When you need help putting together a solid plan for your money, you might seek out financial consulting services. A financial consultant can offer advice and guidance on things like investing, retirement planning, and building wealth. You may also hear financial consultants referred to as financial advisors, as the terms are often used interchangeably, though there may be some slight differences.
What is financial consulting designed to do? In simple terms, it’s all about helping clients formulate a strategy for managing their money. What working with a personal finance consultant looks like for you can depend on your situation and goals.
Key Points
• Broadly speaking, financial consultants help clients identify strategies to help them reach financial goals.
• Services offered by financial consultants may include investment management, estate planning, tax planning, and retirement planning, among others.
• Financial consultants and financial advisors may hold certificates or designations that reflect advanced training, such as Certified Financial Planner (CFP) or Accredited Financial Planner (AFP).
• Choosing the right consultant requires evaluating the scope of services they offer, their professional certifications and designations, their fee structure, and more.
What Is a Financial Consultant?
Broadly speaking, a financial consultant is someone who offers advice about money – be it retirement planning or buying stocks or other securities – in a professional capacity. A financial consultant may work independently or be employed by a financial consulting firm, and they may offer services online or in-person.
Examples of Financial Consulting Services
Financial consultants can offer a variety of services to their clients. Again, those clients may be individual investors, business owners, or even a non-profit organization. The types of services a financial consultant may offer can include:
• Basic financial planning, such as creating a household budget
• Estate planning
• Tax planning and legacy planning
• College planning
• Succession planning for clients who own a business
A financial consultant’s overall goal is to help clients create a comprehensive plan for managing their money. Financial consultants may work with a diverse mix of clients, or niche down to offer their services to a specific demographic or client base, such as dual income couples, with no kids or members of the LGBTQ community.
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Financial Consultants vs. Financial Advisors
The terms “financial consultant” and “financial advisor” are often used interchangeably, as their meaning is roughly, but not quite, the same. There are some important differences, including the licensure that each is required to hold in order to practice, and the regulators each operates under. Generally, they both offer financial advice and guidance in a professional capacity, though.
Other Names for Financial Professionals
Financial consultants and financial advisors can go by more specific names, depending on which professional certifications they hold. Certifications and designations signify that a consultant or advisor has completed advanced training and education in a particular area. Here are some of the most common designations for financial professionals:
• Certified Financial Planner (CFP®)
• Chartered Financial Consultant (ChFC)
• Certified Public Accountant (CPA)
• Accredited Financial Planner (AFP)
• Registered Investment Advisor (RIA)
• Certified Annuity Advisor (CAA)
• Certified Financial Consultant (CFC)
• Certified Tax Advisor (CTA)
• Chartered Financial Manager (ChFM)
Navigating the alphabet soup of designations for financial consulting services can be confusing and it helps to understand what type of advice you need.
For instance, if you want to work with an advisor who can help with everything from budgeting to retirement planning, then you might choose a Certified Financial Planner. On the other hand, you might want to work with a registered investment advisor if you’re specifically seeking investment help.
The main thing to know about financial consulting services is that there’s more than one option to choose from. Taking time to research a consultant or advisor’s background and qualifications can make it easier to find the right person to work with when you need consulting services.
When Would You Need Financial Consulting?
Working with a financial consultant is a personal decision. With that in mind, you might start working with a consultant at any time if you feel that you need help managing your finances. If you need more specific examples of when it makes sense to hire a financial consultant, here are a few scenarios to consider:
• Your parents pass away, leaving you $500,000 in assets. You might work with a financial consultant to figure out the best way to maximize your inheritance while minimizing taxes.
• After 15 years of marriage, you and your spouse have decided to divorce. You decide to hire a financial consultant to help you create a plan for managing the assets that you’re leaving the marriage with.
• You’re a parent to a child with special needs who will require long-term care after you’re gone. You reach out to a financial consultant to discuss setting up a trust to pay for their care when the time comes.
Financial consulting services can be an appropriate choice when you have a difficult financial decision to make or you’re trying to navigate a situation that feels overwhelming. Winning the lottery, for instance, could leave you paralyzed with indecision about what to do with the money.
A financial consultant can also help you move through changing life stages. That can include getting married or divorced, having a child, starting or selling a business, or changing careers. Financial consultants can look at the bigger financial picture to help you get through the changes while keeping your long and short-term goals in sight.
Finding the Right Financial Consultant
Finding a financial advisor starts with taking inventory of your needs to determine what kind of advice is appropriate. Once you’ve figured out what kind of help you need, the next step is creating a list of advisors in your area that you might want to work with.
Asking questions can help you get a feel for how an advisor operates. Here are some examples of the types of questions you might want to ask:
• What kind of financial consulting services do you offer?
• Do you hold any professional certifications or designations?
• Do you specialize in working with a particular type of client?
• What is your investment style?
• How are your fees structured and what do you charge for consulting?
• What is your preferred method of communication?
• How often will we meet?
If you’re considering a robo-advisor, then it may be a good idea to look at how the platform manages portfolios, what benefits or features are included, and what you’ll pay for consulting services. Should you choose a robo-advisor vs. financial advisor? There are some pros and cons to consider.
On the pro side, a robo-advisor can be a less expensive way to get financial consulting services. The typical financial advisor cost is around 1% of assets under management per year. Robo-advisors may cost much less, with some offering services charging a fraction of what a human advisor would.
Of course, there’s a trade-off to consider, since you’re not getting financial advice with a human element behind it. For instance, if market volatility sets in and you’re tempted to sell off stocks in a panic, a robo-advisor wouldn’t be able to talk you through it the way a human advisor could. Taking that into consideration can help you decide which one might be right for you.
The Takeaway
A financial consultant’s job is to help you feel more secure and confident when making decisions about your money. Whether you need a consultant’s services or not can depend on where you are financially right now and where you want to go in the future.
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FAQ
Is a financial consultant the same as a financial advisor?
Financial consulting and financial advisory services are typically grouped together, as they generally mean the same thing. A financial consultant or a financial advisor can provide advice about things like investing, retirement planning, and estate planning. The difference is that consultants may offer their services on a one-time basis, while financial advisors may work with clients long-term.
What does a financial consultant cost?
What you’ll pay for financial consulting services can depend largely on the type of professional you’re working with. A typical financial advisor’s fee is around 1% annually, though it’s possible to pay more or less, depending on the kind of services you receive. Robo-advisor financial consulting can cost less, though it does lack the human element.
What does a financial consultant do?
Financial consultants help their clients create a plan for managing money. A financial consultant may work with individual investors, businesses, or organizations to offer financial advice. Financial consulting services may cover a broad scope of topics or concentrate in just one or two areas of financial planning.
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