What Is a Financial Consultant and What Do They Do?

A financial consultant, like a financial advisor, offers several services based on the client’s specific needs and goals. In some cases, a financial consultant may have more financial planning experience than the typical financial advisor. Financial consultants typically specialize in investment services, although many also specialize in areas such as tax planning, forensic bookkeeping, wealth management, and life insurance. It’s important to check a financial consultant’s certifications before meeting so you know their area of expertise. 

A financial advisor can also provide you with a range of services tailored to your individual goals and budget.

What Is a Financial Consultant?

“Financial consultant” is a somewhat antiquated term that’s largely been replaced by the term “financial advisor.” Financial consultants may work for a firm or as a self-employed contractor, and their clients may be companies or individuals.

In short, financial consultants offer personalized advice to help investors build wealth. They may offer financial planning, identify well-suited investments, or guide insurance decisions. They often direct the buying and selling of investments, like stocks and bonds, on their clients’ behalf. Some may also sell financial products, possibly on commission.

A financial consultant usually meets with clients to assess their financial situation before they make any recommendations. Any time a client experiences a major life change (such as marriage, job change, or retirement), they’ll likely request another meeting. Consultants also spend time marketing their businesses. They often travel and work outside normal business hours to accommodate their clients’ schedules.

What Do Financial Consultants Do?

Financial consultants or advisors offer clients a big-picture analysis of their finances. They break down different aspects of a client’s financial life, including assets, expenses, and income, and help them create a financial plan to reach different types of goals. These goals can be focused on specific milestones like buying a home, relocating to a different city, retirement, and paying for the education of a grandchild through accounts like a 529 plan.

You should also note that financial consultants and advisors offer clients different types of services depending on their specialization. As an example, a certified financial planner helps clients in many areas of financial planning, including taxes, retirement, estate planning and insurance. However, a chartered financial analyst focuses on portfolio management and data-driven research.

For a quick reference, the table below breaks down four more types of financial consultants or advisors and their common services.

In addition to in-person financial consultants or advisors, robo-advisors are inexpensive portfolio management alternatives for clients who are trying to build up their portfolios. Generally, financial consultants or advisors charge higher percentages in fees when clients have fewer assets under management.

But, if you need more comprehensive financial planning advice, working with a consultant or advisor online could be a middle option. They are typically more expensive than robo-advisors, but more affordable than in-person advice. They offer a wide range of services, including investment management and financial planning, for different specializations.

When hiring a financial consultant or advisor, you should work with a fee-only advisor, which means that clients pay them directly and they do not make money from commissions. If your consultant or advisor gets money from commissions, ask them about their fiduciary duty.

Financial Consultants vs. Financial Advisors

The terms financial consultant and financial advisor are almost synonymous. In fact, many financial advisors refer to themselves as consultants. Both financial consultants and financial advisors help others with comprehensive financial planning. You’ll likely need to look into a financial advisors’ education, experience, and certifications to determine which one is right for you.

Both consultants and advisors may have studied economics, accounting or finance in college. It isn’t uncommon for them to earn MBAs, and many hold advanced certifications. One of the most highly regarded certifications is the Certified Financial Planner™ (CFP®) designation, but there are many others of value.

For instance, the chartered financial consultant (ChFC) designation was introduced in 1982 as an alternative to CFP. The Institute of Financial Consultants issues ChFC designations after a candidate has completed eight courses. ¹ Seven of the eight are the same as the CFP program, plus an additional course on financial planning. 

The consultant designation doesn’t require a comprehensive board exam like the CFP designation does, however. Instead, an exam is given at the end of each course. Both CFPs and ChFCs are qualified to analyze your financial situation and give advice.

How Financial Consultants and Advisors Are Regulated

Financial consultants and advisors fall under different oversight frameworks depending on the services they offer. Those who provide ongoing investment advice for a fee generally register as investment advisers with either the Securities and Exchange Commission (SEC) or state securities regulators. Their obligations include filing disclosures and following specific rules for how they deliver advice.

Professionals who sell securities, such as stocks, bonds or certain investment products, typically register with FINRA as broker-dealers. Their regulatory duties focus on suitability rules, sales practices and supervision. Some individuals hold registrations in both systems, which is often referred to as dual registration.

Titles can vary, but regulation is tied to the work performed rather than the job label. Two people may call themselves financial consultants, yet one may be regulated as an investment adviser and another as a broker-dealer. This is why registration status is one of the most important distinctions to review.

Investors can check public databases to learn more about a professional’s background. Form ADV provides details for registered investment advisers, while FINRA’s BrokerCheck lists information for brokers and broker-dealers. These filings outline services, fees, and any past disciplinary events that may affect a hiring decision.

When Do You Need a Financial Consultant or a Financial Advisor?

Depending on your needs and goals, you may want to work with a specific type of financial consultant or advisor to help you reach different milestones. You should keep in mind that the most practical time to hire a financial consultant or advisor will be when you have enough money saved to invest in those milestones.

One example for when a financial consultant or advisor could be useful is when you have to manage multiple retirement accounts. Financial advice may not be needed when you first open a 401(k). But as you move on through different jobs, and you have to juggle multiple accounts and additional financial concerns besides retirement could surface. A consultant or advisor could help you roll over your accounts to create a financial plan that optimizes different investment and tax strategies.

If you are starting to build an investment portfolio, a consultant or advisor can help you manage and review it to keep on track with retirement and other financial needs and goals. If you happen to lose money on your investments, a consultant or advisor can also help you re-evaluate your portfolio and diversify it to increase your net worth over time.

Financial consultants or advisors can help you create and manage an estate plan to pass on assets to loved ones or charitable organizations with minimal tax burdens. An estate plan not only protects inherited assets but can also implement a strategy to help them grow over time and ensure that your legacy can last for generations to come.

How to Find a Financial Consultant or a Financial Advisor

Everyone’s financial situation is different, so it helps to look for a consultant or advisor who works with clients like you. Some professionals focus on specific areas, while others work with a broad range of investors. You can start by using online search tools or asking people you know for names to consider.

After gathering a few candidates, review their websites and public records to learn about their services and background. This can help you see how they work and whether their approach fits your needs. Pay attention to the type of clients they serve and the scope of their work.

Before meeting with anyone, prepare a list of questions about fees, account minimums, certifications and investment approach. Asking the same questions across several candidates makes it easier to compare your options. You can also request their Form ADV or look them up through public databases.

Meeting a few candidates in person or by video can help you evaluate how they communicate and whether you feel comfortable working with them. After these meetings, you can decide which advisor aligns with your goals and preferences.

Brief History of Financial Advisor Terms

Originally, the person who did the job described above was referred to as a stockbroker or just a broker. At some firms, they were called account executives or registered representatives. Even retail bankers, insurance agents, and accountants offered financial products and advice.

The investing industry went through a re-branding in the 1980s. Many financial professionals changed their titles from stockbroker or account executive to financial consultant. They hoped this would shift their image from transaction-driven salesmen to highly trained financial professionals with valuable investment skills and advice.

The title of “financial consultant” didn’t stick for long though. By the 1990s, people began to refer to the role as a financial advisor. Because a consultant’s advisory skills were chiefly important, this appears to be a natural progression.

Eventually, pressure mounted for these professionals to adhere to fiduciary standards. There previously hadn’t been much coordination or regulation among professionals. Thus, they developed a reputation for giving biased advice to sell more products even if the products didn’t fit the needs or circumstances of the consumer.

Bottom Line

Although the terms financial advisor and financial consultant mean the same thing, the distinction is important to understand. Gathering ample knowledge about the financial advisor industry will make your final choice a much safer bet. To figure out what kinds of specializations an advisor might have, pay close attention to their designations.

Financial Advisor Tips

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• When searching for a financial advisor to work with, try to stick with advisors bound by fiduciary duty. When an advisor is a fiduciary, they legally must act in their client’s best interests at all times.
• You should always look at a firm’s Form ADV, which is the SEC paperwork that all RIAs must fill out. In this two-part report, you can learn everything from how the firm will allocate your investable assets to whether it has an in-house expert on retirement planning.

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