What is a Financial Consultant? How to Use them for Your Business

A financial consultant is basically a kind of financial advisor who carries out an audit of your present financial position and comes up with an informed strategy to help you plan out how to achieve your objectives in both the near and distant future. They work in close association with their clients to help them understand all the essential facts about their assets, and what they should expect from those assets in the days to come.

Here’s an example – let’s say a client wishes to save up for their retirement but doesn’t really know how to go about it. In this case, a financial consultant can suggest the kind of retirement account they can use, give them advice about certain investments and clear their doubts regarding how much they should save. Financial consultants who have a higher level of training and certification should be able to help out clients with more advanced requirements like insurance and tax preparation as well.

woman, piggy, bank, financial consultant

Although the terms “financial advisor” and “financial consultant” are generally considered to be equivalent, certain financial consultants possess an additional designation known as a chartered financial consultant or ChFC. Before you choose to work with any financial advisor, you should always ask them particularly about the certificates they possess.

What are the duties of a financial consultant?

Basically, a financial consultant is supposed to consider all the important aspects of a client’s financial position, such as assets, income, expenses, and debts. With the help of this information, they must then show their clients the goals that they should aim for. If financial consultants have the proper licenses, they can handle their clients’ investments as well.

The kind of financial consultant you work with determines the type of services you will get from them. If you are looking for a financial advisor or consultant, you have three basic options to choose from –

  1. Robo-advisors – They mainly offer economically priced portfolio management services. Some of them provide tools and services for financial planning as well. You should go for Robo-advisors if you are considering investing but do not want to manage your investment portfolio by yourself.
  2. Online financial planning services – These provide investment management services and offer other kinds of financial advice as well. You should approach them if you are looking for financial planning that is more than mere investment management. These services are much more cost-effective than hiring in-person advisors.
  3. In-person financial advisors or consultants – Although you will have to pay much more to work with a financial advisor, developing a good professional relationship with one overtime will help you a lot. Your in-person financial advisor will gradually get acquainted with your family and community, as well as your own personality and needs. Thus, you can be more reassured when you are making a big investment such as buying a new home, paying for your child’s college fees, or saving up for your retirement.

Financial Advisor vs Financial Consultant?

The differences between a financial advisor and a financial consultant aren’t very significant. In fact, a lot of investment firms use these terms interchangeably. Both financial advisors and consultants can hold a large number of designations or licenses. A lot of them possess FINRA (an organization that regulates broker-dealers) licenses like Series 7 and 66 licenses, by virtue of which they are able to sell investments. Many others hold ChFCs or other specialized certifications like a certified financial planner (CFP).

As of now, there is no significant regulation that governs what labels finance professionals give themselves. Thus, as a customer, you need to be particularly vigilant and knowledgeable when you work with one of them. There are quite a few ways for you to find out whether your financial advisor is trustworthy or not. For example, you can look for a fee-only fiduciary. Since financial advisors or consultants who are fiduciaries do not accept commissions for investments they sell, they must serve their clients in a very dedicated manner. Also, you should check your financial advisor’s background thoroughly before working with them. Make sure you find out what their licenses and certifications mean.

Should you work with a financial consultant?

You may or may not require a financial consultant, depending on your situation. For example, you can hire a Robo-advisor to manage relatively simple investment portfolios that you don’t want to handle yourself. For more complicated investments or tasks like debt payments, tax calculations, or estate planning, you should consider working with a qualified financial consultant. Alternatively, you could consider going for online financial planning services as well.

If you go through any major events in your life that could impact your finances significantly, such as getting a new job, getting married, or having a child, then you should try to get advice from a financial consultant. That will help you manage the financial implications of these changes well and adjust your long-term financial plan accordingly.