Journal of Financial Planning: May 2018
Saundra Davis, MSFP, FBS®, is a financial coach, trainer, speaker, and executive coach for financial planners. She is executive director and founder of Sage Financial Solutions and past president of the Financial Therapy Association. She teaches the Coaching Skills for Financial Professionals course at Golden Gate University.
The greatest benefit of comprehensive financial planning is that the process and the development of the plan takes into consideration every aspect of a client’s life. One would think that a plan so perfect, so on target, is sure to result in the client achieving their best life…unless it doesn’t.
You have likely heard the adage “the best laid plans of mice and men…” and as a financial planner, you have likely experienced the sense of pride that comes with creating and presenting the perfect plan followed by the disappointment when the plan is not implemented and quickly becomes obsolete.
Financial planners can use coaching skills to bridge the gap between the financial plan and the client’s actions.
I joined the financial planning profession in 2004 as a mid-life career changer from the non-profit sector. I found this profession life changing as I learned how money “works” and how creating a comprehensive plan could be life changing for clients. I completed a master’s degree in financial planning at Golden Gate University, attended FPA Residency, and began to prepare for the CFP® certification exam. It was during that time I began to hear the early rumblings of “life planning” from many experts in the field. I attended events and workshops held by the psychologists who were teaching about behavior, brain science, and motivation.
Although I had achieved a significant milestone with my degree and the workshops and conferences to learn more about various financial planning topics, I realized I didn’t need to know more, I needed to be better. This realization started my journey as a financial coach. In 2016, I became a Financial Behavior Specialist (FBS®) to continue learning more about how behavioral finance and coaching skills can help planners adapt their approach to creating and delivering financial plans.
What’s in a Word?
One of the questions I am asked most often is: what is financial coaching and how is it different from financial planning? In many ways, financial coaching is very similar to financial planning. Both focus on the client achieving their desired outcome or goals and apply a very specific process to discovery and the design of the client’s plan for action.
Although comprehensive financial planning addresses the client’s whole life, the coaching engagement may address one aspect in the context of the client’s life or overall goals. Using coaching skills doesn’t require that planners abandon their comprehensive approach. Many planners use coaching skills during each stage of the planning engagement, and these skills are most often used to help the planner understand more about the client’s situation in order to create the plan.
Coaching has no universal definition; it is an amalgamation of many different disciplines and has several specific approaches based on the target clients. As a financial coach, my role is to collaborate with clients to identify their desired outcomes, discover what is most important to them about achieving those outcomes, and how their lives will be different as a result. The point of this process is to invite the client to deepen their awareness and establish the necessary motivation to take the actions required to achieve the desired outcome(s). Using a pure coaching model, the coach is an objective observer in the client’s experience, reflecting what they hear, what they notice, and—when appropriate—sharing their perspective.
To be an effective coach, four core skills are necessary: listening, effective inquiry, self-management, and intuition (see the Financial Fitness Coach® program at afcpe.org/certification-and-training/financial-fitness-coach for more). Each of these skills works in concert allowing the coach to hold the client in perfect, positive regard while supporting their deeper exploration of their goals and the best approach to goal attainment. The coaching approach recognizes that clients do not have financial goals, but rather, as author and financial education specialist at the Consumer Financial Protection Bureau Pamela McClelland says, life goals with financial implications.
Clients Want an Expert
In their groundbreaking book, Motivational Interviewing (now in its third edition), William Miller and Stephen Rollnick explain how it’s easy to overestimate how much information and advice clients need. “To be sure,” they write, “most clients expect you to have expertise to share with them. Yet they come with a wealth of relevant information themselves; no one knows them better than they do. How much do they already know? In general, it’s unhelpful to give people information that they already have. What advice do they have for themselves? What have they already tried? It is not particularly helpful to suggest what they have already considered or tried.”
One of the viewpoints planners hold that can be a barrier to using coaching skills is the perspective that clients want to be told what to do and are working with a planner to get expert advice. While this is often true, many planners notice that clients may not follow through on the advice and are using coaching skills to support the implementation of the plan. By integrating coaching skills, the planner has insight into the areas where the client is motivated and where they may have barriers to implementing the plan. The planner maintains the expert role and offers advice and perspectives, and recognizes that the client must own the plan if it is to be truly transformative.
Practice Makes Better
Students in the coaching course I teach at Golden Gate University are experiencing the power of using coaching skills in practice with each other and during the engagement with their practicum client. They are becoming comfortable with tools, such as the Wheel of Life, and coaching approaches including Miller and Rollnick’s Motivational Interviewing “OARS” (an acronym for open-ended questions, affirmations, reflective listening, and summaries) to deepen the client’s awareness about their satisfaction with all areas of their lives and how that satisfaction is impacted by their finances.
Effective coaching makes a financial plan more personal, as the client is an active participant in building the plan from the beginning of the engagement. Although it’s possible to read books about this topic to learn about the theory, being effective requires skills and practice, as well as feedback from the client (or practice partner).
Try these three steps to determine if building coaching skills can help you be a more effective planner:
Notice your current approach to working with clients. Do you hear their “why” in the discovery session? Do you understand what motivates them? Are you seeing any consistent issues with implementation of the plans?
Observe your talking-to-listening ratio during client meetings. Is your attention focused on making sure they understand you, or that you understand them?
Explore your options. What areas feel like a struggle to you? What skills might support greater ease in your client engagements?
What’s Your “Why”?
Financial planners integrate coaching skills for many reasons; often they are experiencing frustration with the client during the implementation stage. The planner may view the client as the problem, labeling them as “non-compliant” or not ready for financial planning. The fact is, coaching skills can benefit every aspect of your planning engagements and create a greater sense of well-being for you as a professional.
A coaching approach creates good boundaries for and supports the client in owning their forward movement and progress. Coaching skills promote a partnership between planner and client and a sense of mutual accountability to discover, design, and implement the plan.
Students in the GGU course are finding that treating clients as the expert in their own life has a positive impact on their partnership with clients and helps minimize resistance and ambivalence, which are often barriers to effective planning. This approach supports more forthcoming and direct communication about topics that are often challenging for clients to discuss. The safety of the “judgment-free zone” reduces the client’s reluctance to openly discuss areas that may be barriers to successful completion of their goals.