It amounted to ‘financial life coaching’, a relatively new professional field that treats money and life as intertwined and is truly holistic in its approach. It is an approach I started to adopt in 2006 after training with the Kinder Institute of Life Planning in the US. In truth, most of my client interventions since then have been holistic, coaching interventions. I have found that the coaching element is of far greater value to my clients than arranging financial products, which, within the context of most financial life plans, should be simple, low cost and commoditised.

Financial coaching is for everyone?

I have witnessed the impressive changes that financial life coaching can bring about in clients, and I’d argue that everyone needs a life coach. In reality, the service is less suited to what Ross Honeywill and Christopher Norton call ‘Traditionals’ and more suited to what they call the ‘New Economic Order’ (NEO) (Honeywill, Ross and Norton, Christopher (2012). One hundred thirteen million markets of one. Fingerprint Strategies. ), and what James Alexander and the late Robert Duvall in their research for the launch of Zopa (the first peer-to-peer lending business) called ‘Freeformers’ (Digital Thought Commanders: Robert Duvall, published by the Digital Strategy Consulting).

Two types of customer

These distinctions are important in the framework of a key concept about cash, which I will cover shortly. First, let us consider the differences between the two categories. Honeywell and Norton describe ‘Traditionals’ as primarily interested in the deal, features and status. A sub-group connected with ‘Traditionals’ is ‘High Status Traditionals’ for whom status is the highest priority. They cite Donald Overcome as the epitome of a High Status Standard.

Honeywill and Norton contrast ‘Traditionals’ with NEOs. According to the authors, NEOs buy for authenticity, provenance, uniqueness plus discovery. They are more likely to start their business, are usually graduates, see the web as a powerful tool for shortening their lives, understand investing (money and personally), and are repulsed by conspicuous consumption. They are highly individual and express their own individual beliefs through what they say, buy, perform and who they do it having.

Honeywill and Norton discovered NEOs in the US and wrote about them for all men but Robert Duvall and David Alexander arrived at a similar concept in england in the early 2000s. In their exploration prior to launching Zopa, Duvall in addition to Alexander identified a group of people they known as ‘Freeformers’, a new type of consumer ‘defined by their values and beliefs, the alternatives they make, where they spend their cash. They refuse to be defined simply by anyone, they don’t trust corporations or the state. They value authenticity in what they buy and they want to lead “authentic” lives. ‘ Duvall and even Alexander saw these people as the key of an IT society based on self-expression, choice, freedom and individuality.

A couple attitudes to money

In my unique career as a financial adviser, planning software and coach I have identified two prevailing attitudes to money. One can find those who see money as an will itself, and those who see money as a means to an end. I cannot admit to having carried out detailed research about this, but I have seen enough to produce a reasonable assumption, namely that it is the Traditionals who see money as an end in itself, and it is the Freeformers who see money as a means to the end. (At the risk of upsetting Messrs Honeywill and Norton and aware that NEOs and Freeformers are generally not exactly the same, I am going to refer to both simply as Freeformers in the rest of this paper as I feel the word can be a better and more evocative description on the species than NEOs. )

Inside very general terms, Traditionals are intent on making their money get as far as possible by getting the best deals and features. Psychologically, they associate money with ego and status. Conversely, Freeformers use their money to get their individuality and authenticity and also to express their values. Whilst they cannot spend entirely irrespective of cost, his or her spending criteria are written in terms of authenticity, provenance, design, uniqueness and even discovery.

Mapping attitudes to life and money

In my own experience Traditionals respond to financial advice, but not economical planning or coaching, whilst Freeformers only start to value financial guidance when it is supported by an individual and one of a kind life and financial plan born out of a deep coaching plus planning process.

Putting it another way, Freeformers understand that the link between lifestyle and money goes deep, and so respond well to coaching that addresses their life and dollars. Traditionals, on the other hand, do not harbour this kind of powerful connection between life plus money, and are less likely to respond to the concept of ‘financial life coaching. ‘ Traditionals form the key market regarding financial services institutions and packaged solutions, especially those that provide deals (discounts hcg diet plan competitive fees), features (pension programs with flexibility, for instance) together with status (high risk, high returns). Freeformers are more likely to select a platform (an online service to aggregate all their assets and tax wrappers) and pay attention to selecting investments to suit their principles and goals.

The spectrum of help with personal finances

In the UK and various parts of the world you can now find numerous forms of help for your personal budget. Its a wide spectrum with economic advice at one end together with financial life coaching at the other. In between, families and individuals can access financial planning, guidance, coaching, mentoring and education. Of course nothing of these are mutually exclusive and some firms or even organisations will provide a combination so it is vital that you understand what is available and the limits together with benefits of each.

Financial advice

Economical advice is product oriented. In the UK the Financial Conduct Authority (FCA), which regulates personal financial tips, defines financial advice as assistance to buy, sell or switch financial product. Whilst there is a regulatory qualification to ‘know your customer’ and be sure any advice is ‘suitable’, the particular thrust of financial advice is the sale for products.

A financial adviser must be authorised by the FCA and abide by their rule book.

Financial planning

Economical planning goes deeper than economical advice. It aims to ascertain some sort of client’s short, medium and long term financial goals and develop a plan to meet them.
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The plan should be thorough and holistic. It should cover every area of the client’s personal and household finances and recommendations in any part of the plan should maintain the integrity of the plan as a whole.