If you’re considering hiring a financial consultant, it’s important to understand what they do and how they can benefit you.
A financial consultant is a type of financial advisor who provides personalized advice and guidance on a range of personal finance topics like investment management, tax planning, and estate planning.
Working with a financial consultant can help you make more confident financial decisions and achieve your short-term and long-term goals.
What Is a Financial Consultant?
A financial consultant is a professional who provides financial planning services for clients. They help individuals and businesses make informed decisions about investments, taxes, insurance, and retirement planning.
A financial consultant can work independently or as part of a larger financial services firm. They usually have a deep understanding of financial markets and trends, with strong analytical skills.
Clients of financial consultants could be individuals, small business owners, or large corporations.
Financial consultants may have different certifications that demonstrate their expertise, competence, and specialty. Obtaining these certifications can enhance a financial consultant’s credibility and help them provide better service to their clients.
Here are a few common ones to look for:
- CFP: The Certified Financial Planner (CFP) designation is one of the most widely recognized. CFPs offer a wide range of financial planning services, from everyday budgeting to complex investment strategies.
- ChFC: Chartered Financial Consultants(ChFCs) provide a similar suite of services to CFPs, from taxes to estate and retirement planning.
- CFA: Chartered Financial Analysts (CFAs) primarily focus on investment analysis and large-scale portfolio management.
- CPA: The Certified Public Accountant (CPA) certification is also valuable for financial consultants specializing in tax planning and accounting.
- CLU: Chartered Life Underwriters (CLUs) specialize in helping clients purchase annuities and life insurance.
What Does a Financial Consultant Do?
The ultimate goal of a financial consultant is to help clients achieve their financial goals and maximize their wealth over time.
They often take a holistic approach and get a sense of their client’s financial situation, factoring in everything from their credit card or student loan debt to their career path and income to establish a personalized financial strategy.
Specifically, they help clients in some of the areas below:
- General financial advice
- Investment decisions
- Wealth management
- Retirement planning
- Estate planning
- Tax strategy
Financial Consultant vs Financial Advisor
There are several types of financial professionals out there, and spotting the differences between them can be challenging.
Financial consultant and financial advisor are often used interchangeably in the finance world. Rather than focusing on the names “consultant” and “planner” to decide who to work with, you need to pay attention to professional designations.
Credentials like CFA, CFP, or ChFc show an advisor or consultant’s education and training. They can also clue you into their areas of specialty.
Regardless of the type of financial consultant you choose, work with one that is a fee-only fiduciary.
Fiduciaries are legally bound to act in your best interest, and they have to report any potential conflicts of interest to you.
When Should You Hire a Financial Consultant?
Here are a few instances when hiring a financial consultant makes sense:
- Personal finance: A financial consultant can be a great asset if you need help with decision-making in your day-to-day finances, helping out with areas like budgeting, debt, and savings.
- Retirement: It’s worth it to work with a financial advisor if you’re serious about planning for retirement. They can help build a plan for reaching financial independence, open retirement accounts, and choose investment products strategically to keep you on target.
- New business: If you’re starting a business and need assistance with creating a financial plan or securing funding, the expertise of a financial consultant can be invaluable.
- More money: Whether you win the lottery, receive an inheritance, your side hustle takes off, or you get a major promotion, it could be wise to work with a financial advisor if you get a windfall of cash.
- Life changes: In the event of a major life event like marriage, divorce, or the death of a loved one, a financial consultant can provide much-needed support and help you navigate the financial implications of these changes.
- Major purchases: When you’re considering a major purchase like a home or a car, a financial consultant can help you evaluate your options and make informed decisions that align with your financial goals.
- Investing: If you want to optimize your investment portfolio and ensure that your money is working efficiently, a financial consultant can help you define your risk tolerance and goals, provide investment strategies, and diversify your investments.
How to Find a Financial Consultant
If you aren’t sure where to look for a financial consultant, here are a few steps you can take to land on the right one for your needs.
- Identify your financial goals: Before you set out to find a financial consultant, it’s crucial to determine your financial goals. Assess whether you need help with investments, retirement planning, tax strategies, or debt management.
- Ask for recommendations: Get advice from friends, family members, or colleagues who have successfully worked with a financial consultant. Their experiences can provide valuable insights and help you make an informed decision.
- Do your research: Use Google and third-party review sites to find reputable financial consultants in your area. Read reviews, check their website or LinkedIn, and examine their credentials. You can use BrokerCheck by FINRA to vet an advisor’s credentials and background.
- Interview multiple candidates: Narrow down your options and schedule appointments with several financial consultants. Ask questions to get a sense of their experience, investment philosophy, fees, and approach to client communication.
- Consider fees and services: Understand the fee structure and the services provided by each financial consultant. Ideally, you should work with a fee-only advisor who doesn’t earn a commission on the financial products you invest in.
- Make sure they’re legit: Choose a consultant who is held to the fiduciary standard to ensure they have your best interests at heart. You should also check to ensure they’re properly licensed.
- Know your preferences: Are you looking for an advisor you can meet with in person, or are you comfortable with virtual visits? Do you prefer a well-known brokerage, or are you content with an independent advisor? Or do you just want low-cost investment management with no interaction, in which case you may want to a robo-advisor? Establish your preferences and choose accordingly.
Should You Use a Financial Consultant?
A financial consultant plays a vital role in helping individuals and businesses make smart financial decisions.
Whether you need help with retirement planning, debt management, or investment advice, these experts bring valuable insights to the table.
By leveraging their knowledge, you can navigate the complex world of finance with confidence and achieve your financial goals.
While you might think financial consultants are reserved for the wealthy or for older established professionals, there are plenty of great personal financial advisors for millennials and affordable advisory services to help you get started.