Most investors have never heard of an Investor Coach.
The differences between Financial Coaching and Financial Planning couldn’t be more diametric. They are as different as day is to night, and that difference is critical to your wealth. Although a financial plan is a good thing to have, the problem lies in the way that planning is carried out.
Financial Planning
For starters, Financial Planning or the development of a financial plan is very often used to sell a firm’s products. The sales of these products produce a commission on the plan’s recommendations. Unfortunately, the investor rarely knows whether or not the plan’s recommendations are in their best interest or in the best interest of the planner and their firm. In addition, the majority of planners work for a brokerage firm or insurance company, and don’t really wok directly for the client. In this case the brokerage firm or insurance company actually controls what products the planner can recommend to clients.
In addition, the financial planning model does very little to educate investors and help them deal with the instincts and emotions that are at the root of a poor investment experience. These common feelings about money cause most investors to make imprudent decisions, costing them a lot of money and a loss of peace of mind. Despite knowing that an investor’s behavior to the market is the greatest factor in investor’s returns, the planning industry provides little to no effort on educating clients to avoid these pitfalls. Selling products become the driving force and the less knowledgeable the client, the greater the chances of a sale.
Part of the problem is how and where advisors are trained. Over 90% of the advisors are trained by broker dealers, insurance companies, or wire houses. Thus, the bias is in selling products to make the carriers and dealers profitable. High commissions and or sales incentives (trips, awards, bonuses, and recognition) create and motivate the advisors to achieve their goals. Unfortunately, these incentives cloud many advisors judgments, putting the client second in line. Most advisors truly want to do what’s best for the client. The problem is that many of them are not aware of what is best for clients because they only hear one side of the equation. Despite the overwhelming evidence, many choose to ignore it, and keep the status quo.
Can you imagine what kind of medical advice you would receive if all the doctors were taught and trained in Pharmaceutical schools, and the only way they made a living was off of commissions from medications they sold? In addition, they would receive bonuses, awards, and luxurious trips based off of quotas set by the pharmaceutical companies. How objective could they possibly be? How likely would it be that they would convince themselves that they are doing the right thing, despite their patients are getting worse not better? This is what the average investor is dealing with and no one is the wiser.
Financial Coaching
Financial Coaching is quite different. Coaching focuses on your education, growth and decision process so that you can independently understand how the markets work, where return comes from, and how to make better informed investment decisions. The essence of our approach is based on a pledge to act in your best interests. That means making recommendations based on what decades of peer-reviewed financial research has shown to be the right way to invest. It means getting to know you, your family, your goals and your most important dreams. It also means, discovering and clarifying your true purpose for money.
Every decision we make is measured against how well it helps you achieve your goals. We are fiduciaries, which means we have enthusiastically accepted the highest legal standard to act in your best interest at all times. We believe an educated investor is a confident investor, able to make informed decisions about their money and their future. We work with you, side by side, applying the science of investing to work on your behalf. Your future, and even your financial security, is about more than just investments. It’s about helping you design a plan to protect what’s yours and manage risk across your entire future life.
In other words, Financial Planning may give you a fish today, but Financial Coaching will teach you how to fish so that you can have all the fish you want for the rest of your life. The job of a coach is not to give people what they want, but to educate them about what is possible so they can make the best decision.
So how do you know if you are working with a coach or a planner? Take the “Investor Quiz” on this website. Answer the questions that are listed. An Investor Coach will work diligently to help you answer all of the questions. If you’re current planner is not helping you seek the answers to these important questions than it might be time for a second opinion on your investments. Get started today.