2 May 2017
2 May 2017,

My Top 3 most Frequently Asked Questions about Financial Coaching

In my training program “Your Spending Coach” where I teach other Financial Advisers, Mortgage Brokers and Accountants how to build a Personal Money Management or Financial Coaching program for their clients – I get asked these 3 questions more than any other…so today I thought I’d answer them for everyone.

FAQ No#1 – When should we start using the transaction data?

So the No#1 question that I get always comes back to the budgeting side of things. Which is, when should we start using the information that we’ve got?  Or more specifically, “Do we go backwards to get existing client transactions or do we start from today and go forwards?”

The answer’s going to be “it depends” and if you use one of the main software providers such as Moneysoft, Myprosperity or Money Brilliant – they’re all going to get retrospective data…somewhere between 45 days and 3 months.  And a lot of them are looking at expanding that back to 365 days at some point in the near future as well.

We all know that the further back the client looks, the cloudier it seems to get from an understanding of what they’re actually spending money on.  So my view here is pretty straight forward…

Have your own view on what you actually want them to look backwards for.

If it’s around getting a good base to start their budget setting exercise from, so they’re not just making it up from scratch, then that’s fine.  Just understand that’s really only going to be relevant for what I call Living Expenses – Education, Food, Financial, Housing, Health, Loan & Bank Fees, Transport and Utilities.

In our business (Experience Wealth) we use benchmarks that are based on our clients’ actual spending data from the previous financial year and instead of looking backwards we use that data as a proxy.  The benefit of doing this is the client gets the same outcome (confidence that the starting budget is accurate, without the need to spend time trawling through 90 days of transactions).

Now regarding spending data going backwards, it’s not going to be that valuable and the reason is most people don’t remember what they spent money on two weeks ago let alone 3 months ago. So you’re going to get a lot of guessing. Also my view is clients shouldn’t be held accountable to budgets they never signed up for.

And finally, spending is really about how they want to budget from this point on. So I’d say use the software default setup, as it gives you the option to have 3 months’ worth of data. Keep the Living Expenses information and use that. Get rid of the Spending data and set the budgets from scratch for the beginning of this month, or the beginning of next month going forwards.

FAQ No#2 – When should we setup the clients Spending, Storage and Savings accounts?

NO#2 is around the banking side and again it comes down to when do we start? So I talk to my coaches about having Spending, Storage and Savings accounts for their clients. The idea here is, help them see what they’ve got available for Spending, that their money is going into Savings and they’ve got enough to cover their Expenses.

Obviously when you get a client, they’re going to have their own bank account structure already set up and your job is to help them migrate from a system that might not work 100%, to one that should help them hit their targets. This is all tied up with whether or not you’re restructuring your clients loans, and sometimes that means re-financing to a different lender that provides the structure that the clients are looking for. During the re-finance process, you’re going to be getting bank accounts closed down and new accounts and loans getting setup.

Quite often my coaches ask me “Do I wait until the re-finance is finished before I set the new accounts up or do I do it today?” and the answer is “well it is sort of a bit of both”. What you want to try and get out of the clients bad habit set straight away is mixing their Savings, their Spending and their Expenses into one account. I hate that. You should have the client having Savings – which their Loan repayments and money going into Savings Accounts – separated from Spending money and definitely separated from the Expenses side of things.

So I’d suggest you implement a hybrid setup to help them get that done straight away, and then potentially when they’re in the new loan structure, or new re-financed structure then you’d have all of your ideal Spending, Storage (being accounts where yearly spending is stored e.g. Holidays and Xmas) and Savings buckets setup the right way. I spend a lot of time on this process in the Workshop because in my opinion Banking is the most important of the 3 Financial Coaching elements (Budgeting, Banking and Reporting) and if you get it setup right the clients get the best outcome.

Quite often I see a lot of coaches skipping over this part because it’s outside of their wheelhouse or they don’t have a Lending Specialist they can work with so it’s one that you definitely need to think through and don’t just leave it up to the client to deal with themselves.

FAQ No#3 – Does the Money Management software integrate into my Planning Software?

No#3 most commonly asked question is one of my pet bug bears and it comes down to the Reporting side. That is “Does the Financial Planning software integrate with Money Management software?” being Myprosperity, Moneysoft, Money Brilliant and Xero and the answer is “Some them do and some don’t” but the real answer is “Why do you need it to integrate?”

My view, Financial Planning software is about long term projections using big rolled up numbers. Money Management software, or Financial Coaching software is about getting access to micro levels of real information going backwards in time.   One’s about going forwards (Planning Software), and one’s about going backwards (Money Management software). And your ‘rear vision mirror’ stuff with your Money Management software is all Micro and your Financial Planning software is forward based, long term numbers.

So why do you need them to integrate? The only thing you need is Total Expenses, Spending and an accurate Savings figure! That’s all the client cares about. You can validate Income at any stage from their payslips and details like that, but as long as you can identify real expenses, real spending and therefore a real savings figure… that’s all you need!

And this is coming from a guy that wasted a lot of time trying to get integration off the ground (in Experience Wealth)… with our software at the time, and we did, and in the end it didn’t add a lot of value.

So save yourself some time, save yourself some heartache – “Yes” the planning software and these Money Management guys are going to integrate and that’s fantastic. But take it at the level that they’re going too you and don’t worry about breaking it up to much

Guys if you thought this was useful, and you think you need a little more help we’d love to see you at one of our upcoming Workshops. So just go to www.yourspendingcoach.com.au/workshops to find out when the next one’s on. And if you’ve got any questions you can email me directly at Steve@theXYacademy.com

Otherwise, if you’ve got anyone that you think this blog would be beneficial to share it around, we love to get the stories about Money Management and Financial Coaching out as far and wide as we possibly can… Have a great week and I will talk to you again soon…Bye



Listen the Podcast here

One response on “My top 3 most commonly asked questions about Financial Coaching / Money Management

  1. Jon Shaw says:

    Like the video, Steve! And yes these questions are quite common, or rather, strong views on these questions are quite common.

    So here’s mine.

    FAQ No#1 – When should we start using the transaction data?
    You are correct that it depends on what we’re trying to achieve with the client but in general, I recommend that customers use enough transaction data to gain a reasonable picture of a client’s general behaviour with money. There’s no need to know exactly what they did for the whole past year. That is a huge time sink. 2 or 3 months past view is plenty and can be achieved in fairly quick time. Past history is about past behaviour and gives the professional planner a feel for what might be achievable, and where the “soft spots” are.

    FAQ No#2 – When should we setup the clients Spending, Storage and Savings accounts?
    To manage money, they should be identified immediately. This is about usage of the banking structure to control cashflow and have a “management system” in place, That’s the value of a clean banking structure – each bank account should have a useful purpose. There’s not necessarily a need to re-work the entire banking setup, but at least identify which account all money should flow in to from external sources, which account(s) are used for spending, and which account(s) are used for Savings. Others (such as multiple credit cards) are possibly surplus and/or redundant. Set a plan for consolidating those and get cracking!

    FAQ No#3 – Does the Money Management software integrate into my Planning Software?
    It should give you the option to easily do so. It’s not acceptable if it takes many days or months to achieve. Do you need it to? That comes down to your business process. If your planning process requires regular keying of income, expense and balance data, then yes, you’ll get great value from an integration. There are much more advanced flavours of this, which we are working on now, but in general an integration should provide efficiency gains and/or open up the possibility to innovate in terms of the services you provide. And it should be out-of-the-box!

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