From CompliNEWS | Financial Services Intelligence Watch

The role of financial coaching in financial advice
By Lee Rossini

Financial coaching is a valuable service offered by some financial advice businesses to support clients to develop healthier financial habits, make informed decisions and take greater control of their financial lives. While traditional financial advice often focuses on investments, retirement planning, insurance and other technical matters, financial coaching places greater emphasis on the client’s behaviour, goals and relationship with money.

Financial coaching can be defined as a collaborative process in which a trained financial coaching professional works with a client to identify needs, financial goals and priorities. Financial coaching also works at a deeper level to understand current behaviours, overcome barriers and develop practical strategies for achieving greater financial wellbeing. Rather than simply telling clients what they should do with their money, a financial coach helps them understand their choices and supports them to take action.
Although financial coaching differs from life coaching, there can be some overlap. Life coaching generally takes a broad approach to personal development, focusing on areas such as relationships, career, confidence, wellbeing and personal goals. Financial coaching has a specific focus on the client’s financial circumstances and behaviours. The practical strategies that a financial coach may assist a client with include drafting a budget, managing debt, building an emergency fund, improving saving habits or developing confidence around financial decision-making. In a financial advice business, coaching can also complement regulated financial advice by helping clients implement recommendations and stay accountable to their longer-term financial plan.

One of the key benefits for clients is increased financial confidence. Money can be an emotional and sometimes stressful subject, and clients may avoid dealing with financial issues because they feel overwhelmed or uncertain. Coaching provides a structured and supportive environment in which these concerns can be discussed without judgement. By breaking larger financial objectives into manageable steps, clients can feel more capable of making positive changes. Financial coaching can also improve accountability. A financial plan is only effective if the client is able and willing to implement it. Regular coaching conversations can help clients monitor progress, identify obstacles and remain focused on their priorities. Over time, this may contribute to better financial habits, greater clarity about spending and saving, and stronger engagement with their overall financial plan.

However, financial coaching also presents challenges. Changing financial behaviour can take time, particularly when habits are deeply entrenched. Clients may experience setbacks or struggle to maintain motivation. There can also be a gap between understanding what needs to change and actually making that change. Coaches therefore need patience, empathy and strong communication skills, while recognising that every client’s circumstances and relationship with money are different. Another challenge is maintaining clear boundaries between financial coaching and regulated financial advice. Coaching should not replace appropriate professional advice where clients require recommendations on investments, retirement planning, tax, insurance or other specialist matters. Instead, the two services can work together: financial advice can provide the technical strategy, while coaching can help clients understand, commit to and implement that strategy.

Ultimately, financial coaching offers a client-centred approach to improving financial wellbeing and as such, it is a useful additional service for a financial advice business to offer clients in need of extra support. By combining practical guidance including legal-technical advice, behavioural support and accountability, it can help clients move from simply having financial goals to taking meaningful action towards achieving them.