Now Trending: Financial Coaching

Why coaching is integral to financial behavior change.

Financial coaching is gaining ground as a key ingredient in successful financial wellness programs. While many have historically considered financial wellness programs as only beneficial for lower-income workers, data indicates that even higher-income employees can benefit as well. In addition to the technology required to give plan participants the on-demand wellness experience they require, the human element—or coaching—amplifies the success of any wellness program and, indeed, is integral to it.


Participant-centered coaching has traditionally been a core component of nonprofit programs intended to help low to moderate-income workers who are struggling with debt or saving to purchase a home. But it is quickly being integrated into many employer-sponsored financial wellness programs. And for good reason.


Coaching, in general, is based on Prochaska’s well-known model of health behavior change, which has been widely used to successfully reduce addictive behaviors such as tobacco use and applies this model to other life areas. All coaching employs techniques that are consistent with the concepts and principles of effective behavioral change. A relatively new entrant to the coaching field, financial coaching differs from traditional financial advising in that it tends to focus more on allowing client-centered goals to guide the process, rather than only providing specific expert advice or recommendations.


Typically, coaching involves interventions such as motivational interviewing that work collaboratively with an individual to identify behavioral outcomes, set goals, brainstorm strategies, create concrete action plans, identify strengths, build motivation, and provide accountability. However, because financial coaching is a highly personalized process that meets people ’where they are’, there may be times when specific advice or counseling is appropriate, given an individual’s circumstances. The coaching model is also congruent with the concept of financial wellness as a holistic approach to personal finance, one that views money as a tool for living life in accordance with a person’s values.


While financial coaching specifically is a relatively new field, research is showing promising evidence. Several evaluations of the effectiveness of financial coaching in changing financial behaviors have now been published. Although still in its early stages, coaching is demonstrating positive outcomes through rigorous testing.


In 2013, NeighborWorks America and the Citi Foundation partnered on the Financial Capability Demonstration Project, which involved 30 financial coaching programs, and assessed the effectiveness of financial coaching offered by participating community-based organizations. The project began by developing training for the coaching practitioners and then evaluated the results of the coaching. More than one-half of clients who reported no savings at the start of services reported some savings after participating in coaching, with a median savings increase of $668. Clients also saw an average increase in their FICO scores of 59 points, with clients who participated longer being more likely to see increases in their credit scores. Almost two-thirds of clients who reported feeling stressed about their financial situations when they began coaching no longer felt that way after participating in coaching and related programs offered through the project.


In the most stringent evaluation of financial coaching to date, the Urban Institute recently released a report funded by the Consumer Financial Protection Bureau evaluating coaching outcomes at two community-based nonprofit organizations, The Financial Clinic in New York City and Branches of Miami, Florida. Clients were randomly assigned to treatment and control groups, so a cause and effect relationship between coaching and outcomes could be demonstrated. Client populations varied between the two organizations, so outcomes also varied somewhat between each site. At the Financial Clinic, the treatment group accumulated $1,200 in savings, roughly two times that of the control group, and reduced average debt in collections by about two-thirds compared to the control group. At Branches, total debt among the treatment group declined by $10,650, roughly 20% lower than the control group. The study also showed statistically significant improvements in credit scores: Financial Clinic clients offered coaching saw their average credit score increase by 21 points.


Financial coaching is a powerful method for engaging participants in making decisions and taking positive action to improve their financial well-being. It’s one of the best ways to deliver personalized and effective financial education that can actually change financial behaviors and improve outcomes.


There’s no question that employers are taking a more active role in helping employees in their journey to financial well-being. It’s the right thing to do, and it makes good business sense—for advisors too. The question for advisors and coaches, though, has to be around scalability and progress management. Helping participants with both immediate and longer-term financial needs and goals can position advisors to build relationships, and along with that, their wealth management practice.

But how do they manage progress or behavior change over time? That is where technology and a mechanism to manage participant data comes into play. Coaches and advisors have the amazing opportunity and responsibility to help people live the financial lives they want to live. But simply talking to a large number of people annually for a contextless check-in is not the answer to the problem. Coaches need a way to track, take notes, quickly reference, and make sure people are making progress through the year—without having to manually check up via email or phone. Digital goal setting, automated reminders, progress check-ins, and even gamification is the answer to both the advisor and the participant problem. This is where a nimble technology platform with the ability to manage participant data and power a focused participant experience is invaluable.

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