There is often confusion when it comes to the world of finance. It could be said in many circles that the people that created and derived many of the financial products and services available in the market did so in a confusing way so that only those ‘privileged few’ could understand what was going on.
This was no more prevalent than the ‘US subprime mortgage crash’ in 2008. Driven by financial instruments known as credit default swaps and then derivatives on those swaps, in simple terms, the crash eventuated after people bet on the outcome of a group of mortgages which were bundled together by a financial institution and sold off as a debt instrument – this sent the global economy into a freefall!
When it comes to starting out on your financial journey, it is important that you understand the difference between a financial planner and a financial coach.
What is a Financial Coach?
Ever found that you can’t get on top of your bills? Have a credit card or two that keeps spiralling out of control? When it feels like you might never be able to get out of a personal debt spiral, enter the financial coach.
A financial coach is there like a personal trainer, a football or netball coach, they are engaged to coach and guide you through your current financial situation, take control and make more constructive choices on how and where you spend your money in the future.
That is not to say that will take control of your money for you – although some financial coaches certainly do this as well – but they work on a budget, debt reduction strategies, saving strategies, reorganisation of accounts, and debt refinancing options.
A financial coach is most certainly your first step in your financial journey. Why? Because if you go into an appointment with a financial planner with no savings, high debt and no idea on why then you are more than likely wasting your time.
What is a Financial Planner?
Once you are feeling more on top of your finances, you have savings, and want to look into purchasing a property, an investment, planning for your retirement or setting yourself up for the future – then it’s time to meet with a financial planner.
A financial planner will review your current situation – which is now looking much better thanks in large part to your financial coach – and sets an individual roadmap to your financial goals and objectives.
This could be taking the plunge into purchasing an investment property through a Self Managed Super Fund (SMSF), looking into investing into financial instruments such as funds, bonds or other available vehicles.
Your financial planner is qualified and an expert in a wide range of investment options, setting up vehicles for you to invest into your future, providing access to funds and ensuring that your investment plan is panning out. If it isn’t, then they will recommend adjusting your strategies or investments.
Financial planners as well are governed by far more stringent rules, regulations and CPD requirements. They require an undergraduate degree, post graduate studies and ongoing CPD to provide you services.
If you are planning on getting a financial planner in the future, you could run some investment strategies past them to get their input. After all, the sooner you get financially stable and pay down your debt, the sooner you can engage them to invest on your behalf.