What Is a Financial Consultant? Discover Their Role in Growing Your Wealth

Financial consultants can help clients develop an overall financial strategy and address specific needs such as retirement planning, tax strategy and more. Here’s what you should know about financial consultants including when it’s best to hire one and how to find a financial consultant in your area.

What is financial consulting?

Financial consulting involves developing an overall financial plan including retirement planning, estate planning, tax strategies, debt management and more. Financial consultants are very similar to financial advisors and the two terms are often used interchangeably.

A financial consultant may also hold the chartered financial consultant (ChFC) designation, but the designation isn’t required to call yourself a financial consultant. Be sure to understand the education and professional certifications of a financial professional before hiring them.

These are the common types of financial consultants and how they can help. 

Financial consulting may also refer to management consulting, where consultants are hired by a company or organization to work on specific projects or develop solutions to financial challenges.

What do financial consultants do?

A financial consultant will first get an overall picture of a client’s financial situation. They’ll work to understand your assets and liabilities, your short- and long-term financial goals, as well as your risk tolerance.

From there, financial consultants can help you come up with a plan that addresses your needs and goals. They may help you set up retirement accounts, determine how much you need to save in order to meet your goals, or identify suitable investments for your portfolio.

You’ll likely experience a variety of financial needs during your life and a financial consultant can assist with many of them. Everything from saving for retirement to estate planning to dealing with unexpected job loss may be areas that financial consultants can assist with.

Financial consultant vs. financial advisor: How they differ

Financial professionals use different terms to refer to themselves and hold many of the same certifications, so there is often little difference between a financial advisor and a financial consultant. However, just like in other professions, just saying you’re a financial consultant or advisor doesn’t make you a good one. 

Pay attention to which professional certifications a consultant or advisor holds, their education and area of expertise and if their credentials match your needs. You’re looking for expert help. Certifications help show that expertise. 

Financial consultants may hold the ChFC, chartered financial analyst (CFA) or certified financial planner (CFP) designations. They may have additional licenses that allow them to sell investments. Financial advisors may also be CFAs, CFPs or personal finance specialists. 

One of the best questions to ask a financial consultant or advisor is whether they’re a fiduciary, which means they’re legally required to put a client’s interest before their own or their firm’s.

Since consultants and advisors can be so similar, look past the title and focus on picking the financial professional with the right expertise for your needs.

When to get help from a financial consultant

Hiring a financial consultant comes down to your individual circumstances and needs. In general, the smaller your investment portfolio is and the simpler your financial life operates, the less likely it is that you’ll need a financial consultant. You may benefit from using a robo-advisor, which automates the investing process based on your goals and risk tolerance for a lower cost than traditional advisors.

However, if you have a more complicated financial situation or need help with specific areas such as tax strategy or estate planning, a financial consultant could be particularly helpful to you.

Times you might need a financial consultant include:

• Your finances are complicated. If you have multiple income sources, numerous investments or you own a business, a financial consultant can help you develop a plan.
• You need to consolidate or eliminate debt. Having a large amount of debt in various places can make it difficult to eliminate it. A finance pro can help you weigh your options and come up with a plan.
• Tax season is approaching. A financial consultant can help with tax planning questions, such as how to maximize deductions or credits.
• You recently had a major life event. Major life events, such as college graduation, getting married or having a child can introduce new complexity to your finances.
• You’re planning your estate. Estate planning can be challenging, but financial consultants are well-equipped to help you plan accordingly.

Some consultants may require a certain amount of assets before agreeing to take you on as a client, so you may need to wait until your portfolio has reached a certain level to start working with a specific consultant.

You also may be able to schedule one or two sessions at an hourly rate if you have a handful of questions about the financial impact of specific life events such as marriage, having children or receiving an inheritance.

Need an advisor?

It’s easy to find a qualified financial advisor to guide you through life’s most important financial decisions.

Try Bankrate’s free AdvisorMatch service to quickly get connected to a CFP® professional who can help you achieve your financial goals.

Financial consultant fees and costs

The average cost of financial advisors depends on the fee structure they use. Some advisors charge a set retainer fee or by the hour. The cost of a fixed fee can range from $2,000 to $7,500 per year, or higher, depending on the complexity of your financial situation and the services the advisor will provide. Hourly fees can range from $200 to $500 and up.

With a percentage-based fee, you’ll pay a percentage of your account balance, usually between 0.25% and 1% per year. The majority of firms charge a percentage of assets under management (AUM) for ongoing advisory services.

Over time, these fees can make a significant difference. For example, suppose you start with $1,000 and invest $500 per month for 30 years. If you have a 7% annualized rate of return on average, a 0.25% fee results in a balance of $568,612 after 30 years. If you increase the fee to 1%, all else being equal, your balance after 30 years would be $495,372. This means that an extra 0.75% management fees costs you more than $70,000 over 30 years.

How to find a financial consultant

Finding a good financial consultant can be challenging, you can make your life much easier with the right approach. Start with the following steps:

1. Determine your financial needs. Determine why you need a financial consultant, such as for tax, investment or retirement planning.
2. Find the right kind of professional. As mentioned, there are many kinds of financial credentials, such as CPA, CFP and ChFC. Each may offer different services. Match their services and expertise to the help you need.
3. Check registration. It’s generally a good idea to verify your financial consultant credentials by using databases such as BrokerCheck and Investor.gov. Remember to also ask if they’re a fiduciary.
4. Look for reviews and testimonials. No matter how good a salesperson your financial consultant is, results are what matters most. Look for reviews online to get a sense of the experience past clients had working with them.
5. Check their fees. Financial consultants may have different fee structures, such as a flat rate or an AUM fee. Seemingly small differences in AUM fees can make a big difference over time.

FAQs

• Who are the Big 4 financial consultants?
  

  The big four financial consultants are Deloitte, PwC (PriceWaterhouseCoopers), EY (Ernst & Young) and KPMG. These companies work with other businesses rather than individuals.

• How do you become a financial consultant?
  

  There are several possible paths to become a financial consultant. However, it generally starts by getting an education in finance, economics or business. Later, you will likely pursue a financial certification, such as ChFC or CFP.

• Can anyone call themselves a financial consultant?
  

  Financial consultant is not a formal designation, as there are no laws that say one must meet certain criteria before using it. This is why it is important to properly vet your financial consultant before you start formally working with them.

Bottom line

Financial consultants are professionals who can help you develop a financial plan in areas such as tax, estate and retirement planning. They can also help you set up an investment portfolio to meet your needs. Financial consultants may hold various credentials, such as ChFC, CFP or PFS.

There is little difference between a financial consultant or financial advisor, but neither is a formal distinction. That’s why it’s important to vet them in advance, as well as ask if they are a fiduciary. Don’t forget to check their fees, too, as this can have a significant impact on the cost of their services.