Key Takeaways
- Financial consultants, also referred to as financial advisors, are financial professionals who help people manage money.
- They commonly provide services relating to tax planning, retirement planning, investing and estate planning.
- If you need a financial consultant, enlist the services of an experienced, fee-only fiduciary. Such consultants are legally and ethically committed to always acting in your best interest.
What Do Financial Consultants Do?
A financial consultant is a professional that helps individuals and businesses manage their money, make sense of complex financial issues and plan for near- and long-term objectives. Offerings vary, but the most commonly provided services are designed to enhance budgeting practices, streamline banking frameworks, manage debts, optimize insurance coverages, manage investments and implement comprehensive retirement plans and estate plans. A full-service consultant offers guidance in all these areas, while a specialized consultant maintains a narrow focus with expertise in one or a few areas.
Most consulting arrangements span long periods of time and entail periodic touch-base meetings to discuss your ever-evolving lifestyle and financial needs as well as any economic and legislative developments that could impact you. However, some consulting arrangements are short in nature. Short-lived engagements are usually structured to address a very specific one-time need, such as establishing a plan to reduce debt, conducting a business valuation or establishing a trust account.
People of all ages should consider the benefits of hiring a financial consultant to review their current plan or help establish one. Even young investors can benefit from establishing prudent financial habits early.
Stephen Kates, CFP®Expert Contributor
Financial Consultant vs. Financial Advisor
A financial consultant is essentially the same as a financial advisor. Historically, the terms have been tossed around and used interchangeably. In recent years, a degree of distinction has emerged due to differences in the naming conventions for some well-known financial designations, such as those highlighted below.
Common Financial Professional Designations
Certified Public Accountant (CPA)
Consultant or Advisor
- Tax Planning and Filings
- Audit and Assurance
- Bookkeeping
- Business Management
- Forensic Accounting
- A host of financial planning services via the Personal Financial Specialist (PFS) add-on designation
Certified Financial Planner™ (CFP®)
Advisor
- Financial Planning
- Tax Planning
- Insurance Optimization
- Investing
- Retirement Planning
- Estate Planning
Chartered Financial Analyst (CFA)
Consultant or Advisor
- Investment Policy Formulation
- Portfolio Management
- Capital Budgeting
- Risk Management
- Asset Valuation
- Statistical Modeling
Certified Public Accountant (CPA)
Consultant
- Financial Planning,
- Tax Planning
- Insurance Optimization
- Investing
- Retirement Planning
- Estate planning
Let’s Talk About Your Financial Goals.
When Do You Need Financial Consulting Services?
Generally, consulting services make sense when you have complex financial affairs and a substantial amount of money to manage. Some people prefer to manage things on their own, regardless of the complexity and size of their financial accounts, but most people lack the resources to do so effectively.
Regardless of your personal situation, there are circumstances when it makes sense to (at least) consider whether a financial consultant should be retained. The following scenarios are at the top of the list.
When You Might Benefit From Hiring a Financial Consultant
- You cannot seem to stay on track financially. Perhaps you lack a budget or your debts are hard to manage.
- You recently inherited a large sum of money.
- You are in the process of a major life change, such as getting married, buying your first home, starting a family or getting a divorce.
- You are contemplating starting a business or selling an existing one.
- You are retiring in the next 10 years and lack a comprehensive plan.
How To Find a Financial Consultant
If you need help finding a financial consultant, a great place to start is with the CFP® Board. This non-profit organization sets and enforces standards for the highly respected Certified Financial Planner™ (CFP®) certification. The CFP® designation ensures that consultants have a high level of proficiency and always act in a fiduciary capacity. Essentially, this means he or she is legally and ethically bound to always act in your best interest.
Fiduciary consultants will never encourage you to buy investment vehicles or insurance products that are inappropriate for you or could run counter to your long-term investment objectives and tolerance for risk. They bill their clients on a fee-only basis, and they never maintain third-party relationships that introduce conflicts of interest.
Other Frequently Asked Questions About Financial Consultants
The extent of a financial consultant’s service offering depends on his or her service offering. A full-service consultant offers guidance on budgeting, banking, managing debt, optimizing insurance coverages, tax planning, retirement planning, investing and estate planning. A specialized consultant will focus on one or a few of the aforementioned areas.
Generally, the larger and more complex your finances, the more likely you need a financial consultant. This rule of thumb is accentuated if you have minimal competency and/or capacity to manage your financial affairs. In other words, if you have a lot of money and are subject to complex arrangements — but do not have the time or experience to keep tabs on everything — a financial consultant is highly recommended.
