Financial planners can, and should, use coaching skills to help clients work out their objectives. The approach provides real clarity and context to planning, and often leads to clients making meaningful discoveries about themselves.
That said, there is a potential conflict with the burgeoning area of behavioural finance.
The role of the coach is to facilitate thinking. The more you think you are doing something clever, the worse a coach you are likely to be. In this way, a good coach is rather like a good referee. If you do a really good job, people do not notice you.
This shows itself in many ways. Take paraphrasing, for example. The very act of taking what someone says and changing the words into your own is a process of turning the coachee’s comment into one based upon your values, not theirs.
It is notoriously difficult to truly take oneself out of a conversation. Social conventions mean smiling and nodding when someone is talking to us, yet even this provides a kind of casual confirmation which a coach must be careful to avoid.
Learning to be an effective coach is all about this neutrality.
In contrast to this, behavioural finance is all about helping people to realise they are almost pre-programmed to make bad decisions when it comes to money. Advisers are becoming more knowledgeable and able to help steer clients to making good decisions. They intervene.
One could argue that lifestyle financial planning is where behavioural finance and coaching skills meet.
However, if the life planner is not suitably trained in coaching skills and not fully aware they must be as neutral as possible in the discussion, then it is possible they will guide the client to conclusions which may be based on their own values, not those of the client.
When helping a client to understand their own objectives and motivations, we must leave our expertise and knowledge outside the room.
Being an effective financial planner means not using our expertise until late in the process (be that technical knowledge or behavioural finance issues). This does not come naturally to most people. It requires training and practice.
Coaching is a technique that needs to be learned. There is no shortcut. It took me two years to get my diploma in business coaching and I continue to learn constantly.
Real financial planning is the key to complete the transition from an industry to a profession. But that change will only work if we realise that clients are not under our spell.
We are there to help them plot a path to clearly identifiable objectives, and to do so takes skill. And skills require training.
Chris Budd is founder of Ovation Finance
Five tips for advisers using coaching skills:
- Silence is golden
- Your technical knowledge will get in the way. Leave it until later
- Spend time reflecting. Record meetings and listen back. If there was a moment of realisation, what did you say or do just before it arrived?
- Do not start a question with “why?”
- Knowing when to coach is almost as important as knowing how to coach