How a financial 'coach' can screw up your life

Anyone can hang out a shingle as a coach, but have they been trained?

By Bloomberg News

May 26, 2015 @ 4:37 pm EST

Anyone can call himself a life coach. Gordon Grigg, for example.

He called himself a “life and financial coach,” comforting clients with personal problems and promising to put them in safe investments with high returns. After 13 years, more than 60 clients learned they had been coached out of more than $6 million in a Ponzi scheme. “I did steal their money,” Mr. Grigg admitted in federal court in 2009. “I did take advantage of emotions.” He's serving a 10-year prison sentence.

Mr. Grigg is an extreme example of what's worrying some involved in the field of financial coaching. To attract clients, a life coach needs an appealing personality, and that's about it. Ethics and expertise are optional. That might not be disastrous when a client wants help getting organized or encouragement losing weight. But when people want a life coach to help them straighten out their finances, the wrong coach can make a bad situation worse.

“A financial coach can do damage if you don't have a thorough knowledge of finances,” said Rebecca Wiggins, the executive director of the Association for Financial Counseling, Planning & Education. Her group works with Saundra Davis of Sage Financial Solutions to train financial coaches for the Consumer Financial Protection Bureau and others. Together, they certify financial coaches and insist they get financial training along the way.

Without a financial background, a coach doesn't know when to speak up if a client's goals are unrealistic or just plain foolish. Clients might buy a house they can't afford, take out a payday loan with a dizzying interest rate or trade penny stocks with retirement money. A client might decide on bankruptcy without realizing the long-lasting consequences.

“If I don't understand the implications, I can be motivating them right down a path of financial despair,” Ms. Davis said.

The right coach can be a great help to people trying to get their finances on track. And more and more people are turning to financial coaches for help these days. Foundations, nonprofits and now the CFPB are hiring coaches to work with lower-income Americans and groups with special financial needs, such as veterans. The rich, meanwhile, are hiring coaches to conciliate in family fights or help the next generation avoid blowing its inheritance.

In theory, a financial coach is distinct from other professions that help people with their money, though the difference isn't always clear in practice. Financial therapists help clients with psychological issues related to money, such as undue anxiety over money or reckless spending binges. Coaches can do the same, though the issues are typically less serious. And people feel less stigma going to a coach than to a therapist, said Richard Orlando, whose firm, Legacy Capitals, coaches and advises the wealthy. “Families don't need to be in therapy to focus on money matters,” he said.

Most financial advisers and planners, by contrast, actually set up clients' investments and manage their financial affairs for them. A coach isn't really supposed to tell clients what to do. Instead, she might help a client figure out what he really wants to accomplish and then motivate him to achieve that goal. “You meet the client where they are, and you support them in going where they want to go,” Ms. Davis said.

This sort of judgment-free coaching can help people tackle difficult situations.

Asanutu Wilson, a single mother of three, was in debt and knew her bad credit score would make it impossible to rent a better apartment. Despite working two jobs as a home health-care aide, she was never sure if she'd get hired for 40 hours a week. “Sometimes the money I make is not enough to cover bills,” she said. “It was stressing me out so much.”

Ms. Wilson met a financial coach through Food Bank for New York City. She used a tax refund to pay off her debt, and now she's budgeting, saving to move to a new apartment and looking for a better job. Food Bank's coaches get training, especially on how to connect their low-income clients with resources.

Then there are cases like Mr. Grigg's Ponzi scheme, and many far short of it. A coach who wins a client's trust can easily steer him into unprofitable or inappropriate investments. That's why the Association for Financial Counseling, Planning & Education has a strict rule for any coaches and counselors it certifies: no product sales.

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