Financial planning: How can a coach help you?

These days, there's a personal service provider for just about every area of our lives. We have therapists, private bankers, personal fitness trainers, financial advisers and now coaches - life coaches, financial coaches, and even "money coaches". What exactly is a financial coach? Do you need one, and would such a person ever take the place of your financial planner?

The financial services industry in South Africa has become highly regulated and consumers are enjoying more protection than ever. Thanks to the implementation of the Financial Advisory and Intermediary Services Act, financial planning is growing in credibility as a profession and more consumers are waking up to the distinction between a qualified financial adviser and a product peddler.

But what is a financial coach and how does he or she differ from a financial adviser?

Gregg Sneddon is an independent financial planner with a Certified Financial Planner (CFP) accreditation, which is internationally recognised as the highest qualification for financial planners. He runs a fee-based practice in Cape Town called The Financial Coach.

"The financial planning function is one of ongoing coaching," Sneddon says. Financial planning, by his definition, is "objective advice that results in a plan to manage current, and achieve future, financial needs and goals". It involves the following internationally recognised six-step process:

Step 1. Establish and define the relationship between client and planner;

Step 2. Gather data and information from the client;

Step 3. Analyse the data and develop the plan;

Step 4. Present the plan - and alternatives;

Step 5. Implement the plan; and

Step 6. Review the plan on a regular (annual) basis.

The service Sneddon offers his clients is comprehensive, he says, meaning that you can expect help with debt reduction and budgeting, risk cover, retirement planning, investment, tax planning, drawing up a will, estate planning and financial education.

This service will cost you between R400 and R500 an hour, depending on the nature of the work involved. "Fee-based planning is still new in South Africa and there have not been any models on which to base my practice," Sneddon says. "The bottom line is that we charge from the first consultation. You don't see any other professional for free, so why should you see a financial planner for free?

"Traditionally, the financial advisory community has been premised on the idea that we will see you for free now in the hope of selling something to you at a later stage," he says. "Fee-based financial planning is done in the knowledge that clients will be paying for objective advice, and there is no need for the adviser or planner to sell products to generate an income. In theory at least, fee-based financial planning should lead to more objective advice."

Sneddon says there are plenty of situations in which there may be no need for a client to buy a product - "all that is required is good, sound advice and ongoing counselling and coaching".

He sees the role of a financial coach as one of helping people to "manage and arrange" their finances on a macro or micro level.

"A coach is someone who teaches and directs another person via encouragement and advice," Sneddon says. There needs to be mutual understanding of the nature of the relationship in order to manage expectations and to be able to judge the outcomes. In a coaching relationship there is also an element of accountability, he says.

Very often, coaching takes place on an emotional level, as well as a financial level, Sneddon says. "For instance, looking at reasons behind spending patterns in order to correct them."

Not everyone who calls him- or herself a financial planner will be a good financial coach, and vice versa, Sneddon says.

Andrew Bradley, the chairman of the Financial Planning Institute (FPI) and the chief executive officer of acsis, an asset consulting and financial planning company, says the key role of a financial planner should be one of financial coach.

"To be a financial coach you need to have a variety of skills and qualifications to perform a variety of services," Bradley says.

"You need to understand your clients' requirements and aspirations and then be able to counsel them through the financial implications of these. For example, you may have a client who wants to retire at 50, but only has enough money to last them until they are 70. But what if they live beyond 70?"

A true financial coach, Bradley says, goes beyond pure financial planning and helps people make lifestyle choices and avoid that which may harm their finances, such as destructive spending habits. As a minimum, he says, one needs to have a CFP, "which requires extensive education and ethics". A financial coach also needs "softer skills" similar to those of a Lifeline counsellor, he says. These skills include being a good listener and not being judgmental.

Sneddon is also emphatic that no one should be allowed to practise as a financial planner without the necessary professional qualifications. "This is the case for all professions, so why not financial planning? Typically, this should be some postgraduate financial planning degree or diploma, which would then allow the planner access to the CFP licence.

"There are, however, many advisers and planners who do not have these qualifications - because until now, they were not legally obliged to - and who are excellent at what they do. They have experience on their side and you cannot discount the value of this."

Wealth consciousness

Kiki Theo is a Cape Town-based businesswoman who, for the past two-and-a-half years, has been coaching individuals in business and running a course called The Alchemy of Money. Theo defines herself by various titles, such as money coach, life and business strategist, mentor and guide. What she is not - and does not pretend to be - is a financial adviser. Theo has something different to offer, and she calls it "life-changing stuff".

"Essentially, I help people develop their money-making consciousness. We talk about wealth consciousness and poverty consciousness. We know that moneymaking is much more than doing the ABC - the financial planning, the goal-setting and business plan. Wealth creation has little to do with education, background or even opportunity," she says.

Although Theo has neither a finance-related qualification nor any formal qualification in coaching, she believes that her "extensive" life and business experience are more than ample qualification for her to offer her services as a money coach. Theo ran her own information technology recruitment company and was a 50 percent shareholder in an equity port-folio management company, which she also ran for 10 years until it was sold, but by her own admission she was not a portfolio manager.

"I've been in business since I was 18. And I know how to make money and run businesses," Theo says.

"Broadly speaking, I believe if you're going to tell people how to run a business, you must have a background in running a business. And if you're going to tell people how to run their finances, you must have impeccable finances. You must be financially independent yourself."

Theo says it took her 10 years to achieve financial independence. "I don't have any debt. I only have assets. I own my house. I own everything I have.

"I teach/coach about money-making. Teaching people the essence of money-making has been my plan since the mid-1980s. I have been wonderfully situated for this plan, in both my work with the very wealthy, as well as in my own life experience of accumulating wealth. As such, I have spent nearly two decades observing, recording, writing about and formulating the approach I now use on the essence of money-making," Theo says.

Her two-day Alchemy of Money course costs R950 and offers "an unconventional guide to success, with creative money-making skills to expand earnings, increase profits, realise goals, and lift to the next level of your wealth programme".

People who have done the course rave about it. For this article, she provides a sample of glowing feedback from her clients, but to protect their confidentiality, it is anonymous.

In July last year, "Linda" wrote: "After attending the Alchemy of Money weekend workshop, I set my intentions very clearly. I intended to earn what I am worth - which is a fortune Well, I have just been given a 50 percent increase on my basic salary and have been offered directorship! Thank you for the shift in mindset We will definitely be doing the Art of Manifestation workshop."

"J.S." says: "A lot of fun. An eye-opener. Something you must approach with an open mind Presented by a woman with life experience - if you name it, she has probably done it!"

"C.C." writes: "I feel as if I have embarked on a love affair with money and abundance."

Theo says that after one of her courses, "the way you do everything is going to change and set in motion a sequence of events that will keep changing.

"Cultivating wealth consciousness is a combination of personal transformation work, raising of awareness, development of wealth creation patterns and business skill, and osmosis, if you are lucky enough to have a mentor. It is therefore important to learn from someone with experience. Someone who can do what they teach, and do it well. Someone who is also sufficiently developed in their own self and therefore has the wisdom to offer another guidance. This, for me, would be a mentor or guide.

"Perhaps coaching is actually something different this is not something you go and learn. It is something you are."

Theo says the question of what qualifies a person to call themselves a coach is a contentious one. "Any Tom, Dick and Harry can go and train for six months or a year and become a coach. And that's very, very nice, but a lot of people who are coaching don't have the experience. A lot of people who are telling you how to run your business have never had a business, have never had staff. It's the same as having a tennis coach who has never played tennis, and that is, in fact, what you're getting today in a lot of coaches.

"We're inclined to think, Oh, this person's an accountant, he has a B.Comm, he knows about finance.' Well, he doesn't. It doesn't qualify you to run a successful business. And a lot of people whose own finances are not in a very good state are running around telling people how to run their finances because they have a coaching qualification," she says.

Coaching profession

Coaching as a profession has taken off in South Africa and, as defined by John Paisley, a co-director of The Coaching Centre and The Learning Centre in Cape Town, it is not what Sneddon or Theo call "coaching".

"We accept that people will have different thoughts and views about what a coach is or does. For us, a coach does not advise, tell, teach or instruct. A coach asks good, incisive questions that help clients think for themselves," Paisley says.

"In our view, a financial coach would not tell their client how they ought to conduct their financial affairs, and they certainly would not sell a product or service," he says.

Bradley takes issue with this: "A coach does not tell a client how to conduct their financial affairs, but should certainly be able to inform a client of the consequences of certain financial conduct.

"This approach assumes that a client and a financial coach have a full understanding of the financial consequences of their actions."

Without extensive training in such a specialised field, this is not possible, he says. "Financial coaching requires that advice be given in an educational and informative way. This differs quite considerably from life coaching, where decisions are largely based on a client's own morals, values and ethics."

Paisley says a financial coach would "work with their client to establish financial goals and would help their client develop clear, specific, measurable, achievable, realistic and time-bound goals for their financial success".

He says a financial coach would enable the client to connect their values with their goals.

"The coach would help the client to think through their current reality' - where they are (in a financial sense, as well as other perspectives) and what obstacles they face in achieving their goals. They would work through options and the client would decide on a course of action. It is here that a coach may advise the client to obtain specific information relevant to their goals and options," Paisley says.

Bradley concurs, except to the point that to be a financial coach, he says, you need to be able to provide clients with the information they need in order to make informed choices.

"My mother could perform the definition of what has been set out here to be a financial coach, but as she knows nothing about finance she will be speaking in a vacuum and together with the client they may go down the wrong road completely."

When working with a financial coach, Paisley says, both client and coach would work out an action plan (of tasks and deadlines) for the client to implement - and the coach would offer support to the client as they implement the plan. A coach would not do "the work".

"A financial planner may be of great value when implementing the plan," he says.

Paisley says financial coaching is not necessarily about what investment needs to be made to ensure a comfortable retirement.

"Coaching is a challenging process and requires a person to dig deep into their own thinking and what it is that may be stopping them achieving financial success," he says.

The client may be harbouring "limiting assumptions", such as a belief that you do not deserve to be rich, are not clever enough, or don't know how to succeed. Are they true, and can they be replaced by liberating assumptions: I do deserve to be rich; I am clever enough; and I do know how to."

He says coaches live by the following quote from Margaret Wheatley: "People support what they create and resist what they are excluded from."

Coaches help their clients create their own future, he says. Coaching does not work when you want someone else to create your future.

Bradley says financial coaching is no different to coaching a rugby team.

"You have to be able to mentor players, challenge them and assist them to achieve their full potential, overcoming all obstacles in their way. However, as a coach you also need to be a student of the game and know more than your players to gain their credibility and enable them to achieve what they want to achieve," he says.

But the truth is that while many financial advisers may be expert planners and number jugglers, not all have the softer skills to work with the obstacles their clients face, such as their worries and self-doubts.

It takes a special kind of professional to offer what Bradley says is needed: "You need to guide and advise them through the maze of challenges they face utilising your own knowledge and experience and those additional technical experts that may be required from time to time."

What is 'advice'?

The sources quoted in this feature have referred frequently to advice, and the qualifications and skills they believe a person should have in order to dispense financial advice.

But what, in terms of financial planning, is advice? The South African Financial Planning Handbook 2006 says the following about what constitutes advice:

In terms of the Financial Advisory and Intermediary Services Act, "advice" means any recommendation, guidance or proposal of a financial nature, furnished by any means or medium to any client or group of clients in respect of:

- The purchase of, or investment in, any financial

product;

- The conclusion of any other transaction aimed at incurring any right or benefit or liability in respect of any financial product (this includes a loan or cession); and

- The variation, replacement or termination or any financial product.

This is irrespective of whether or not such advice:

- Is furnished in the course of, or incidental to, financial planning in connection with the affairs of the client; and

- Results in any purchase, investment, transaction, variation, replacement or termination being effected.

As seen from the above, the scope of the definition of "advice" is very wide. However, "advice" does not include factual advice given in respect of the following:

- The procedure for entering into a financial product transaction;

- A description of a financial product;

- Answering routine administrative questions;

- Objective information about a particular financial product; and

- The display or distribution of promotional material.

How to choose a financial coach

John Paisley, a co-director of The Coaching Centre, says there is a "valid belief" that a coach does not need vast experience in a particular field to be able to coach in it.

"If they have the ability to ask questions that help their clients think for themselves, they will have done a good job. Certainly, knowing the language and concepts helps formulate good questions.

"We would advocate that a person needs good training and development as a coach, rather than particular expertise in the financial field," Paisley says.

Assuming you have decided that you want coaching from such a person, how do you go about selecting one?

Paisley says to find a good coach, you should ask at least three questions:

1. What is your purpose as a coach? Who do you work with, and to what end? "If they can clearly articulate their purpose and intention, and it agrees with what you are looking for, you may have found a good coach," he says.

2. What is your process? How do you work? Do you follow a coaching model, and if so, what is it?

"A good coach will have a clear and explicit explanation of how they coach, what process they follow and what tools they use. They will always inform their client what they are doing and how they are working," Paisley says.

3. What is your perspective? "A good coach can articulate their philosophy' and approach - how they bring their experience and qualifications to bear on the issues for you," he says.