Coaching is becoming a global industry, with millions of highly experienced coaches helping clients solve a wide variety of issues. Whether it’s life coaching, business coaching, or health coaching, the market size of coaches worldwide has reached $15 billion in 2019 and continues to grow to this day.
And financial coaching is no different, as it can be just as vital to a person’s happiness and success. By helping people make better decisions, financial coaches can transform their wealth, secure their future, and help achieve ambitious goals.
But if you’re considering becoming a financial coach, you need to have a solid understanding of what that requires, who your target audience should be, and whether it’s the right choice for you.
With that in mind, let’s answer all of the most critical questions related to financial coaching so that you can make a more informed decision for your business..
What is Financial Coaching?
Before you can decide whether financial coaching is a good fit, you need to have a clear understanding of what it is. Mainly because many people make the mistake of conflating the roles of a financial advisor and a financial coach.
Even though there is some overlap between the two specialties, they are quite different, approaching their clients’ finances from their own perspectives and with their own approaches.
A financial advisor is primarily focused on the management of the client’s financial assets. They can provide specific advice on how to handle a situation, what investments to make, how to weigh risks against rewards, and many other technical details that go into making sound financial decisions.
Meanwhile, financial coaching usually doesn’t have anything to do with specific investments. Even though they might be very knowledgeable on the subject, they typically don’t do the job of handling the assets themselves.
Instead, financial coaches focus on helping their clients gain the necessary knowledge to effectively manage their finances on their own. And that encompasses a wide range of areas.
For instance, you might coach your clients on the principles of investing, diversifying, insurance, but only to the extent that the client could gain a better understanding and then decide what specific actions are best in their situation.
In many cases, you will also be working with clients to help them develop better financial habits that help them save more money, accumulate wealth, and use the money they have more effectively.
Sometimes, you will even work with people who have negative equity, meaning that their liabilities exceed the assets that they own. In these cases, investing won’t even be a priority because the first task is getting out of debt, stabilizing the financial situation, and building up an emergency fund.
That’s why financial coaching can be so impactful and so rewarding for coaches that do it. Setting up a person for financial success on a personal level is highly rewarding and can completely turn around their situation.
And as a financial coach, you get to be there every step of the way and guide the person through their unique circumstances towards financial freedom.
Who Needs a Financial Coach?
64% of Americans wouldn’t be able to come up with $1,000 if they needed it for an emergency. And that’s a worrying statistic that clearly shows just how many people need financial help as soon as possible.
While many factors contribute to the overall financial situation of people in the United States, one of the key aspects is lack of financial education, which results in a limited understanding of how to manage personal finances.
These are the situations where financial coaches can step in and provide clear and constructive guidance that can help anyone start moving in the right direction.
But who are the people that you could help?
Well, the first category of people is the one that needs to get their personal finances in order. Whether it’s tackling debt, reducing expenses, or learning how to plan ahead, financial coaches can empower people to make better day-to-day decisions about how they spend their money.
The first aspect of this is specific, actionable budgeting strategies. By helping people make the most of the money they have, you can produce powerful results that have a lot of value.
As a coach, you can also help people set short-term and long-term goals while also holding them accountable and ensuring that they actually follow through and get on the right financial path.
Because of the broad range of knowledge financial coaching offers, you can pursue various clients based on your own unique experiences, areas of expertise, and personal preferences.
What Are the Benefits of Becoming a Financial Coach?
Becoming a financial coach is one of the most lucrative industries. With the lack of quality education on making financial decisions, there’s a huge demand for experts who can step in and provide people with the necessary tools to succeed on their own.
Sure, financial advisors have their role, but they mainly focus on handling financial assets. They can’t help people who need to get out of a difficult situation and learn to manage their money independently.
Meanwhile, financial coaches can guide a person from almost any situation towards a feasible and goal-oriented solution. Coaches can stay with the client throughout the entire journey, helping them make adjustments and transforming how they approach their finances.
So, the primary benefit of becoming a financial coach is access to a vast market of prospective clients who desperately need your services and are actively looking for solutions to their current financial situation.
But another massive advantage of becoming a financial coach is the ability to impact people’s lives in such a meaningful way. Every coach has the rewarding experience of helping people move forward, but few can say they make such a life-changing impact as financial coaches.
You can take on someone in a terrible financial situation and come up with a solution that solves their issues not just now but in the long-term future as well.
The Financial Coaching Business Model for Getting Paid
As a financial coach, you need to consider how you can turn your career into a profitable business. As rewarding as helping people can be, you need to be able to sustain yourself and grow your revenue if you want to stay in financial coaching long-term.
And for that to happen, you need to have an effective financial coaching business model, understanding the principles of starting a coaching business and adapting them to your situation.
But the good news is that there are many approaches you can take to start earning an income from your coaching.
The most popular approach is to have a fixed-price structure for a set amount of time (for instance, three or six months), during which you go through the financial education process, helping each person develop the proper habits and take control over their finances.
With this model, you can accurately predict how busy you will be, plan your work in advance, and fill up spots for new clients as they become available.
Some coaches also choose to have a retainer option for clients that want a more customized approach to their financial coaching plan. Even though financial coaches don’t provide specific investment or insurance advice, they can help maintain the right habits and hold their clients accountable.
When working with new clients, you could also offer a single session option, where you sit down and review their situation, talking about how you would approach helping them. While it’s not as comprehensive, it can act as an introduction to how you operate and help you get clients into your main program.
Finally, as you grow your business and become more established, your ultimate goal should be to transition from one-on-one coaching towards a model where you can help more people at once.
What Do You Need to Become a Financial Coach?
The number one asset you need to become a successful financial coach is knowledge. Your unique experiences, education, and the ability to help people will dictate your success above all else, so that’s good news for those that don’t have formal education in the field.
Unlike financial advisors, you do not need to have a license or a certification, at least if you don’t want to give out specific financial advice to your clients. However, getting at least some coaching certifications might be a good idea because that will give you more credibility and allow you to be more flexible in what you teach to your clients.
As a coach, you need to consider any legal liabilities you might have when working with clients and cover them with the right certifications and licensing.
But before you start thinking about certifications or training, you should consider whether you have enough knowledge and experience to actually help people. Having the credentials is great, but in the end, your clients are paying you for the results you can help them achieve. So that’s what’s going to end up dictating your level of success.
You should also think about what types of clients you want to help, considering the niches that you have the most experience with. For instance, you might want to help a specific group of people, such as those suffering from a lot of debt, and center your entire service around that central focus.
Requirements and Training to Become a Financial Coach
In the previous section, we discussed that you don’t strictly need any certifications or training to become a financial coach. And in some cases, the knowledge you have accumulated might be enough to make you an excellent coach, even if you don’t have any formal training.
But at the same time, it’s important to understand that financial coaching carries a big burden of responsibility. You will be helping people make decisions that will often decide the future of their lives, so any mistakes you make (or things you miss) can have massive implications.
Sure, as a coach, you might not handle the specific assets of the clients. But you will still be working on developing better habits and developing a strategy for addressing the most pressing financial issues in their lives.
To do that effectively, you must be absolutely sure that you know what you’re doing and that the advice you’re giving is sound.
To ensure you don’t have any blind spots in how you understand personal finances and help people, you should strongly consider certification programs designed for financial coaches. These programs can help you review and strengthen your fundamental understanding of financial coaching.
Becoming a financial coach can be a rewarding and lucrative opportunity. If you have the necessary expertise in the field and can genuinely help people overcome their financial challenges, you can build a successful business and develop a powerful personal brand.
As you gain more experience and work with more clients, you can expand into group coaching, enabling you to help as many people as you want while still having time to run the business side of things.
However, since financial coaching helps people make crucial life decisions, you need to be sure that you have the necessary expertise and consider whether you might benefit from official accreditations.