Why Financial Coaching Is Necessary

Financial Coach vs. Financial Advisor

The difference between a Financial Coach and a Financial Advisor


The first question I am often asked, “isn’t it a conflict of interest for a commercial loan broker to also be a financial coach?”  The answer is no.  Too many business owners come to me as a last resort to obtain funding to save their business.  If these owners had a proper financial education before they launched their business, they would not be in the situation they are facing.  It is one thing to seek funding for growth and quite the opposite to delay the inevitable. 

In fact, 96% of businesses fail in ten years. How can that be? Why do most companies fail? It is simple because they can not pay their bills. Most entrepreneurs are either (or start as) financially illiterate.  Besides those with financial services or accounting experience, most entrepreneurs do not go to business because they love numbers. Most entrepreneurs saw a chance to make the world somehow better and built a business around that idea.  Many went into debt to start their business rather than save to start their business.  Many more proclaim to have financial advisors and strongly feel that because they have a financial advisor, they are financially sound.  Traditional financial advice has failed the consumer and thus the entrepreneur and the data proves it.

According to two separate studies, one from the US Department of Health and the other by the American Council on Life Insurance, over 95% of the population is unable to retire with any financial security.

According to Statista, the personal savings rate of Americans had dropped to 2.4% in 2017, the lowest rate since 1960 and according to the U.S. Commerce Department, the lowest since the Great Depression of the 1930s. 

Statistics also show, 46% of American workers have less than $ 10,000 for saved up for retirement, and the average American household has 12 credit cards with an average credit of $ 8,500.

Add to the mix; the American Bankers Association states that  8 million Americans are delinquent on their credit card debt.

If traditional financial advice were appropriate, these statistics would not exist, but they do. The facts are undeniable.

People are left behind by a complex financial system that is changing fast. Traditional financial advice has not satisfied people’s needs to make smart financial decisions, and the results prove it.

A new alternative is needed, and this alternative is financial coaching.

The financial advisory system is based on a business model that benefits from the assets already acquired. The problem is that most people do not need it. Most people want help to accumulate wealth.

Most of us know what we have to do to create wealth and obtain financial security. It is no secret that we should spend less, save more and invest wisely. We also understand pretty well how we should do these things. The problem is not knowledge – the problem is doing.


It is one thing to tell people what to do, and it is a very different thing for them actually to do it. Humans are complex, emotional animals, not rational computers.

You can not motivate people to create wealth by giving them “how-tos.”  It is like telling someone who smokes, quit smoking and live longer. How does that help?  People already know what they should do, but they do not. Likewise, those who have financial problems know that they spend less, save more and invest more intelligently – but they do not.

The real question is how to make someone do what he or she wants to do, but for some strange reason, they do not. How do you make people prosper and gain financial security?

This is where the discipline of financial coaching enters. A mysterious “something” prevents people from doing what they already know, and traditional financial advice will not solve that problem.


Traditional financial advice is concerned with the management of existing assets and the sale of investment products – not you.   It is all about the money, not the problems you have with money. 

Financial advisors sell tools – not solutions. Because people are the cause of their financial problems, all the tools in the world will not help until that is solved. 

So, just as we can all buy the same tools from the local big box store, we do not all have the same skills to build a quality house. Different people with the same tools will build radically different houses. Some will come out well, and others will be garbage.

Similarly, we can all buy the same financial tools from a broker or financial advisor, but we will not all achieve the same financial success.

People with financial intelligence will succeed regardless of income level, while others without financial intelligence will live in financial mediocrity – or worse. The difference is the financial intelligence of the person, and that is the domain of financial coaching.

Essentially, traditional financial advice ignores the most important part of your financial success – you. If you have a financial problem, then you are the reason why it exists.  As a former debt counselor, I repeatedly had to inform people they will not find the solution to their financial problems by consulting a financial adviser. Instead, they need to look into financial and emotional intelligence.

Financial coaching does just that – traditional financial advice is not.

The second question I am often asked is, “

What’s The difference between financial advice and financial coaching?”


In short, financial advisors want to manage the wealth you have already built up. Financial coaches help you build wealth first.  One teaches you to fish; one cooks the fish you provided.

The only thing financial advice and financial coaching have in common is the word finance. They are as different as black and white. 

In financial coaching, there is no analysis or valuation of particular securities or markets, but there is investment strategy and risk management training so you can conduct your own securities analysis and make your own independent investment decisions.

Your financial coach will never recommend a specific asset allocation to transfer a percentage of the assets into stocks, mutual funds, bonds or other investments, but your coach will educate you on the intricacies of asset allocation so you can make an appropriate decision for yourself.

In coaching, there are no specific recommendations or referrals of investment advisers.  Your financial coach instead will work with you as an unbiased partner to develop the skills you need to find the right investment advisor for you and to understand the trade-offs of delegating to an investment adviser and managing your money independently.

In short, a personal financial coach is always focused on you: your education and decision-making process and teaching you how to overcome the obstacles that keep you from achieving your financial goals.


Your coach never makes any specific securities or market recommendations, as this is the meat and potatoes of financial advice.  Keep in mind; the two should never be mixed. It is not in your best interests.

The Benefits of Financial Coaching


Since no two people are alike, your path to financial freedom will be unique to you, and the obstacles that you must overcome will be yours alone.  Because of this, financial coaches work with much more than just investment products and investment tools. They work with you.

If financial freedom is your goal, then it is important to find the right path that fits your needs.

This requires a more comprehensive model that inserts the pieces into the puzzle that has been released through traditional financial advice.

After all, there is no point in taking you down a path to wealth unless you learn how to get on the path and stay on the path long enough to be successful.

Financial coaches are educators not sellers of investment products. Financial coaching is focused on educating you on what works, what does not and why. This will save you time and money on your way to financial freedom.


Additional benefits of financial coaching


Financial coaching provides a structured and collaborative environment in which you can expect not only financial growth but also personal growth and performance improvement.

Clients often say that many other aspects of their lives improve their financial picture in coaching.

Personal financial coaching promotes self-discovery, improved concentration and a new openness to more effective action. Through financial coaching, you can develop an improved self-confidence and the control of your financial security.

The result is a successful, capable and independent you.

Hiring a coach means you do not have to go through the journey to financial freedom alone. You can avoid the obvious mistakes and accelerate your progress with this support.  Because your financial coach is not focused on selling investment opportunities, you will not be dealing with many of the conflicts of interest that traditional financial advice entails.

In summary, the difference between financial coaching and financial advice is simple.

Your financial advisor is paid to invest your capital, but he is not paid to help you create investment capital.  Your financial coach is paid to help you create capital. 

You stay in control by learning to manage your money smarter and make better-informed investment decisions, or you put your future in the hands of someone else’s decision making abilities.

Even as a loan broker, I am a firm believer that everyone needs to grow their financial intelligence to increase their wealth; in the perfect world that would be before opening a business.