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- Financial consultants provide advice on a wide range of topics, like estate planning and wealth management.
- Financial advisors offer similar services. Sometimes the terms are used interchangably, but other times they signify different credentials.
- Because the term financial consultant can be ambiguous, make sure to research their credentials, fees, and more.
When searching for professional money and investment advice, you may have come across titles like "financial consultant" or "financial advisor." In some cases, these terms mean the same thing and are used interchangeably. In others, however, the terms might signify slight differences such as varying services and credentials.
In general, if looking for an expert to help you create a personalized, long-term financial plan, a financial consultant can often do the job. However, some financial consultants have narrower focuses than financial advisors, such as only advising businesses or working on more specific, short-term financial situations, like consulting you on how to manage an inheritance.
Financial advisors and consultants can be either humans or robo-advisors (automated investment platforms). The best online financial advisors typically offer low-cost portfolio management, advice, and additional perks for all kinds of investors.
Services offered by financial consultants
The exact services offered by financial consultants can vary by consultant or the company that employs them.
For example, some financial services companies call their advisors financial consultants, and these professionals help with essentially all aspects of managing and planning your long-term finances. Others might call their retirement experts financial consultants, and these professionals excel at helping you with retirement planning but might not help with other issues like managing debt and taxes.
"In general, financial consultants offer a range of services tailored to individual client needs," says Brent Weiss, CFP and head of financial wellness at Facet. "They may look at one aspect of your finances, offer a one-time consult, or review your entire financial picture and develop an ongoing plan. You need to know the right questions to ask to determine the services they will provide."
With that in mind, some common services offered by financial consultants include:
Financial planning
Financial consultants create personalized financial planning based on a client's whole financial picture, including factors like debt, assets, living expenses, and investment goals. The consultant might help you create a budget that includes paying down debt while investing for retirement, for example, and as part of that plan, the consultant might help you choose an appropriate retirement investment strategy for your age.
Investment management
Many financial consultants also help with making investment recommendations and/or directly managing clients' investments. This can involve both retirement and non-retirement accounts, and financial consultants can tailor investment advice based on factors like a client's age, goals, and risk tolerance. Typically, if they're giving specific investment advice, they have to be registered with the SEC and/or FINRA.
Insurance planning
Connected to long-term financial planning, many financial consultants also advise clients on what insurance policies might make sense for them from a risk and cost perspective. This can include reviewing policies for life insurance, health insurance, disability insurance, long-term care insurance, and more. Some financial consultants are licensed to sell insurance policies, while others simply help you analyze your options and might recommend you to insurance agents when it comes to buying policies.
Tax planning
Many financial consultants can help you identify strategies to optimize your taxes, such as minimizing capital gains taxes from your investments and lowering your taxable income based on retirement contributions. Some consultants have more tax expertise than others, such as if they're also a certified public accountant (CPA) and can file your tax returns for you. Others provide more general tax advice and can refer you to tax experts for filing and more specialized support.
Estate planning
Financial consultants who take a long-term approach to financial planning also often assist with estate planning areas like creating wills, trusts, and health care directives that are important for managing your finances and well-being toward the end of your life and after you pass away. Because estate planning often involves legal aspects, many financial consultants help you get started with estate planning but then point you in the direction of an attorney who can help with finalizing estate planning documents.
Types of financial consultants
Because the term financial consultant does not have strict parameters, not all financial consultants are the same.
"As long as they have passed the appropriate state and federal licensing requirements, they can use any name they want — advisor, consultant, planner, wealth manager — provide any range of services, and charge in different ways," says Weiss.
That said, financial consultants typically have a degree in finance or a related field, and many have credentials and certifications, like earning the designation of being a Chartered Financial Consultant (ChFC), a certification offered through the American College of Financial Services. As part of the requirements to earn the ChFC designation, financial consultants must have at least three years of financial planning experience.
Keep in mind that there are financial professionals who do not have the ChFC certification, yet they still might be considered financial consultants. It's possible, for example, that someone who becomes a Certified Financial Planner (CFP) chooses to call themselves a financial consultant, rather than other common terms like financial advisor or financial planner.
So, it's important to dig deeper than the overall name and look into a financial professional's background, services, fees, etc., to choose the right one for your needs.
Choosing the right financial consultant
There can be several criteria for choosing the right financial consultant, which might be weighted differently depending on your preferences and financial needs. Still, some common areas to consider include the following:
Credentials and experience
As mentioned, credentials like the ChFC designation indicate that the financial consultant has gone through rigorous training and has some experience already in this field. There are many possible credentials that a financial consultant might earn, however, so it's important to look into these to see which ones line up with what you're looking for.
While non-certified financial consultants and advisors may still offer useful advice, you don't necessarily get the assurance that comes from a third-party certification.
"These credentials not only represent a profound understanding of financial principles, but also a commitment to ongoing education and ethical standards," states Weiss.
It's not uncommon for financial experts seeking further education to be certified as both a ChFC and a CFP (or another financial certification like CFA).
"While a ChFC has more education and experience than many others in the field, it's really more like a CFP-light," Weiss says. "The CFP Professional designation remains the gold standard."
Fiduciary duty
You might assume that your financial consultant is acting in your best interest, but that's not always the case. Some financial professionals, such as brokers who might call themselves financial consultants but make commissions based on what investment products you choose, are not necessarily required to put your interests first. That's not to say that titles alone dictate what a financial professional does, but in general, many clients want their financial advisors or consultants to have a fiduciary duty to them, meaning they have a legal or at least professional obligation to put your best interests first.
If you're unsure if a potential financial consultant is a fiduciary, simply ask them or review materials on their website to see if you can confirm this.
Fee structure and costs
Financial consultants can use different fee structures with varying rates. When considering a potential financial consultant, one of the first questions you should ask is how they charge for their services.
"Try to avoid fee models that create conflicts of interest, like commissions and paying a percentage of how much you invest. You want your advisor to offer unbiased advice and sit on the same side of the table as you," says Weiss.
More specifically, some common fee structures include:
- Fee-only: This means they only make money based on what clients pay them for their services. Among fee-only advisors or consultants, the fee structure and costs can vary further, such as by being based on a percentage of your assets, a flat fee, or an hourly charge. Fee-only often coincides with being a fiduciary.
- Commission-based: Commission-based financial consultants, such as some who work for banks, don't directly charge clients but instead earn commissions from other financial services companies based on the financial products you choose. For example, they might make more money from an insurance company commission if they sell you an annuity for retirement rather than managing your investments themselves. Commission-based consultants are often not fiduciaries.
- Hybrid: In more select cases, financial consultants earn money from both client fees and commissions. Sometimes this means the consultant acts as a fee-only fiduciary for some aspects, like financial planning, while earning commissions and not being a fiduciary for investment management.
Communication and compatibility
Don't overlook the importance of a financial consultant's communication style and your compatibility with them. In some sense, personal finance is simple, but it's the emotional aspect of money that causes us to veer off course or make decisions that don't follow the guidebook. So, it's important to choose someone who you connect with and who you're confident can help guide you through tough decisions over the years. Take advantage of free consultations when interviewing financial consultants, and read reviews and testimonials if available.
How to find a financial consultant
The easiest way to find a financial consultant is often through referrals from friends, family, or colleagues. However, you can also find consultants online through organizations such as:
On these websites, you can access a wide range of advisors, planners, and consultants with varying certifications and credentials on different financial and investment topics. Make sure to thoroughly look through your options to find the one that best fits your needs.
"When meeting a potential financial consultant, ask about their qualifications, experience, areas of expertise, and fee structure. It's also important to understand their approach to financial planning, how they tailor their services to individual client needs, and the types of clients they work with," says Weiss.
FAQs about financial consultants
You should consider hiring a financial consultant if you're generally unsure of how to manage your finances, as well as if you have more specific needs, like you're nearing retirement or facing another life transition like having kids, getting divorced, or other circumstances where you need financial guidance.
Financial consultants charge fees that can vary based on factors like fee structure, location, and experience. Some common charges are 1% of assets annually, $1,000-$3,000 for a one-time financial plan, or $100-$300 per hour, but get quotes from different financial consultants to see what applies to your situation.
Some important questions to ask a potential financial consultant include inquiring about what services they offer, whether they're a fiduciary, what their fees are, and how they typically work with clients.
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