Financial coaching is like having a GPS for your financial journey. While financial advice offers general direction, a coach guides you through the twists and turns, helping you avoid pitfalls and stay on course to your destination. In this episode, Wade Reed breaks down the critical differences between financial advising and financial coaching. He shares how financial advisers often provide information-based, product-focused recommendations and work on a transactional basis while financial coaches are dedicated to partnering with you to help achieve your specific financial goals. Tune in to explore how financial coaching can empower you to take control of your financial future.
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What’s The Difference Between Financial Advising And Financial Coaching?
Financial Advice Vs. Financial Coaching
In this episode, I want to deal with the topic of financial advice versus financial coaching. This comes up quite a bit when people ask me what I do. “What do you do for a living?” “I’m a financial coach.” “Do you manage money?” “No. I don’t manage money. I’m a financial coach.” “Do you do investments? Are you a financial adviser?” “Kind of but not really. I’m the financial guy you’ve always wanted to have in your life who’s more on the same side of the desk as you versus the opposite side of the desk as you. I’m not the guy who’s giving advice and telling you what to do, but instead, I’m helping you identify your goals. I’m helping you set projects and timelines around those projects that are achievable so that you accelerate your financial results.” They’ll say, “Okay. I don’t know if I’ve ever had somebody in my life like that.”
I wanted to distinguish more clearly during this episode the value of having somebody as an advocate, as a guide, as a mentor, and as a coach to support you in your financial journey. Financial coaching is an area that is not well known. There are coaches in sports. There are coaches in your career. There are coaches in health. There are coaches at the gym known as personal trainers. Coaching is a way that you encourage somebody toward a goal that you’re trying to accomplish toward a future objective.
Advice is more like, “I’m not sure what to do here. What would you do?” Periodically, a coach will give advice but that’s not the primary objective of a coach. I want to clearly distinguish what advising looks like in the financial world versus coaching, and why I think you ought to be looking for somebody who is in the coaching mindset rather than somebody who is on the advising side.
The Nature Of Advising
Advising versus coaching. We’re going to bring up a couple of things about advising. Advising is primarily information-based. Above my shoulder, there’s a bookshelf and there’s a bunch of advice in books. There are stories and there are experiences. I love books because I can dive into somebody’s life experience, their entire life up to that point when they’re writing this book, and how everything is coalesced into what they view as truth in the topic that they’re addressing.
I’m big on the self-help. I’m big on personal finance. I’m big on business and developing value for other people, solving problems, and how that all comes together. One of the books above my shoulder says, The Engine of America, which is all about small business and how to be successful as a small business owner. You’ll recognize that I always talk about even those in a W-2 position as a full-time employee for someone else, technically, you’re still a business owner. You just happen to have one sole client right now. You’re giving 100% of your time to one client, and they’re paying you a specific salary for that.
If you can have the mindset of I am choosing to give my labor, my skill, and my ability to this employer because I feel like it’s the right place, it’s got the right culture, it’s got the right objectives, it’s got solutions I enjoy solving. I’m paid well for my services. I have whatever other things I like. I like autonomy. I like flexibility. If it meets all those things, you are giving your service to somebody else and that’s perfectly acceptable, but being the business owner mindset that I choose to be here, I don’t have to be here.
Back to this, advising is information-based. When we sit down with somebody and say, “I don’t understand investing. Tell me about investing,” and they tell you, “Investing is doing this, that, or the other. You have to put money in the stock market, and you have to diversify it across this different spectrum of stock classes. Use mutual funds, ETFs, or a variety of things.” You start to learn the lingo and they teach you the lingo, and they leave you to do your own thing.
That’s information-based, where coaching, we’ll get to it in a minute. Advising is largely product-focused. An adviser in the financial world is either on the investment side or the insurance side typically. I fall onto the insurance side. I’m licensed and have been since 2009 in life insurance-based products, whole life insurance, term life, annuities, things that create certainty, and things that can create guarantees. It’s a balance against the other side of the coin, which is risk-based assets like mutual funds, stocks, alternative investments, and things like that.
Advisors typically make money off commissions, not advice. It’s pretty rare to find somebody who’s selling their advice for a fee and that’s pretty rare for somebody to be willing to pay for advice for a fee because information is readily available on the internet. It’s hard to be willing to accept somebody else’s advice. This happens in the medical world. We look things up on our own before we go see a doctor. In any case, the product focuses very heavily on the nature of financial advisers. Not to say it’s bad, it’s just what it is. You’re going to primarily receive a recommendation of a product if you go to somebody who’s giving advice.
They’re also focused on money. What does that mean? They’re almost exclusively looking at the financial situation they’re in and looking at you objectively and giving advice in a sterile environment. It’s not focusing specifically on you, your goals, objectives, what you care about, the values that you have, and the priorities you have in life.
Oftentimes, when you’re asking for advice, that person is also not in a position to be willing to ask the questions that dive deeper into your personal life. They get clear on your perspective, how you’ve come to the beliefs that you have, how you’ve come to the decisions that you’ve made up to this point, and the direction that you’re going or might want to be going instead. It’s more focused on the money aspect of trying to find efficiencies with money and less on you.
The Nature Of Coaching
The last part is it’s largely transactional. When you’re going to seek advice from somebody, usually that person’s going to end up in a transaction with you as a primary focus. It’s product-oriented and transactional because that’s where money is made in the financial world for the most part. Now on the coaching side, we’re going to find that coaching is primarily results-based rather than information-based.
I’m always telling my clients, “You can get information anywhere. Anytime we have a coaching session, I want you to be seeking insight.” In other words, the information I’m sharing may be familiar to you, but find the insight about how you can apply it to get the results that you’ve asked me to help you accomplish.
It’s results-based. What are you trying to accomplish, and how can I help you accomplish that? I’m not doing it for you. I’m not telling you what to do, but I’m helping you stay accountable for what you say you want to do. If there needs to be information and advice, sometimes that comes along but then there’s always this, what do we do with that? What’s the action that’s associated with it to get results?
It’s goal-oriented. What are we trying to accomplish and by when? Is that realistic? Is that achievable? Is it measurable? In a coaching world, we put those things in place. The other day, I met with a guy and he said, “I feel disorganized in my business finances. I’m frustrated about it.” I said, “Are you frustrated enough to do something about it?” He said, “I think I am.”
There’s this willingness factor. I could give them all the advice in the world. “I think you should set aside a specific hour of your week to do this, that, and the other to stay organized.” I think you should do this to get organized but it falls on deaf ears unless somebody is willing and unless they have a goal around it. Coaching asks the question, what is it about what’s important to you? What would be different in your life if you had that accomplished? Can you imagine how it would feel to accomplish that? Are you willing to do what it takes to accomplish it? If all those are described in yes, then, what’s the action plan? Let’s come up with a game plan. What’s something you could do? What’s one step you could take?
We create objectives, we create timelines, and we create action items around that with some accountability. It’s focused on you rather than on money. In the financial coaching world, we focus on you because you’re the generator of the income in the first place. If you’re in a good mental state, if you’re taking care of your body, mind, and spirit, and if you are serving people in a way that they’re willing to pay you, the money will come in. Yes, we need to deal with that and I’ve got my system. I’ve already talked to you guys about it.
If we put those things in place, money takes care of itself. In coaching, we’re focused on you. As you make decisions and as challenges come up, we come in and we have the conversation about what it is that you’re doing to deal with that. What is it that’s triggering the emotional reaction? In some ways, it’s counseling, but we’re not focused on the past. We’re focused on the future. What is it that’s coming up? How long have you felt this way? When have you experienced that before? What can we do differently this time? What’s one thing we can do that might be a little different than you normally react to this to test out a different approach?
Insanity is doing the same thing over and over again. Let’s try getting out of insanity and into sanity and do something a little different. Test it out. See how it goes and because we’re in that safe coaching space, we can go try something out, come back, and have a productive conversation. See how it went or didn’t go. Sometimes people will balk and say, “I know I said that I wanted to do this. I just got scared.” What caused that to come back up? Maybe we need to take a different approach. It is a person-focused rather than money-focused.
The Impact Of Financial Coaching
The last thing here is it’s transformational. If we’re focusing on a human being and that person is focused on accomplishing something important to them and the coach has helped draw that out and then helped create the action associated with it to get those results, it can be transformational.
When a coach helps a person create the actions needed to achieve their goals, it can be transformational.
I have clients all the time who come back and say, “My gosh. I never knew how much I didn’t know about personal finance, and I never knew how simple it could be. I never knew how important it was to have this in place such as reserves. I always thought that was a farce. It was useless to have that much cash. It should always be invested but I see now the value of having cash on hand because it’s helped me deal with a crisis.”
I had multiple people come and say, “If I hadn’t known what you taught me and applied what you taught me about money, I would be all over the place emotionally right now. I’d be freaking out that this financial issue came up.” I had that happen a lot during my coaching with people and during COVID. They had cash in place. They had systems in place. They could deal with the downturn.
It’s transformational. You become a new person because you’re trying new things. When you’re looking for financial advice, that’s plenty. You can get that anywhere at any time, plenty of videos out there, but coaching is personal. As I always say, make personal finance personal. If you’re willing to take a personal approach to it and it becomes meaningful to you, the person who you are is expressed through how you spend money and deal with money, how you give, how you save, how you invest, and how you spend.
You vote with every dollar. If you want to enhance how that happens and you have some specific goals and you want somebody to be a guide and a support, that’s where coaching comes in. That’s where the value of having somebody like me can support you through that in a powerful way. We don’t just do a handful of sessions, sell a product, and goodbye, see you in a year. Nothing particularly wrong with that. I have lots of clients on the life insurance side of my life and that’s what we do. We spend a handful of sessions. We have a good strategy in place. I teach them some of the core principles. They go out and they try to implement on their own, and they’re perfectly fine with that.
I have other clients who want that hands-on, side-by-side, done-with-you experience, and we spend many months working together, sometimes a dozen to twenty meetings or more to get things figured out, to build accountability, to build rhythm, and to build success patterns that are different than the fears that you’re dealing with. It’s an accelerant.
I have clients who always tell me, “Wade, I have done things faster than I ever thought possible because of working with you.” That’s why in my email signature, I say, “Wealth accelerator and money coach.” It’s not me so much. It’s your decision to hire a coach. It’s your decision to invest in yourself. That’s the accelerant. I just happen to be the intermediary to help you.
Other coaches in your life may be doing similar things in business, health, and other things. Coaching is very important. It’s not for everyone at all times. There are times when you need advice and there are times when you need a coach. If you’re one of those who’s ready for coaching, you can apply to work with me. I have very few people I work with one-on-one, maybe 5 to 10 people a year.
I’m building out group coaching that’s going to launch in the fall. I’m going to have a membership where you’ll be able to participate in a group fashion through these principles and still have some guidance from me, but it won’t be 100% one-on-one. It’s going to be in a group fashion. I want to be able to reach hundreds and thousands of people as opposed to a few dozen over a couple of years.
I appreciate you tuning in to this. I appreciate you letting me be a part of your life, hopefully, creating inspiration and action. Most importantly, take some positive steps and some positive action in your life so that you’ll have confidence in how you’re handling money. You’re happy and excited. Money becomes fun and easy as opposed to worrisome and fearful. I love you. We’ll catch you in the next one.
Take some positive steps and actions in your life so that you’ll have confidence in how you’re handling money.