Research Paper By Rajanikanth Chandrasekar
(Executive Coach, INDIA)
A financial planner is a qualified professional who analyzes a clients financial situation and develops a comprehensive financial plan based on the client‟s goals. The main purpose of a financial planner is to assist clients in the planning and arrangement of their financial affairs, such as savings, retirement provisions, tax treatment and wills, and protecting what is most important. To ensure ethical practices, financial advisors must understand a client’s financial situation as well as their need for financial stability.
Finance can be complicated and any adviser has responsibilities ethically to see that a client’s risk is minimized, and monetarily, that money is maximized within the established risk boundaries. The Certified Financial Planner Board of Standard (CFP Board) and Financial Planning standards Board (FPSB), the owners of CFP trademark for US and Outside US respectively, offer CFP designation, a professional certification mark for Financial Planners. The designation means that they have met specific education and testing requirements, agree to standards of ethical conduct, and engage in continuing education. These planners are often referred to by the CFP_ designation. Meeting the CFP standard requires a significant investment of time (and testing fees). But the CFP designation is widely accepted and clients should expect quality services from a Certified Financial Planner.
The International Coach Federation defines coaching in the following way:
Professional coaches provide an ongoing partnership designed to help clients produce fulfilling results in their personal and professional lives. Coaches help people improve their performances and enhance the quality of their lives. Coaches are trained to listen, to observe and to customize their approach to individual client needs. They seek to elicit solutions and strategies from the client; they believe the client is naturally creative and resourceful. The coach’s job is to provide support to enhance the skills, resources, and creativity that the client already has.
(ICF website) Formed in 1995, today the ICF is the leading global organization, with over 19,000 members, dedicated to advancing the coaching profession by setting high professional standards, providing independent certification, and building a network of credentialed coaches.
Coaching and Financial Planning
From the above definitions it is fairly clear that there are some clearly overlapping positions between Financial Planning and Coaching like significance of the client relationship, establishing trust, assisting the client in achieving his goals etc. Of course both the approaches have unique methods wherein financial planner would primarily use his knowledge on financial products to define a plan for the Client while coaching enables and empowers the Client to be able to develop his own plan. This article explores how the technical skills of financial planning when combined with facilitation skills of coaching can elevate the Client engagement to a higher level, leading to enhanced and sustainable client satisfaction.
Coaching differs from and complements financial planning, financial education and knowledge sharing
Steps in Financial Planning
The CFP Board of Standards specifies six steps of financial planning for CFPs:
- establishing and defining the relationship with the client;
- gathering client data, including goals;
- analyzing and evaluating the client‟s financial status;
- developing and presenting financial planning recommendations or alternatives;
- implementing financial planning recommendations; and
- monitoring financial planning recommendations.
Impact of Coaching skills for every step of Financial Planning
Step 1: Establishing Client relationship
A critical step for both financial planning and general coaching. Creating a trust environment where the Client feels that this process apart from being a rewarding experience is also safe. Confidentiality is paramount for the success of both financial planning and general coaching. The one critical benefit of Coaching in this step is in comparison to the standard financial planning exercise, the impact of emotions, values and goals would be addressed much more deeply and hence the significance of trust and confidentiality.
Step 2: Gathering Client data, including goals
The significance of application of coaching methodologies in this step of financial planning has the potential to elevate the exercise to a completely different higher level. While the normal financial planning exercise leaves the onus of identifying the current reality and desired goal completely to the client‟s current thinking process, coaching enables the client to go deeper into himself and encourages self-discovery.
In many cases, the current reality and the desired goals that come out after a coaching process are significantly different, deeper and satisfying for the client and sometimes even may be opposite to what was stated initially at a superficial level. Some of the key coaching tools that will aid in this step are
The financial planning exercise‟s prime objective is to clarify and identify the Client‟s relationship with money. But the relationship with money, typically is a much bigger thing. Childhood attitudes, emotions, current relationship with other people, perception of self, values etc., play a big role in determining the relationship with money. So understanding the relationship with money could very easily lead to a process of clarifying and understanding relationship with one‟s true self. Coaching process helps in this. For e.g., in the coaching process, the question “ Are you using your resources including money intentionally to achieve your highest goals?” sets the mind in the process to seek clarity.
Step 3: Analyzing and Evaluating Client’s financial status
The significance of coaching discussed in the previous step has a huge bearing on available options and hence more clarity is available. The financial planner is technically skilled in financial products and has a fairly detailed financial knowledge. One of the objectives of the financial planner is to educate the client the basic financial knowledge. The significance of coaching process sets the clients mind in a right perspective for learning resulting in personalised teaching and personalised learning. The coaching process establishes a need for the specific knowledge and hence the client is receptive to the teaching – need based learning. Coaching process encourages the client not only to focus on current perceived needs but to honour who he/she truly is and can be.