Money coaches: the mentors who focus on financial health, not wealth | Financial advisers

Dharmesh Patel was sceptical about how much he would get out of sessions with a money coach.

“I thought it might just be about budgeting – how to manage the pot that I’ve got – but it was much more holistic: less about trying to grow your personal wealth and more about thinking about your financial health and wellbeing.” The 31-year-old from east London is now a convert: “I couldn’t recommend coaching enough.”

He saw an advert through work for the option to see a money coach, paid for via a salary sacrifice scheme, which meant it worked out at about £12 a month.

“My wife, Francesca, was pregnant at the time. Things change a lot with money when you have a child but it’s easy to fall into a trap of just managing things as you always have done.”

He says it was valuable to have an independent person reflect on what they were doing already and what they could improve.

Over five sessions, the couple received help with reviewing their outgoings and savings, and thinking about how to manage the cost of getting a child through nursery and what safety net they might need.

The life, business and career coaching industries in the UK are booming, and it’s perhaps no surprise during a cost of living crisis that there has been an increase in the number of people offering their services as money coaches, and a rise in take-up.

Money coaches are often marketed as being like a “personal trainer” for your finances, and a more affordable, accessible and lower-key alternative to traditional financial advice.

There are a number of providers, from independent sole traders to bigger companies, and money coaching is increasingly being offered by employers as a staff benefit. This week, the tax and advisory firm Blick Rothenberg became the latest company to offer every member of staff, from trainees to partners, one-to-one access to a money coach after a link-up with Octopus MoneyCoach.

But what do you get for your money (if you are paying for it), what do you need to watch out for, and is there free help you can access that means you don’t have to hand over cash?

What a money coach will not and cannot do is recommend specific financial products and services, or invest or manage your pension on your behalf. They are able to offer only “guidance” rather than financial “advice”, the latter of which should be regulated by the Financial Conduct Authority.

This means a coach is less suitable for those who need help navigating the complex landscape of, say, retirement or tax management.

The FCA is yet to regulate the financial coaching industry, so you need to tread carefully.

Patel signed up to his face-to-face sessions through Octopus MoneyCoach, which was set up to tackle the issue of people wanting one-to-one support from a money expert but feeling priced out of the market, says Adam Price, its chief executive.

“Clients typically need to be able to invest £100,000 or even more to work with traditional advisers,” Price says. “We estimate that our solution is 10 times cheaper.”

At Octopus you get a first free session to try the service, ask some money questions and discuss your personal goals before you sign up. There is then a charge of just under £25 a month for a 12-month subscription.

It also offers the service as an employee benefit, where businesses will either pay for it for their staff or let employees use salary sacrifice, which means the fee is deducted before you pay tax and works out at about £14 to £17 a month.

“As the cost of living pressures began to mount, more workplaces signed up with Octopus MoneyCoach last July and August than in the first six months of the year,” Price says. “We’re now launching to nearly 10,000 new employees every month. We’re signing five times more workplaces every month than we were a year ago.”

Patel and his wife were encouraged to create a checklist of money to-dos, from getting a will in place to researching life insurance and critical illness, considering their pensions, and whether they had thought about saving for their child’s future. “Every month or so, we would then get a reminder of tasks.”

One of the unexpected benefits was scheduling time and space to sit down, look at what they have, think about what they want to achieve over the next couple of years, and create a solid foundation to build upon.

Patel says it is hard to be realistic about your finances “until you’ve sat there and gone through every transaction you are spending money on, been honest with yourself, done that analysis – ‘I’m worried about not being able to pay the electricity bill but I’m spending £50 a month on coffee.’ Plus having some accountability. That’s what coaching did for me.”

Claro Wellbeing is another money coaching service offered mainly via workplace benefit schemes. Mike Barrow, the lead financial coach at the service, says a money coach’s main aim is to help people develop a plan to reach their financial goals, and execute it themselves.

“This might include buying a first home, saving for a wedding or getting started with investing. A financial coach can help educate people to better manage their money, empowering them to make smart financial decisions and develop a positive money mindset.”

He adds: “A coach will educate, inform and set out the options available, while helping people to grow their financial confidence and build healthy habits.”

He says a certified, insured and experienced financial coach would typically charge in the region of £60 to £80 an hour. Claro Wellbeing works with companies to provide financial coaching to their employees, starting from £3.49 an employee per month.

However, the sector’s rapid growth has prompted concern in some quarters.

Alison Blackler, a life coach based in Wirral, says she is concerned that anyone can now call themselves a coach despite having very little experience of working with clients. Before turning to coaching, she was a counsellor in the NHS for 25 years.

“It is really important for the client to do their own due diligence to ensure they are working with someone who is competent in coaching skills as well as finance matters.

“As a qualified therapist, having trained for years, I worry about people calling themselves coaches because they can, or have been on a coaching course for a few days. A coach needs to know how to create a safe space for their client to explore and grow. My concern is that advice will be given, and this may not be right for the client.”

There have been some moves towards trying to help consumers find well-qualified coaches. The London Institute of Banking & Finance has recently introduced the first accreditation for money coaching companies where, says John Somerville, the head of financial services and professional education at LIBF, “they have evidenced that they have put the right training and structures in place. That helps ensure consumers will receive a good-quality service while being clear that the guidance they provide won’t be the same as that provided by a regulated financial adviser.”

You can search for accredited coaching programmes at libf.ac.uk.

The site VouchedFor, which matches advisers with people seeking money help, has started recognising financial coaches, too, for the first time.

Another option could be to pick a money coach who also has formal financial advice training and qualifications.

Catherine Morgan is a qualified financial planner as well as a certified financial coach, and the founder of the Money Panel, which is one of the few money coach training companies in the UK.

“Financial planners focus on creating a bespoke financial plan in line with your goals to ensure you never run out of money. This is often, but not exclusively, followed by financial advice on a product required to help reach those goals – for example, a pension or investment or life insurance,” she says.

Morgan believes a coach who has been an adviser is therefore extra-useful. “They understand the complexities of future planning, taxation and goal-setting, which can be part of the money conversations. They may be able to offer this advice themselves, or cross-refer to a regulated arm of their business.”

She suggests you get to know a coach’s background and qualifications, seek out testimonials, and ask the coach for information if you are unsure.

“Some coaches prefer money-management strategies over the emotional elements of money management. This is a great question to ask your coach before considering working with them. I am a big believer in identifying and addressing the client’s relationship with money before any practical application of money-management methods, so that the client can stick to positive habits. Knowing more about how to manage money does not guarantee we behave well with money.”

Nick Seagrave, 36, who lives in Cornwall and works in digital marketing, ended up changing careers after a few sessions with a money coach helped him gain a better picture of his financial situation.

“I got to a stage in life where I felt I needed to make some slightly more informed decisions about money with a third party, as opposed to doing it off the cuff. I got married, had a little boy, joined everyone else with a mortgage and started to think more about the importance of saving, being careful and planning for our future selves and son.”

Nick used the Claro financial coaching app to book a free consultation, had a few sessions and found them helpful.

“I was aware of financial advisers but they felt a bit far removed from me and my personal circumstances – they sounded serious and expensive.

“I like to do my own research, look after my own money, but I wanted someone to check my working and steer me in a particular direction.”

At the time he was self-employed, but with a dependant, he wanted to think more carefully about his salary.

The coach got him to work through a budgeting exercise, dividing up income into essential bills, discretionary spending and saving.

“What we realised was that in order to save, we actually didn’t have enough income as a pair. Ultimately, I decided I needed a new job.”

He says he would definitely seek out some coaching again at a different life stage.

“The process of booking the appointments, getting them in the diary, having to do some homework, got my arse in gear to actually do it and take action.

“I think financial advice and literacy should be available to many more people – I don’t understand why it’s not part of the curriculum when it’s so fundamental to how we operate in the UK.

“I would advise anyone to seek some money coaching. I consider myself as more on the front foot as a result than many of my colleagues and peers.”

Companies such as Claro say they can help people achieve their goals and get answers to questions such as whether they are putting enough into their pension, how to save for their first home and the best ways to get started with investing.

Free help and advice

Pensions

Pension Wise is run by the government-backed MoneyHelper service and offers free, impartial guidance to over-50s. It aims to help people with the various options when it comes to taking money from pension pots. Appointments last about 60 minutes. It is usually done over the phone but a limited number of face-to-face appointments are available. You have to be 50-plus and have a UK-based defined contribution pension pot (this could be a personal or workplace pension). It does not matter how small your pot is. Go to moneyhelper.org.uk/en/pensions-and-retirement/pension-wise.

If you are under 50 or only have a defined benefit pension, you won’t be able to have a Pension Wise appointment but there is still help on offer. Call free on 0800 011 3797 or use the webchat.

Debt

If you are struggling with debt, there are lots of free advice services available across the UK that can let you get immediate, personalised help.

They include StepChange Debt Charity, the Money Adviser Network, National Debtline, PayPlan and Money Wellness.

Many of them offer easy-to-use online advice tools or free live chat.