To advise or not to advise? That is the question!

coaching finance investing Mar 03, 2021

Warning….serious blog time.  No apologies, though.....as I want people to know the important difference between a financial coach and a financial advisor (IFA).

Being of the “typewriter” generation rather than the Tik-Tok age, I’m still working on gaining the confidence to be visible online, and I am learning all the time.  Slowly, but I’m learning!

In the Facebook Groups, both my own  group for women to come and talk about money and in others that I engage with, I am becoming more aware that people are expecting me to give financial advice.  I don’t, and I won’t.  They then seem disappointed, or feel as though I’ve been brushing them off, when I try to divert the conversation or response to their question to one that relates to financial coaching, and not to financial advice.

I get it – I have been an Investment Manager in my 9-5 for over 25 years.  I spend every working day providing advice to my clients on stockmarket based investments that can be really quite complex, so why am I not prepared to give the benefit of my wisdom and experience when I have my “coaching hat” on?.

Financial coaching is NOT financial advice.  There is a very definite line between the two, and it is absolutely vital that this is not blurred.  However, people are not aware of this, and I understand why they why might expect different.

Sadly, it seems that some who are selling their services as a financial coach are ALSO not aware of those differences……or if they are, they are choosing to over step the mark, or at the very least blur the lines.

So, what is the difference, and why should people make sure that they are working with the right person for the right reasons?

 

Providing financial advice involves doing a deep-dive fact find into a client’s financial needs and expectations, taking into consideration a whole host of elements such as their attitude to risk, how much they can actually afford to invest based on their income, expenditure and lifestyle objectives, what investments they have already got, what their tax situation is, and what it is that they are really looking to achieve and over what period of time.  From there, we can construct advice that is relevant to that client.  It is, if you like, the practical, action side of people’s investment relationship.

 

Coaching, on the other hand, works with the emotional blocks and previous experiences that hold people back from being able to push forward with their finances.  If you are having difficulty in being able to have a conversation about money with your partner or your professional advisor, if you are holding yourself back because you’re feeling that “investing isn’t for people like me”, or that “I’m no good with money”, financial coaching is what you could benefit from.  It’s for you if you keep saying “you ought to….” or “you should be able to……”

If you’re not sure what your objectives are, or what your financial goals will be, because something stops you from having the confidence to move forwards, then coaching is what you need.

A good financial advisor, or investment manager/wealth manager will help address some of these issues when they are working with you.  They will have a holistic approach to their work, helping their clients to get the very best from all aspects, from their relationship with their finances, so that they can actively help them create a plan that is going to help them build their wealth and get their money working in the best way for them.  Along the way, that client will feel comfortable with what they are doing, and confident in opening up the conversation and committing to the investment relationship for the right reasons.

So, a financial advisor can also use coaching skills – either on a formal or an informal basis, as part of their advice process.

But a Financial Coach, unless working within the Financial Conduct Authority regulations, cannot provide any element of advice as part of their coaching process.  And even if they are working within those regulations, they must be absolutely clear that there is a line. If they are being employed as a Coach, they must ensure that they do not cross that line into advice, and they must make sure their client is understanding of this.

As a financial services industry, we have good reason to ensure that these differences are observed.

Financial advice is an area that has come under intense scrutiny over my time in the industry. (I took my first stockbroking exams in the mid 90’s – over 25 years ago!).  Over that time, and for all the right reasons, finance professionals, whether advising on pensions, mortgages or, as in my case, investment, have become more and more heavily regulated, as we need to rebuild a reputation that has been lost in the past.

And quite rightly so.  During my time in the industry, I have seen “scandals” relating to the mis-selling of pensions, of endowment fund policies, of zero dividend preference shares and – the big one – the great Financial Crash of 2008/09, where banks and investment houses across the globe were creating and selling financial packages that even they didn’t understand!

I’ve always taken the highest level of professional qualification available to me. I take massive pride in being able to deliver top quality investment advice to my clients.  I am a Chartered Fellow of the Chartered Institute for Securities and Investments, and I complete a minimum of 35 hours of Continuing Personal Development a year and undergo strict credit checks and a Fit and Proper Persons test for the Financial Conduct Authority (FCA) on a regular basis.

For my role as an Advisor, I am regulated.  I can be checked out with the FCA and the CISI where you can see exactly which categories of investment I can advise on.  There is no hiding.

If I don’t live up to standard, I am held accountable. I will be subject to disciplinary action, and I can be struck off.

Serious stuff.

But if I give advice outside of that regulated role, i.e.  to someone who is not a client of mine within my 9-5 I have crossed the line and, again, I will be held accountable.

 

With my Financial Coach hat on outside my day job, however, I can do some incredible work with clients on their approach to money.  We work to identify why they feel constrained or held back.  A coaching client holds all the answers within them, and I can ask the right questions to help them work out why they behave in the way that they do, why they do not feel comfortable with their money conversations, and the real reasons why they don’t feel confident in dealing with their finances.

I have an amazing toolbox of stuff that can help them overcome their self-sabotaging hurdles. As well as knowing which questions to ask, we can use such techniques as NLP (Neuro Linguistic Programming), EFT (sometimes known as “tapping”) and Hypnosis to overturn the blocks that have become part of their money mindset if needed. In doing so the client can then develop the confidence to know what they want, rather than what they think they ought to want.  We can work on setting financial goals, with an appropriate plan of action, but I won’t give the investment advice that I would in my day job.  Absolutely non-negotiable.

A good coach can help clients make life enhancing changes to their way of thinking and doing.  A good coach will enable clients to get the confidence to seek the Financial Advice and to make the decisions that they would have felt uncomfortable with beforehand.  A good coach will help their client realise that they are now in control of their money.  Their money is no longer in control of them.  As a result, a good coach will help their client realise they have an amazing financial future ahead of them, and it isn’t all down to the rate of return on their investments.

Quite simply, having a good financial coach in place is every bit as important, and some would argue more so, than having a good financial advisor.

Yet coaching, unlike Financial advice, is not regulated.  You do not have to even do any training to market yourself as a coach of any sort – Life Coach, Confidence Coach, Mindset Coach, Business Coach and yes, Financial Coach.

I believe that it SHOULD be regulated.  I have worked hard to gain the knowledge that I have that I use to coach.  I have spent many hours in the classroom, with case studies, and I know that I approach things in a way that is every way as stringent as my day job.  But there are plenty of people out there who don’t have that professionalism that I do.  They just decide to “become a coach”.

So you can see that if a coach steps over the line and delivers anything that can be taken as financial advice, they are moving out what is already an unregulated world, into an incredibly highly regulated one.  And the potential for repercussions and reputational damage is high.

So…..whilst I am more than happy to explain the workings of different financial products, to give you the FACTS about different stockmarkets etc, please don’t take it personally when you ask me in a Facebook group what you should be doing with your money to make the most of it, or where the best place would be to invest it.  I’m not trying to be difficult.  But I act with integrity, and it is incredibly important to me to do so.

And please be wary of any Financial coach, experienced or not, who does offer you that advice without it being part of their highly regulated role.  They may be an incredible Coach.  But check out whether they are qualified to give you Financial advice, or if they are (like me) that they are giving it to you in the right arena.

Phew, that’s enough seriousness for now.  I think I need ice-cream and a large G&T to help unfrazzle my brain!!

 

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