Navigating the world of personal finance can be overwhelming. With a plethora of information available, it’s often difficult to know where to turn for help. This blog aims to clarify the distinctions between financial coaching and financial advice, empowering you to make informed decisions about your financial journey.
Table of contents
What is financial coaching?
In order to realise the true benefit of financial coaching, it’s important to understand where it fits in in terms of guidance. “Guidance provides information and/or options to narrow down a consumer’s choice but without an explicit recommendation” Financial Conduct Authority.
Financial coaching sits within the guidance role but focuses on supporting the individual with their skills, actions, emotions, habits and goals to take financial steps and increase confidence and knowledge.
A reputable coaching programme builds upon guidance by offering support and accountability. It’s like having a personal navigator who helps you chart your course and overcome obstacles.
Key characteristics:
- Financial coaches empower individuals to develop healthy money habits, manage debt, and plan for future goals. They provide ongoing support, fostering long-term financial wellbeing.
- Coaches provide a safe space for employees to share their worries and financial shortcomings to deal with the problem directly.
- Their guidance is based on information that is accurate, balanced and not misleading.
Benefits:
- Having access to a financial coach enhances overall financial confidence and literacy, helping employees develop healthy money habits through personalised support.
- This personalised support empowers employees to craft their own financial roadmap, ensuring the journey is their own.
- Employees are more likely to realise their financial goals when they are kept accountable and invested in their own plan.
Limitations:
- Financial coaches, while certified to deliver their mandate, are not deemed as legal financial advisors, and are therefore not able to offer specific product recommendations or legal protection to employees.
If you’re interested in learning more about Maji’s market leading 1-1 coaching offering, contact us here to book a quick demo.
What is financial advice?
Financial advice, in comparison, goes beyond guidance and coaching by providing specific recommendations tailored to your employees’ individual circumstances. It’s like having an experienced copilot who takes control of the plane and guides you safely to your destination.
“Advice is a service which recommends a specific course of action based on the individual’s circumstances” Financial Conduct Authority.
An advisor’s role is to provide a tailor made plan with specific and personal recommendations for employees to consider. Advice has to be given by a qualified, regulated individual as they are responsible for the accuracy and suitability of the recommendation they make. The advisor needs a full picture of the client, their aims, objectives and financial and personal situation. This in turn means the person acting on the advice is protected by law. This element of consumer protection is key when considering how advice can help you on your journey.
Key characteristics:
- Financial advisors focus on personalised advice suited to the employee
- Advisors are qualified, regulated, and legally protected.
Benefits:
- Employees can benefit from expert recommendations, reducing their decision-making stress, and providing them with legal protection.
Limitations:
- Financial advice can be costly and requires a high level of trust in the advisor.
The difference between financial coaching and financial advice
| Financial coaching | Financial advice |
|---|---|
| Delivered by qualified financial coach | Delivered by regulated financial advisor |
| Suitable for anyone with any level of financial concern or uncertainty | Suitable for people who are facing significant financial decisions or have complex assets |
| Ongoing, proactive guidance | Often one-off or reactive |
| Builds skills, confidence, and long-term financial security | Focused on specific transactions |
| Accessible, relevant, and impactful for all employees | Can be expensive and underused |
| Encourages engagement with benefits and everyday decision-making | Limited engagement or follow-up |
Choosing between financial coaching and financial advice depends on individual needs. If you’re looking to build foundational money habits and gain confidence in managing your finances, financial coaching may be the right choice. For complex financial decisions involving investments or estate planning, consulting a financial advisor is advisable.
Charting your path to financial freedom
While both financial coaching and advice have their place, coaching stands out as a proactive and cost-effective strategy for long-term financial well-being. Unlike advice, which often addresses immediate concerns, coaching empowers individuals to develop the skills and knowledge to navigate their financial journey independently.
It’s easy to be overwhelmed by the choices when deciding between coaching and financial advice. Coaching acts as a guiding compass, helping you determine the best course of action for your unique circumstances. By focusing on building financial literacy and confidence, coaching equips you to make informed decisions and achieve long-term financial freedom.
At Maji, we offer personalised financial coaching to help you achieve your financial goals. Contact us today to learn how we can support your financial journey.
