With the explosive rise of FinTech – Financial Technology that automates and seeks to improve the delivery and use of financial services – there are literally hundreds of ways you can get a handle on your finances in the 21st Century.
From robo-advisors for investments (WealthSimple) to digital banks (Tangerine), money transfers & payments (PayPal), to fundraising platforms (Kickstarter), budgeting (Mint) and saving (Mylo) apps, there is a now a vast range of personal finance services and activities available at our “smartphone fingertips”.
Ernst & Young’s 2019 FinTech Survey shows that FinTech services have reached mass adoption around the world at 64%. In Canada, FinTech adoption has almost tripled in the last two years from 18% to 50%, however, we currently lag significantly behind our global peers. What this means to Canadians is that FinTech is going to become more and more pervasive in our lives once awareness, trust, and perceived benefits improves.
While FinTech has disrupted and spurred significant change across the entire financial services industry, there is one thing they can’t fully disrupt and that is personalized, one-on-one service.
In the space of personalized financial services, consumers also have a number of choices including representatives at their local bank or credit union, financial advisors, financial planners, investment brokers, professional accountants, insurance and tax advisors, and financial or money coaches.
Money Coach vs Financial Advisor
I am most often asked about the difference between a Money Coach and a Financial Advisor. Both are professionals committed to helping you improve your financial life. And while their approaches are quite different, the services of a Money Coach and a Financial Advisor are highly complementary once you understand the areas of focus they bring to your financial affairs.
In simplest terms, you would turn to a Money Coach for help saving money and creating initial wealth, and turn to a Financial Advisor for help investing and growing money or building on wealth that already exists.
Money Coach. As a Money Coach, my goal is to take a holistic approach to your financial wellness. I work with you one-on-one to uncover your past and current relationship with money, and as a personal finance educator, teach you the fundamentals of effective money management, best financial practices based on your life situation, and encourage you to develop good financial habits to last a lifetime.
I am most passionate about helping my clients establish their most important financial and personal goals and then develop saving and action plans to achieve them. In practical terms, I work with you to create a personalized budget that includes (1) a plan to pay off debt, (2) a spending plan aligned with your needs, values, and priorities, (3) a savings plan to establish a basic level of financial security (an emergency fund), and (4) individual saving and action plans tied to your short, medium, and long-term goals.
As retirement planning is a responsibility we cannot ignore, your savings plan will necessarily include a plan to set aside funds to start or add to your current investment program. Money Coaches will teach you about investing (eg. how the stock market works) and investment strategies (eg. tax deferred savings & investments vs passive income), but they do not recommend what stocks to buy or how to allocate your assets, say between say stocks, bonds, and mutual funds. A Money Coach is not licensed to give specific investment advice or provide specific product recommendations, which is the key difference from a Financial Advisor.
Once your saving and action plans are in place, a Money Coach will act as a motivation and accountability partner to help you stay on track, educate you on relevant topics, coach you to success, and help you navigate challenges as your circumstances change and evolve.
My ultimate goal as a Personal Finance Educator & Money Coach is to develop your Fin$marts — Financial Smarts — so that you reduce financial stress and have the knowledge, confidence, and empowerment to be your own best financial advisor. No one cares more about your future, your goals, your aspirations, or your family than you. We all need to be an active, engaged, and committed participant in the management and investment of our own money.
Financial Advisor. At the other end of the spectrum are services provided by a Financial Advisor. While they can advise in all facets of Personal Finance, they usually work with clients who want a professional to create an investment portfolio based on their risk tolerance, manage their assets, and help plan for their retirement. A Financial Advisor is someone who helps you build wealth, manage your financial risk, and prepare for your future through long-term financial planning.
Many Financial Advisors can also help with taxes, insurance, and estate planning. They may meet with you quarterly to give you an update on your portfolio and answer a question or two about financial topics throughout the year, but your relationship with them is usually focused on your investment portfolio, and specifically, the assets that they manage.
In conclusion, there are plenty of FinTech solutions out there to help you DIY with your finances, but the complexity of financial wellness often requires a personal relationship with professionals that you just can’t get from a FinTech, or from reading blog posts and listening to podcasts. Further, online resources and services won’t hold you accountable, help reshape your money mindset, change unhealthy money behaviours, remove the emotion from your finances, or make a plan specific to your own situation.
Given the current state of personal finances in Canada, the majority of people could greatly benefit from the support, assistance, and expertise of a Money Coach and a Financial Advisor. I encourage you to reach out with any questions and take time to do your own research on what will best meet your current needs.