What’s the Difference Between a Financial Advisor and a Financial Coach?

When you need financial advice for your business, should you hire a financial advisor or a financial coach? And what is the difference between the two?

Let’s look closely at each one and help you decide which is best for you and your small business.

Financial coach shaking hands with a customer

Financial Advisor

If you want or need professional advice about how to meet specific goals, then you likely need a financial advisor. These are experts in investments, savings accounts, and helping reach financial goals.

What does a financial advisor do?

Financial planner shaking hands with new client

A financial advisor is an expert planner, particularly with long-term goals. When you come to them with a specific goal such as “I want to retire by the age of 65,” they will look at your current finances and tell you what you need to do in order to make that happen.

They will explain how to set your current budget, which savings accounts to use, and how to invest your money so it grows at the rate you need it to.

Not all financial advisors will sell stocks, bonds, or annuities, but almost all of them do.

Financial advisors don’t have to be licensed to give advice, but they have to be licensed in order to sell investment products like stocks and bonds. And since almost all financial advisors make a commission on the things they sell, more than likely the one you hire will be licensed.

They also help with estate and tax planning and will give you professional advice about the best type of life insurance you need too.

Financial advisors are also educators. They don’t just give you advice, they teach you everything you want to know about future planning. They will go over your current financial health and what to do in order to obtain and reach your goals, whatever they are.

That means they do more than just sell investments. If you already know how you want to invest your money or don’t want to invest in stocks at all, you can still work with a financial advisor. They help people with everything financial-related such as:

  • Long-term planning
  • Budgeting
  • Paying off debt
  • Understanding and planning for taxes
  • Estate planning

How much is a financial advisor?

The cost of a financial advisor depends on your location. However, there are some average standards you can expect to pay.

While some work based on commissions, that’s very rare. Most advisors charge an hourly fee in addition to any commissions they earn from the stocks they sell.

Here is an accurate description of how much financial advisor costs, according to Investopedia.

A typical percentage fee is 1%, while a typical hourly fee for financial advice ranges from $120 to $300. Fees vary by location and the advisor’s experience.

Always ask for a quote before you hire an advisor. It’s a smart idea to shop around and compare prices with a few different ones to find the best one for you.

Financial Coach

What about a financial coach? Is that the same thing as an advisor? It is similar, with some marked differences.

If you need to learn about budgeting and money management, you might consider hiring a financial coach. These are very similar to financial advisors, but more like a tutor than an investor. Take a closer look at what a financial coach is and how much they cost.

What is a financial coach?

A financial coach works with people to teach them the basics of money management. Whereas financial advisors typically work with people in need of investment guidance, financial coaches mentor and teach people how to build a healthy relationship with money.

Most financial coaches work with people to help them in any of these ways:

  • Educate them on the basics of personal finance
  • Building awareness around spending habits
  • Teaching budgeting techniques
  • Teaching them how to get out of debt and creating action steps
  • Helping them build an emergency fund
  • Defining other financial goals and helping them meet them

Financial coaches will meet with clients weekly to check-in and address any concerns that came up that week and help them overcome bad habits so they can meet their goals.

How much is a financial coach?

The price of a financial coach varies from state to state and even person to person. According to the National Financial Educator’s Council, coaches sometimes charge an hourly fee or can also create a package based on your needs. The average fee will vary based on experience, area, and other factors.

Some financial coaches charge a package rate and others will charge a fee based entirely on how effective they are at helping you meet your goals. It depends on the program and the person, along with the reason you are seeing a coach.

There are lots of people that hire financial coaches because they are either so bad at managing money that they are in over their heads, or they need to find a way to dig themselves out of a bad situation. In those cases, they don’t have $275 an hour to pay.

In those cases, shop around. Be honest about your financial situation and ask the coaches how they advise you to be able to afford them. They will show you how you can pay off debt, or give you ideas on things you can sell so you can invest in their coaching.

Financial coach meeting with small business owners

Small Business Financial Coach

If you are looking for financial advice and coaching for a small business, it’s important to look for a coach who has experience in working with entrepreneurs. There is an entirely different set of considerations small business owners need to take.

In fact, only 50% of small businesses survive past the five-year mark according to the Bureau of Labor Statistics, Business Employment Dynamics. They also found that only two-thirds of businesses survive at least 2 years. I personally have experienced the ups and downs entrepreneurs face (you can read more of my story here), and I want you to have the best chance possible of success. 

For most people, the cornerstone to seeing a business succeed is getting their finances in order. 

I want you to have the best chance possible to succeed – and that means hiring someone you can trust who can help you avoid the pitfalls and hazards waiting to stop you on your way to success. If you want to explore this further, schedule a complimentary consultation with me.

Financial Advisor or Financial Coach – Which is Best?

There is a bit of an overlap between the duties of a financial coach and a financial advisor. So which one should you hire? Both of them will help their clients meet their financial goals. Both are educators. And both will be an investment to begin working with. How do you know which to use?

Typically, a financial advisor is someone you hire when you need help planning future wealth. They are licensed to sell investments, stocks, and bonds. They are extremely knowledgeable about estate planning and taxes. If you already have some wealth and need professional advice about how to grow more wealth or how to pass it on to your family in the future, you need a financial advisor.

However, if you are looking for guidance in the day-to-day management of your money, or are facing issues within your finances, you might need to hire a financial coach. Even if you aren’t that drowning in debt, financial coaches are a good choice for anyone that needs a little more guidance to help them overcome bad spending habits.

Financial coaches can help you identify where you can be making more money and saving money. For example, I help clients see that they’re paying for multiple subscription tools that can all be handled by 1 or 2 tools. This way, they can stop paying for so many services that they don’t need. The small things can really add up in the finance world – and it’s a financial coach’s job to help you find these areas.

Even if you simply don’t understand basic budgeting and want a little help, a financial coach is perfect. For example, if talking to your CPA is confusing and what you hear goes in one ear and out the other…seek out a financial coach. In my own business, I have many clients who expect their CPAs to help them understand what to do differently with their business based on their P&L statement, but that’s not what CPAs are trained to do. They focus on taxes. They don’t have the background to help clients dive into where they are overspending or underearning based on their business decisions or lack of systems, etc. That’s what a financial coach does.

For small business owners, a financial coach can be an exceptionally smart choice. They can help you identify where you can be making more money.  For example, in my own business, I help small business owners identify opportunities for additional income streams in their businesses, help them determine if they are spending more money than they are bringing into the business (i.e. loss vs. profit), and help them understand what their numbers mean on their financial statements like the profit & loss statement.

Accept Help When You Need It

It’s ok to admit that you don’t understand everything about personal finances. Taxes, investments, compounding interest, mortgages – it’s all very complicated. Investing in either a financial advisor or coach can pay off in huge ways. With their help, you can discover more money than you knew you had. Just by changing a few habits, you turn your financial situation around.

Especially as a business owner, having a financial coach can be an invaluable addition to your team. A financial coach for small business owners can help you look at your cash flow and profit and loss statement so you can understand what the numbers mean. They will also help you understand how the numbers can help you make better future business decisions and know what to change.

If you decide you’d like to work with a financial coach, I’d love to chat with you. Click here to schedule a complimentary consultation with me.

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