Smith 
Taking care of your physical health and happiness is crucial, but don’t forget about your financial wellbeing. Good financial health can make life a lot less stressful, allowing you to afford things like your kids’ braces, college tuition, and memorable family vacations. However, many people don’t take necessary steps to improve their finances, which is evident from some staggering statistics. For instance, a 2023 report from Experian shows that the average credit card balance is $6,365. Additionally, the average retirement savings for those aged 45 to 54 is only $254,720, and for those aged 55 to 64, it’s $408,420.
Many Americans need to make financial changes but don’t take action, even though financial advisors and coaches are readily available. The sheer number of these professionals can be overwhelming, often leading to "analysis paralysis." So, if you’re looking to improve your finances with professional help, you might wonder whether to turn to a financial advisor, a financial coach, or both. Let’s break down the differences.
A financial advisor is a trained professional who helps clients invest for the long term, mainly for retirement. They assist in building investment portfolios that match one’s goals and advise on major financial milestones like buying a home or paying for college. They also handle complex financial matters such as estate planning. Advisors typically charge a flat fee, a percentage of assets under management (AUM), or earn commissions on financial products they sell. The best advisors are fiduciaries, legally required to act in your best interest. Additionally, online financial advisors, or robo-advisors like Personal Capital or Betterment, offer a more affordable option with the convenience of technology.
Becoming a financial advisor takes more steps than becoming a financial coach. They must be registered with the Financial Industry Regulatory Authority (FINRA). Many also pursue Certified Financial Planner (CFP) status, which requires a bachelor’s degree, additional training, and passing a rigorous exam.
Pros of using a financial advisor include their professional licensing, expertise in wealth-building, and fiduciary responsibility. However, commission-based advisors may not always act in your best interest, costs can vary widely, and some may focus more on investments than daily financial management.
On the other hand, financial coaches concentrate on the everyday aspects of personal finance. They help clients develop better financial habits, manage debt, and budget effectively. Unlike advisors, they cannot provide specific investment advice. Financial coaches often start after overcoming their own financial challenges and may have degrees in finance or accounting. Training programs, like those from the Association for Financial Counseling & Planning Education (AFCPE) or Dave Ramsey’s Ramsey Solutions, offer certification for coaches.
Advantages of using a financial coach include their focus on short-term financial improvement, debt and budgeting expertise, and regular check-ins for accountability. However, the lack of formal qualifications and inability to provide investment advice can be drawbacks.
Choosing between a financial advisor and a financial coach depends on your specific needs. A financial advisor is ideal if you need help with long-term investments, building wealth, and planning for retirement. Conversely, a financial coach is better if you struggle with daily expenses, need budgeting assistance, or require a plan to get out of debt.
When deciding on a financial professional, look for certifications, ask about fees upfront, consider their experience, and ensure they have a genuine interest in helping you. Also, find someone you feel comfortable talking to and who is willing to provide references from past clients.
In summary, financial advisors and financial coaches serve different purposes. Advisors focus on long-term investment strategies, while coaches help with immediate financial management and debt relief. Your choice should be based on your current financial situation and goals.
