'Financial counseling' is making its way into mainstream financial advising. Here's how it could gain you referrals.
The concept of "financial counseling" is making its way into mainstream financial advising.
The Association for Financial Counseling and Planning Education describes financial counselors and educators as helping clients "along a spectrum of knowledge through behavioral adjustments, with the hope of eventually referring them to investment advisers and financial planners."
Certified financial planner Sheryl Garrett, founder of the Garrett Planning Network, says she has "embraced a financial counseling orientation." Financial counseling, she said is "a shift away from the technical side to the human side — what's in people's lives, what can't be captured on paper, what they can get passionate about and stick to."
The typical schooling for financial advisors is very technical, according to Garrett. While traditional financial advisors tend to ask very routine, segmented categories of questions around assets, liabilities, investments, insurance, wills and trusts and retirement savings and the like, the soft training behind financial counseling, by contrast — regarding communication, connectivity and trust-building — focuses on human capital, she noted.
"Our most important asset is our ability to make money, and our biggest liability is our penchant for spending it all," Garrett said. "That's the biggest area where a financial counselor can help."
Coaches motivate, and planners offer technical solutions, she noted. Employing the two approaches in a holistic way helps clients receive education and resources most relevant to them at a particular point in their lives.
Kris Boelte, managing member of Kristine A. Boelte & Associates, is a CFP and an accredited financial counselor, a certification offered by AFCPE. "I knew going forward that financial advice was becoming the critical component of the industry," she said.
More from Investor Toolkit: Roth accounts can help everyone save on taxes Avoid these 5 common Social Security mistakes Can you really afford to help your kids with college costs?
A financial counseling class in graduate school opened her eyes to the needs of clients at the other end of the spectrum, Boelte said. "If all you have is a Series 7, you have no experience in budgeting and income planning or leveraging tools, such as bankruptcy and credit counseling."
Boelte appreciated learning about how to provide psychological support. "The training shows you how to pull people out of that feeling of helplessness and hopelessness," she said. "Serving as a counselor conveys to them that you can get to the emotional roots of their situations."
Boelte provides a few sessions of financial counseling, often on a pro bono basis, as a value-added service to friends and relatives of clients, working with clients' children on issues such as job loss.
Jeffrey Tomaneng, financial advisor with Lincoln Investment, also holds both CFP and AFC certifications. Because the majority of his clients are public school teachers, he does more financial counseling than traditional financial planning with them, he said.
"The AFC training is a lot more aligned with my practice than some of the other designations," Tomaneng said. "The curriculum addresses many issues not necessarily addressed in the assets under management model, from a basic personal finance perspective.
"You work like a psychotherapist, digging into their daily financial habits," he added. "That doesn't fall into a typical financial advisor engagement."
The financial counseling enhances his ability to meet the needs of his clients in two ways, Tomaneng said. First, it allows him to be a "sounding board for all things financial," and second, it enables him to augment the quantitative conversation (e.g., cash flow and net worth) with the qualitative (e.g., personal priorities and values around what they spend on.)
What financial counselors do
● Educate clients in sound financial principles. ● Assist clients in overcoming financial indebtedness. ● Help clients identify and modify ineffective money-management behaviors. ● Guide clients in developing successful strategies for achieving financial goals. ● Support clients as they work through financial challenges and opportunities. ● Help clients understand the dynamics of money in relation to family, friends and individual self-esteem.
Source: Association for Financial Counseling and Planning Education
The results have been positive, Tomaneng said. "At worst, they're in a better position financially," he observed. "At best, they've paid off their debts, are in the black, making more investments and saving for goals."
Jeremy Heckman, CFP, AFC and a wealth manager with Accredited Investors, uses his AFC training to serve the firm's affluent client base as an internal consultant, sharing best practices and tools in areas such as debt and credit management credit reporting, HELOCs, and identity theft.
Financial counseling supports Heckman's firm in being more engaged with clients, he said. Heckman helps his colleagues understand what questions to ask, how to ask the right questions and how to respond to certain statements. Examples of pertinent questions include:What are you feeling right now? How do you think about money? Do your values align with what you spend on? Why did you pick that savings goal? How will you act differently when you reach it?
What is the ripple effect of this approach? "Longstanding, stronger relationships, without a doubt," Heckman said. "More open communication about finances leads to better help, which leads to more trust and more referrals."
— By Deborah Nason, special to CNBC.com
- Investment Psychology 101: Don’t let emotions influence your investing decisions
- The race is on to stop a Zika virus epidemic in the US
- Iceland's genetic goldmine, and the man behind it
- The land of the Vikings may hold the cure for cancer
- After $4 billion pours in, a gold fund runs into a big problem
- Here's what Trump's senior White House employees are worth
- Photographer Spent 25 Years Documenting Our Absurd Obsession With Wealth
- New guidelines for prostate cancer screening
- Golden years ahead: Advisors run a stress-test on pre-retirees' portfolios
- You didn't change the 401(k) beneficiary to your new spouse, and now your ex gets the money
- Charge! Why millennials should not be afraid of credit cards
- First marijuana-focused fund lets Americans legally invest in weed
You might also like
- Stocks close lower as Trump keeps Wall Street nervous; dollar drops sharply
- Asian markets mixed, Korean peninsula tensions in focus; Nikkei down 1%
- Stocks close lower; Dow and S&P post biggest 1-day reversal in 14 months after Fed minutes
- Op-Ed: Dollar rallies from trend line support, Syria missile strike helps
- Op-Ed: Shanghai index consolidation uptrend stronger than expected
- Putin meets with Tillerson in Moscow
- Russia gives Tillerson a dressing down, demands to know White House's real intentions on Syria
- Spicer offends with gassing remark comparing Hitler and Syria's Assad
- CNBC survey: Trump's agenda is popular, until he acts on it
- Trump administration lifts hiring freeze
- Mattis says 'there is no doubt' the Syrian government was responsible for chemical attack
- The Fed isn't even close to being the biggest wild card for markets, Mohamed El-Erian argues
- Powerful South Carolina political consultant implicated in indictments of a veteran state senator
- Will Donald Trump get a second Supreme Court nomination?
- "Hazing" rituals await Supreme Court's "junior justice" Neil Gorsuch
- The hunt is on for Planet Nine. Here's how to join it
- Trump approves controversial Keystone XL oil pipeline
- Trump praises 'Fox & Friends,' renews old feuds in early morning tweets
- Rex Tillerson finally answers question from NBC News' Andrea Mitchell
- First Read's Morning Clips: The Latest in the Russia Investigation
- Spicer: 'I've let the president down'
- Russian President Vladimir Putin met with U.S. Secretary of State Rex Tillerson on Wednesday
- OMB Diriector Mick Mulvaney: Washington's 'a lot more broken' than Trump thought
- Trump attacks conservatives over failure of health care bill
- A very consequential week didn't go well for President Trump
- Health Care Showdown: Republicans look to go big or go home
- No deal on health care bill after conservatives meet with Trump
- CA gov on those supporting health bill: 'Their name is going to be mud'
- Give it to me straight, doc: Is Obamacare dying?
- First Read's Morning Clips: Waiting for CBO
- 14 People Share What's It's Really Like to Have An Ex Who Is Now Their In-Law
- The Internet Is Freaking Out About The Way This Chef Cuts Pizza
- The hunt is on for Planet Nine. Here's how to join it
- Israeli prime minister talks of a snap election amid concerns over a new public broadcaster
- U.S. condemns suspected Syrian chemical attack on civilians, but says the Assad government is a 'political reality'
- Canada's largest school board will end class trips to the U.S. due to Trump's travel restrictions
- Warplanes strike Syrian town already hit by chemical attack
- Vigilantes prowl Europe's border with a target: Muslim migrants
- A letter from Britain to the European Union will trigger the 'Brexit' process March 29
- Ukraine president suggests a Kremlin-orchestrated attack after former Russian lawmaker is shot dead in Kiev
- Russian officials say St. Petersburg subway blast killed at least 11 and injured dozens
- As death toll in hospital attack soars to 50, Afghanistan investigates whether it was an inside job
- South Korea's ousted leader moves out of palace, apologizes for 'not fulfilling my duties'
- A brazen political killing shakes Myanmar, already teetering on the path to democracy
- India's Narendra Modi leads his party to victory in a state with more than 200 million people
- A controversial Thai monk is wanted in connection with a fraud case. His followers won't give him up
- Another Dalit suicide on campus raises fears of a crisis of discrimination at Indian universities
- Syrian government insists it does not use chemical weapons; US vows serious response to attack
- Bodies of U.N. workers and interpreter found in Congo, prompting calls for investigation
- Hamas hangs 3 Palestinians in Gaza it says were collaborating with Israel
- Basque group ETA hands over weapons, ammunition and explosives to France
- Syrian ally Iran blasts U.S. missile strikes as 'dangerous, destructive and a violation of international law'