How I did it: Andrew on becoming a financial mentor

Becoming a parent comes with plenty of financial challenges. In this interview with Andrew Mitchell, we find out more about the services financial mentors can provide to new and expecting parents.

In our series How I Did It, friends of Crayon share their personal stories about how they tackled one aspect of their personal finances. This one is a bit different. Andrew Mitchell shares how he became a financial mentor with the Salvation Army to help Kiwis struggling with debt.

Just keep in mind that, as always, Crayon and our guests are not providing financial advice.

Hello Andrew! How did you decide to become a financial mentor?

Previously, I was an analyst, first at Stats NZ and then for an insurance company. When I was in my mid-40s, I had a breakdown, which led me to reconsider what I wanted my future to look like. I also realised that because my wife is a doctor, I had the financial freedom to do something different, so I became a financial mentor. I enjoyed chatting with people and problem-solving; this was a good way to use my skills to help people who are more or less invisible in mainstream society, especially in terms of income and wealth.

I’ve been a financial mentor for eight years now. It’s really nice to be able to work with people without any time pressure. Someone can come and talk to me for an hour and a half, which allows me to learn a lot about their life and situation. People expose themselves when they're talking about their finances. I can see what they spend their money on, so in a way, they’re laying out their life on the table. Often, I build a connection with them, and they continue to come back. 

What does a financial mentor do?

Around 700 financial mentors work at 200 budgeting services across New Zealand. We help people facing unmanageable debt. Sometimes we’re called ‘Budget Advisors’, but we should really be called ‘Debt Advisors’, which is what our counterparts in the UK are termed. Generally, people come to us when things are fairly dire - they’ve missed loan payments, and they’re about to default. We help them figure out a plan.

On occasion, people do approach us for a bit of help with budgeting or debt consolidation. They may be struggling a bit, but they're up-to-date with their payments, and they have a good handle on the finances. These cases are rare. 

We’re not just helping with the technical side of managing money. Often people end up with money troubles because there are lots of other things going on in their lives. We regularly encounter clients struggling with physical or mental health issues or addictions. We spend time listening to people, and we can refer people to other services and supports. 

What’s the difference between a financial mentor and a financial advisor?

A financial mentor helps people who have serious mounting debt. 

A financial advisor helps people invest their money if they have enough funds to warrant the services. So, our clienteles have quite different needs.

Sometimes people might have a good job or look like they've got it together from the outside, but they’re struggling with debt. Do you come across clients like this?

We would help them, but they tend not to seek our services. Because we’re the Salvation Army, the people who come to us are some of the most vulnerable Kiwis in desperate situations. Many of our clients are on the benefit and already have a prior default on their credit report. 

Suppose a client comes to us with significant debt but the ability to pay it back over time because they earn a decent income upwards of $1,000 per week. In that case, we generally point them toward a debt consolidation service. 

If it's unmanageable debt, we’ll help them through bankruptcy or a no-asset procedure. This will be on their credit record, making it harder and more expensive to borrow in the future, so it’s really a last resort. 

Can you tell us more about debt consolidation?

Debt consolidation services renegotiate your debt with your creditors on your behalf and bring it all under one roof, generally at a lower interest rate. 

Some are for-profit businesses such as Debtfix. A typical client for them would have $60,000 in credit card debt and a job to earn income to pay it back over time. Because many people feel embarrassed and ashamed about their financial situation, most of these services are phone or email-based, which provides more anonymity than fronting up in person.

An alternative option is the charity Good Shepherd, which offers debt deconsolidation lines of up to $15,000 interest-free. 

What would a typical session look like for you?

Here’s what my day looked like on the day we’re speaking: 

• The first client I saw had taken out a car loan with weekly repayments of $160 per week. Then they suffered from health issues, which meant they had to stop working. Now, they’re only paying them $80 a week, but they haven’t made any special arrangements with the lender. To avoid repossessing the car, the lender has asked them to see a financial mentor, create a budget, and then provide it to the lender. At that point, the lender would look at reducing the weekly payments to $80 a week, at least for a period of time. 

• My second client earns over $100,000 in a professional white-collar job but has a severe gambling addiction. I’m helping them get it under control. 

• The last client is one I’ve been visiting regularly over the last three years. They’re still getting into financial trouble despite us helping them through a no-asset procedure (think of it as a financial reset) and their church providing $200 weekly. The minister at the church was starting to get frustrated and asked me to stop by. 

How do most people find you?

People don’t generally know what financial mentors do. We’re a community organisation without the budget to do any advertising. All the advertising people see encourages them to get into more debt, not out of it!

Most clients find us through referrals or word of mouth:

• The MoneyTalks phone service will point people to the nearest budget service.

• Social workers, counsellors, doctors and other community support services generally know about our services and will refer clients if appropriate. 

• The Salvation Army has a food bank, and if the welfare team notices someone coming in for a lot of parcels, often they’ll refer them to us. 

What’s your focus these days?

I still do my one-on-one client work, but over time, my attention has turned to how we can address some of these systemic issues. I’m part of a group advocating for establishing a financial rights legal centre in New Zealand to tackle issues such as irresponsible lending and the mis-selling of payment protection insurance. 

I recently visited the Consumer Action Law Center in Melbourne, which has 50 staff, including 15 lawyers and a multi-million dollar budget. And wow, it’s quite amazing! They have the skills and resources to take on the banks and finance companies to ensure they're doing the right thing. There’s nothing like that here. 

If readers want to get financial help, what are their free options? 

• If you have money problems -> MoneyTalks is the national phone service run by FinCap, the non-government organisation that supports financial mentors. They can answer straightforward questions and refer you to a budgeting service if you need a more personalised approach.

• If you want to get savvier with money -> Sorted is an independent website dedicated to helping New Zealanders get ahead financially. It’s run by the government-funded agency Te Ara Ahunga Ora Retirement Commission.

And what if someone reading this wants to become a financial mentor?

In New Zealand, you do a 6-day training course run by FinCap, plus probation and supervision after that. Of the 700 financial mentors nationwide, just over half are paid (around $25/hour), and the rest are volunteers. It’s really grown out of being a community service.

Andrew, thank you very much for shedding light on the valuable service financial mentors provide.

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Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 21 February 2023.

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