Coach Lisa Explains Which Financial Professional Is Right For You

Coach Lisa Explains Which Financial Professional Is Right For You

Many people lack the tools it takes to move the needle in their financial lives. Most of us grew up in households where talking about money is either overtly taboo or simply non-existent. As an adult, when we make money mistakes, we layer on guilt and shame and then bury our money issues even more deeply.

With the right influence, in the form of a financial coach, advisor or planner, anyone can get into top financial shape.

Here's Lisa's story of how she became a financial coach and how financial coaches can get you on the path to FI.

Lisa’s Path Out Of The Corporate World

Lisa got her first “big girl” job in 1997. Though retirement seemed very far away, she eagerly put money in her tax-deferred employer plan. This was a no-brainer because she hated her job so much and retirement seemed to be the only way out. She wasn’t sure she could make it until retirement, though.

This unhappiness with the corporate world made her an excellent target for a network marketing company. The recruiter she met said the company would teach her and train her on how to help entrepreneurs build their own businesses. She had complete freedom and flexibility in her schedule. She quit her full-time job, and became a high performer, though it didn't show in her pay.

Over the years, though, she watched and began to doubt that truly anyone could be successful. After this realization, she began to feel she was not operating with integrity and so she left the company.

Downsized

In 2005, her husband Darren established his own Information Technology (IT) company and hired Lisa to help with sales. It did well for several years, but the Great Recession meant that many clients were going out of business and others were putting projects on hold.

Over time, this forced them to let all of the employees go. They were keeping their business going at this smaller size when their biggest client wanted to hire Darren directly. It made sense to take advantage of that opportunity and to turn their own business into a side hustle.

They had chased the “earn more” side of the equation. Lisa decided to switch focus to the “spend less” side. They downsized houses and moved to the “unfashionable” side of town. They sold Lisa’s SUV and Darren’s GMC Sierra Denali. Now they have one used Honda Civic between them.

The Path To FI

In April of 2018, during a meeting with their certified financial planner, the planner mentioned in passing that they were now on the path to Financial Independence. Lisa wasn’t sure exactly what that meant but knew it sounded good.

She came home, Googled the phrase, and fell down the FI rabbit hole with blogs and podcasts. She learned as much as she could about the Financial Independence Retire Early concept.

After this, Lisa realized that she wanted to shift her professional life to helping people with their finances. She wanted to shout from the rooftops “You are 100% responsible for your own retirement!”

She sees that retirement often “sneaks up on people,” and they are left destitute in their golden years. Her passion is to help people shove apathy aside and squash ostrich behavior. She found this article and discovered the concept of being a financial coach.

While anyone can become a financial coach, Lisa wanted some credentials so clients would have some objective proof of her expertise. She has passed the AFCPE’s exam to be an Accredited Financial Counselor (AFC) and is in the process of earning her FFC (Financial Fitness Coach) designation.

What Are Financial Advisors, Planners, And Coaches?

One of Lisa’s passions is helping people understand the difference between Financial Advisors, Planners, and Coaches so they can make sure they are getting the right help at the right time.

Financial Advisor

A Financial Advisor sells products such as life insurance and investments. They are a salesperson. They get paid commissions when they sell their products, and most of their training revolves around making sales. Not necessarily good financial management.

Searching the internet for these terms will tell you what designations they have received and what financial products those designations allow them to sell. Thereby better helping you understand where their focus is.

It’s also worth noting that while many people are doing the work of selling, they may use different titles such as financial representative, broker/dealers, or investment advisor. They also have many acronyms such as CFA, CLU, CMF, and more. Searching the internet for these terms will tell you what designations they have received and what financial products those designations allow them to sell. Thereby better helping you understand where their focus is.

If you are unsure what the person does for a living, it is a good idea to ask them how they get paid. They should be willing to tell you if they make a commission for selling you financial products.

If you aren’t writing a check to the advising firm for their efforts, you can be sure they are earning a commission from selling those products. Also note, that any fees you pay are taken out of your investment accounts. Those fees reduce the amount of money you have growing in your accounts.

Suitability Standard Vs Fiduciary Standard

The suitability standard means that the financial advisor is required to sell you products that are suitable. However, they don't need to be the best products for you. So if two products are both suitable they can sell you the one with the higher commission.

Fiduciary Standard means the financial advisor is required to sell you the best product for you, regardless of their commission on it.

It's important to know that many advisors are held to the suitability standard. So it's key to fully understand the decisions you are making with your money. It may seem that your financial advisor is looking out for you, but they may just be looking out for themselves.

Podcast Episode: Let's Talk About Fees–Why Investment Fees Are Evil And How To Avoid Them

Financial Planner

Financial planners can help you purchase the right investments like a financial advisor. The difference is that they take a more comprehensive view of your finances. For example, you may need help with insurance, tax, or estate planning. They can help you connect with such professionals.

To understand the difference between advisors and planners, we defer to George Kinder’s book The Seven Stages of Money Maturity Full Disclosure: We earn a commission if you click this link at no additional cost to you. . To paraphrase, George says:

“Not so long ago, the only person to turn to with your savings was a stockbroker. Most brokers worked with large national firms that advertised extensively in print and on TV and radio. Also, since brokers made their livings from commissions on the investments they sold, many investors distrusted their advice because of the conflict of interest this compensation arrangement created…This conflict prompted the rise of a new profession, now known as Financial Planning.

Financial planners require more education and undergo a rigorous certification process. In addition to knowing about investments, financial planners are competent in taxes, insurance, retirement and estate planning, employee benefits and budgeting. Fee-only basis is on the rise with this group, rather than commission. This compensation arrangement that helps resolve the conflict of interest plaguing brokers.”

The gold standard in the world of financial planning is the Certified Financial Planner (CFP) designation. This designation is received after about two years of college-level education. It also means that he/she has passed the exam.

Many financial planners are held to the fiduciary standard, which means they have to sell you the option that is best for you, rather than what is best for them. It is worthwhile asking your financial team if they are held to the suitability standard or the higher fiduciary standard.

It's important to understand how your financial planner is getting paid. They can be commission based, where they get their fee directly from your investments. They can also be fee-only, which means you pay them directly and let your accounts grow at the maximum amount. Or fee-based, which is a combination of commissions from your investments and payments made directly to them.

Related: What To Expect When Working With A Financial Planner

Financial Coach

Financial Coach can focus on debt payoff, budgeting, finding money, financial education, self-discipline, confidence building, peer pressure, and goal setting.

Their ideal client needs help in developing good habits around money management such as budgeting and saving. They can help people who struggle with limiting beliefs and internal dialogue. Those “tapes” subconsciously interfere with making progress.

Just like an athletic coach focuses on a variety of aspects of the game, a financial coach helps their clients with both the dollars and cents of finance, as well as the mental game.

A Financial Coach also plays the role of counselor. They help their clients formulate a plan to deal with their specific life situation.

For example, when people bring up subjects such as their using a 401(k) as an emergency fund, it is the coach’s job to explain why that's the most expensive way of dealing with emergencies and to provide other solutions. It is the coach's responsibility to talk people through the decision-making process and help them understand that not all decisions are created equal.

With a coach, progress happens in regard to goals, identifying a person’s values, making an action plan and built-in accountability. Thanks, coach!

What about compensation? A typical package for one-on-one help can run about $350 for a one-hour initial call where a complete intake and discovery session is held, which starts the conversation. Some coaches do one-on-one or group coaching, which costs less per person. They may also have a course or book which is even more affordable.

Coaches can’t sell any financial products such as investments or insurance; their entire income comes from the fees their clients pay.

So, Who Is Right For Me?

While choosing a professional is ultimately a personal decision, here are some suggestions of who might be the best fit.

Windfall: If you’ve received a sudden inheritance or want to roll your 401(k) to an IRA and you need to buy investments, and if you don’t care about the fees or need much ongoing support, a financial advisor can be a good choice.

High Net Worth: If you have a high net worth and want to keep fees on your investments low, a fee-only financial planner who holds themselves to the fiduciary standard is a good resource.

Getting Started or Getting In Your Own Way: A coach can be a wonderful resource for those who are getting out of debt and building initial savings. Coaches typically can give more one on one attention on a day to day basis than planners. Coaches usually focus more on mental blocks and behavioral finance, so they may help you execute on goals more effectively.

Summary

Those who follow the FI way of life tend to be a Do-It-Yourself group. They tend to put most everything into VTSAX and ignore it, regardless of age. However, the “set it and forget it” approach to wealth building isn't good for everyone. If you need or want help that’s perfectly fine, just understand who the right fit is for what you are trying to accomplish.

Just sitting down with a professional of your choice is a good idea. The beauty of a fee-only financial planner is that they can give you a financial check-up. This can provide the DIY'er confidence that they are doing the right thing and are still on track.

When working with a financial professional, please ask about standards. Know if they are held to Fiduciary Standards or Suitability Standards. Most advisors work on a standard of suitability which means that if two options are suitable, the professional can legally guide you to what makes them the most money.

The Hot Seat

  1. What is your favorite blog?: I'm going to cheat a bit since my favorite blog, Our Next Life, has already been mentioned on the podcast multiple times.
  2. What is your favorite article?: I'll cheat on this one, too, since my favorite article, The Shockingly Simple Math Behind Early Retirement has been mentioned multiple times as well, and I’ll mention a book, The 7 Habits of Highly Effective People Full Disclosure: We earn a commission if you click this link at no additional cost to you. . It teaches you to focus on what you can control, instead of everything you can't.
  3. What is your favorite life hack?: Downsizing! When we relocated closer to my husband's job to eliminate his commute, we deliberately downsized our home. After we moved into lower cost housing, my husband's truck payment cost more than the new mortgage payment, which made downsizing to a shared Honda Civic the easy decision.
  4. What was your biggest financial mistake?: Joining a network marketing company. ‘Nuff said.
  5. What advice would you give to your younger self?: Start meditating. That chatter in your brain is not helpful and can be paused.
  6. What has been the best Amazon purchase in the last twelve months? Ring Doorbell Full Disclosure: We earn a commission if you click this link at no additional cost to you. . I work from home, alone, so I don’t want to open the door for just anyone. The Ring Doorbell allows me to see who is at the door and talk to them via my phone. It works from anywhere in the world so I can talk to them as if I were inside. The camera is also motion sensitive, so if someone is on the porch but doesn't ring the bell, it will still transmit video.

Lisa is a regular at Fincon and has been to both Florida CampFIs. She can be found at LisaDuke.net and LinkedIn.

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ChooseFI seeks to uncover helpful services that help you be financially resilient. However, we may receive compensation, at no cost to you, from the issuers of some products mentioned in this article, including from CardRatings for our coverage of credit card products. Opinions are the author’s alone, and this content has not been provided by, reviewed, approved or endorsed by any of these entities. See our disclosures for more info.

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