Managing your finances can be a daunting task, especially if you're not sure where to start. That’s why it’s comforting to know there are professionals out there who can help guide you through the process. However, with so many financial professionals available, how do you know which one is right for you and your situation?
Financial professionals have varying degrees of education, certifications, experience, and fees. Before you decide who to work with, you’ll want to have an accurate understanding of your financial goals and what you want to achieve with a financial professional.
Below we’ll discuss three popular choices:
Personal finance coaches
Financial advisors
Certified financial planners
Understanding their different roles and expertise can help you decide which one fits your specific goals and needs.
1. Personal Finance Coaches
Let's start with personal finance coaches. These experts provide support and guidance to individuals who want to achieve their financial goals. Instead of managing your finances or giving investment advice, personal finance coaches focus on educating you on financial literacy and empowering you to make informed decisions.
They'll help you create a budget, set goals, and develop strategies to achieve those goals. They can also pinpoint limiting beliefs and self-sabotaging behaviors that keep you from moving forward. Think of them as your cheerleader, rooting for you to succeed!
When it comes to becoming a personal finance coach, there are no formal education or certification requirements. However, most successful coaches have a background in finance, accounting, or business. They may also hold certifications in coaching or financial planning.
The cost of working with a personal finance coach varies depending on the services provided and the coach's experience. They may charge an hourly rate or a flat fee for their services, and some even offer ongoing support through weekly or monthly coaching sessions.
When to Choose a Personal Finance Coach
A personal finance coach is a great solution when you need:
A new money mindset
The clarity for your finances
Help to implement better financial habits
To improve your financial literacy
Help to increase your savings and to build your wealth
Support for coping with emotions and limiting beliefs around finances
A finance coach can also help you to know when you need support from a financial planner or financial advisor, and can probably refer you to one that suits your needs.
2. Financial Advisors
Next up we have financial advisors. This is a general term encompassing many different financial professionals, including but not limited to, brokers, insurance agents, estate planners, and bankers. Financial advisors help with a variety of different financial tasks.
When choosing a financial advisor to work with, it’s important to discover their specific background and knowledge, because not all advisors have the same expertise. For example, some may not be able to help you with estate or tax planning.
Financial advisors may be independent or work for a financial institution like a bank or brokerage firm. Financial advisors earn money in several ways, including commissions, fees, and a percentage of assets under management. Commission-based advisors earn a commission on the products they sell, such as mutual funds or insurance policies.
While commission-based advisors may offer their services at a lower cost, they may also have conflicts of interest. Fee-based advisors, on the other hand, charge a fee for their services, which may be based on a percentage of assets under management or an hourly rate. These advisors are generally considered to have fewer conflicts of interest than commission-based advisors.
When to Choose a Financial Advisor
A financial advisor is a great solution when you:
Need help with specific financial questions or tasks such as setting up a will or placing a stock trade.
Need occasional guidance in financial decision-making.
Want help building your portfolio of stocks, bonds, and other investments.
3. Certified Financial Planners (CFPs)
Finally, we have certified financial planners (CFPs). These professionals have gone through extensive training and passed the CFP exam to become certified. The CFP certification is considered the gold standard in financial planning and requires individuals to meet rigorous education, experience, and ethical standards.
The requirements for certified financial planners include the completion of a bachelor's degree or higher from an accredited institution, having at least three years of professional experience in financial planning, and passing the CFP exam, which covers a range of topics from retirement planning to investment management.
CFPs provide comprehensive financial planning services, including investment management, retirement planning, estate planning, tax planning, and insurance planning. These are usually revisited every few years, with client investments or strategies adjusted as plans are updated.
They work closely with their clients to create a customized financial plan that addresses their unique goals and needs. CFPs are required to adhere to the CFP Board's code of ethics and professional responsibility, which means they must always act as fiduciaries (acting in their client’s best interests).
When to Choose a Certified Financial Planner
A certified financial planner is a great solution when you:
Already have a good understanding of your finances and want to “level up”—maximizing your current assets.
Are ready to take a more holistic approach to your finances.
Want to develop a long-term plan that includes cash and debt management, insurance, investments, tax, and estate planning.
Want the specialized expertise of a CFP.
Making the Right Decision
Now that you have a good understanding of the functions of financial coaches, financial advisors, and certified financial planners, you’re ready to choose the right professional to support you in clarifying and reaching your goals.
Throughout your life, you may find yourself desiring the expertise and knowledge of a variety of professionals. If you’re just starting your personal finance journey, a financial coach can be the perfect partner. They can help you shift your mindset and behavior surrounding your finances.
If you find yourself needing a specific financial task done, reaching out to an advisor at your local bank can be a quick and easy solution.
As you grow in your career and investment goals, you may find yourself wanting comprehensive financial planning services, including investment management, retirement planning, estate planning, tax planning, and insurance planning.
Start Working with a Personal Finance Coach Today
As a personal financial coach, working with me is a great place to start. Outlining goals and steps to get there is what I do! From shifting mindset blocks to uncovering your core values, I would love to be in your corner cheering you on. I can also help you connect with other financial professionals as needed, and work together to make your financial dreams come true.
If you’re inspired to get started right now, download my free guide: 7 Simple Steps to Break Free Financially, or sign-up for a 1:1 financial coaching call here to learn how to improve your relationship with money.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.