Why Financial Coaching At Work Is Hot

By Dan Kadlec

January 24, 2018

Financial education alone usually is not enough to change money behavior. Individuals need timely interventions that engage and encourage them. Personal financial coaching appears to be the most effective approach, retirement planning firm Questis found.

Financial coaching is a relatively new approach. It differs from financial advising in that a coach lets client-centered goals guide the process, rather than dictate expert advice. The idea is to work with an individual to identify desired behavioral outcomes, set goals, brainstorm strategies, create action plans, identify strengths and motivate. Coaching is at the heart of the five principles of financial educationrecently identified by the Consumer Financial Protection Bureau.

In various studies, financial coaching bolstered confidence, goal-setting and saving. It cut into the delinquency rate among mortgage holders, reduced debt, minimized stress and raised credit scores. These are inarguably wonderful outcomes that textbook financial education has been slow to produce.

This does not mean we should ditch classic financial education, especially in schools. An early grounding in things like compound growth, inflation and bank fees makes financial coaching easier to understand later on. Employers can build on that base through a financial wellness program that is highly personalized.

The best programs include one-on-on interaction with an expert and address specific measureable goals like paying down debt or saving more. They make use of employee-selected nudges like text messages or email notices that encourage certain actions. They also employ relatable real-world data, such as how much monthly income an individual is on track to receive in retirement as opposed to rough estimates of how much that person needs to save and invest.