Financial Planning

What’s the difference between a Financial Coach and a Financial Adviser?

12 April 2021 | Posted by Lucy Burgess

If you’re looking for a little help with your finances, there are many experts available to assist you. The two most common you may come across are a Financial Coach vs Financial Advisor. 

While Financial Advisers have been around for a long time, Financial Coaching is a relatively new service. It came about as an alternative to traditional financial advice, which is often inaccessible to everyone but the very wealthy.

Financial Advisers are regulated to give ‘advice’

The main difference is that Financial Advisers are regulated by the Financial Conduct Authority (FCA) to give ‘advice’. This means they can make specific product recommendations (e.g. a specific mortgage, savings account or investment fund) to their clients. They can even make decisions themselves on behalf of their client. 

By contrast, Financial Coaches aren’t regulated to do that, and don’t necessarily want to, either. A Financial Coach’s goal is to inform and empower their clients so that they feel confident enough to make their own financial decisions.

There may also be a greater focus on the behavioural and emotional aspects of money when working with a Financial Coach.

Financial Advisers typically cater to the very wealthy

Another key difference between the two is that Financial Advisers typically only work with people who have large sums of money to invest.

Within the financial advice industry, advisers typically make their money from a management fee. This fee is a percentage of the assets they are managing (‘Assets Under Management’ or ‘AUM’). They typically charge a percentage in the range of 0.75-1% of their client’s assets on an annual basis, with initial fees on top. This means that in general, it is only profitable for Financial Advisors to work with people with upwards of £100,000 to invest for longer than 5 years. 

Financial Coaches, on the other hand, don’t make their money from management fees, but charge for their time. Their prices vary depending on the experience of the coach and the packages they offer.

Financial Coaches can therefore help a wide variety of people, regardless of how much they have to invest or where they are in their financial journey. It’s common for a Coach to help someone create a budget, buy their first home, begin investing, or plan their pension for retirement, for example. 

Still weighing up whether to meet with a Financial Coach vs Financial Advisor?

We’ve chosen Financial Coaching because it’s accessible for everyone

At Claro, we provide Financial Coaching. We’ve chosen this purposefully as an alternative to financial advice so that we can be accessible to everyone. Our aim is to build a new generation of financially informed savers and investors that are confident in making their own decisions. Find out more about our Financial Coaches.

Want to book a coaching call with Claro? Simply download our app and tap ‘Book a call’.

If you choose to invest, your capital is at risk. 

Here’s a summary of the main differences between a Financial Coach and a Financial Adviser:

A Claro Financial Coach:

  • Is thoroughly trained to ensure they have the knowledge and skills required. We ensure all our Coaches keep their financial knowledge up to date through meeting certain Continuous Professional Development requirements.
  • Can discuss your financial situation and your goals 
  • Will help you build a financial plan to achieve those goals 
  • Can discuss anything about areas of your finances that aren’t regulated by the FCA e.g. spending, planning, budgeting.  
  • Can provide guidance (but not specific product recommendations) in areas that are regulated by the FCA. For example, they can discuss the pros and cons of various financial products (savings accounts, pensions, investment accounts, etc) but can’t recommend a specific one to you. 
  • No minimum wealth requirement – can work with anyone, whatever their situation 

A Financial Advisor: 

  • Is authorised by the FCA to recommend specific products to clients
  • Generally only work with people who have large sums of money to invest 
  • Typically charge a management fee, which is usually 0.75-1% of their client’s assets with initial fees on top
  • Can answer specific questions, e.g. which pension you should take out and what your retirement income will be 

If you choose to invest, your capital is at risk. 

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