The last couple of years has seen a rise of interest in money coaching and its uses and integration with financial planning and advising.
In previous articles, Simonne Gnessen has written about financial coaching and, for the purposes of our discussion today, they can be considered the same. I’m a certified money coach, so I use the term ‘money coaching’.
While money coaching can be an activity – I do coach individuals and couples – it’s best thought of as a framework for understanding how people think, feel and behave around money.
Money coaching starts with the premise that you can’t understand and manage the money in your life till you understand and manage your behaviour around money. Money is intimately intertwined with our emotions and these emotions drive most of our behaviour around money.
Emotions such as fear, greed and regret have a huge impact on our money decisions – it’s rarely just about the numbers. All behaviour makes sense when you understand the underlying beliefs, feelings and thoughts, even if the behaviour has significant negative effects on the individual.
So, money coaching is a framework for understanding those beliefs, feelings and thoughts. And it’s this understanding that helps people to make better decisions, reduce uncertainty and other negative emotions and communicate in healthy ways.
Beliefs drive behaviour and a person’s money beliefs inform how they spend, save and invest
Not only is that important at a personal level, but these are also core areas of interaction for planners and advisers. Understanding a client’s money beliefs will tell you where issues may be rooted. It will let you know if there are any obvious hang-ups that may block a client. It will give you insights into their non-financial lives and it will give you an indication on how to best support them.
As well as a framework for understanding money behaviour, money coaching teaches you how to have open money conversations with clients and how to create a safe space for them to talk to you and share parts of their lives that they have never told anyone else.
You don’t need to be a money coach to ask great money questions and you don’t need to coach clients. Money coaching skills show you how to help clients with change – the changes that we all have in our lives; you don’t have to change clients.
Money coaching also holds up a mirror to our own beliefs and behaviours
We’re not neutral observers. Our beliefs affect how we see the world and how we interact with our clients. Money decisions are not the same as financial decisions. Financial decisions are based on numbers: “What is the best monetary outcome?” Money decisions are made from an emotional perspective: “What makes me feel safest?” While we cannot remove our beliefs from the picture, awareness of what drives our own behaviour reduces the chances that we unwittingly impose our views on our clients or cause them to feel unheard or misunderstood.
Lastly, understanding the origins of money beliefs and behaviours helps us to develop curiosity and compassion. Both are core components of building trust and connection with clients.
The biological reality is that we‘re not hardwired to do long-term planning and strategic thinking. We’re hardwired for the opposite – instant gratification and immediate response to danger. So, we’re going to do things that clash with our long-term wellbeing and make the future more difficult.
And it’s important to acknowledge that because it allows us to be more compassionate towards ourselves and everyone else. We’re not wired to make good long-term decisions – we have to learn.
So, what are the ways to integrate money coaching into a planning practice?
Firstly, money coaches and money coaching operate along a spectrum that stretches from purely practical to entirely emotional.
How someone coaches depends on what they’ve been taught and what they feel most comfortable doing. It’s the same in planning – some people prefer the numbers, others like the human side and most of us are somewhere inbetween. So, when you’re looking at a coach or a training programme, be aware of the differences in approach.
Secondly, you need to decide what skillsets you want to develop yourself and what you want to outsource. Money coaching as a coaching activity that helps clients with behaviour change is like any other service that you can refer your clients to.
Depending on your firm and business model, there are a range of options and some of the ones I have come across are:
- Firm A has set up a coaching practice that sits alongside their regulated planning practice.
- Firm B employs a money coach to sit in on all discovery meetings and help the planner to build a deep understanding of the client.
- Firm C has sent planners on a money coach training course to learn money coaching skills.
- Firm D has sent all their staff on training courses to understand client money behaviour.
The best place to start is by going on an introductory course to understand the basics of money behaviour and the money coaching framework. Understanding client money behaviour sits at the heart of any relationship that involves helping clients to manage the money in their lives.
In the US, based on practitioner feedback, in 2021 the CFP board introduced the Psychology of Financial Planning as a new component in its training and accreditation. This will be in the UK soon so, as well as good business practice, money coaching will be a confirmed part of financial planning.
