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A financial consultant is a type of financial advisor. A financial consultant will conduct an audit of your current financial situation and strategize a plan to help you reach your future goals.
Financial consultants work with their clients to better understand their assets and what they want those assets to do for them in the future. For example, if a client wants to save for retirement, but isn’t sure how, a financial consultant can recommend the type of retirement account to use, suggest specific investments and answer questions about how much to save.
Depending on their training, background and certification level, financial consultants may be able to assist clients with more specialized needs like tax preparation and insurance.
To be clear, not all professionals who call themselves financial consultants hold a ChFC.
The terms “financial consultant” and “financial advisor” are often used interchangeably, but some financial consultants hold a designation called chartered financial consultant, or ChFC. ChFCs may offer more specialized financial planning than other financial advisors, such as business or divorce planning. To be clear, not all professionals who call themselves financial consultants hold a ChFC. Always ask any potential financial advisor about the specific certificates they hold.
Financial consultants look at the whole picture of a client’s financial life, including debts, assets, expenses and income, to help clients determine what those goals should be. Financial consultants who have the proper licenses may also manage their clients’ investments.
The kinds of services you receive from a financial consultant will also depend on the type of consultant you work with. There are three major options for people who are looking for a financial consultant or financial advisor:
1. Robo-advisors provide inexpensive portfolio management. If you’re interested in investing but don’t want to manage your investment portfolio yourself, a robo-advisor can do it for you. Some robo-advisors also offer financial planning services and tools.
2. Online financial planning services offer both investment management and other forms of financial advice. If you need more comprehensive financial planning than just investment management, an online financial planning service is less expensive than an in-person advisor.
3. In-person financial consultants or advisors tend to be the most expensive, but developing a relationship with the same advisor over many years can be beneficial. An in-person advisor can get to know your personality, your family and your community — which can be a source of comfort when you’re buying a home, saving for retirement or figuring out how to pay for your child’s college tuition. Here are 10 questions to ask a financial advisor.
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There is often no difference between a financial consultant and a financial advisor. Many investment firms use the terms interchangeably.
Both financial consultants and financial advisors can hold a variety of licenses or designations. Many hold FINRA licenses, such as Series 7 and 66 licenses, which allow them to sell investments. (FINRA is an organization that regulates broker-dealers.) Others may be ChFCs or hold another specialized certification, such as a certified financial planner, or CFP.
Because there is little regulation governing what finance professionals call themselves, the duty is on the consumer to be extra diligent when working with one. One of the best ways to ensure you can trust your financial consultant is to find a fee-only fiduciary. Financial consultants or advisors who are fiduciaries don’t accept commissions for investments they sell and are required to work in their clients’ best interest.
Always check a potential advisor’s background to find out exactly what their certifications and licenses mean. For example, some CFPs are fee-only fiduciaries, but not all.
» Need help? Learn how to choose a financial advisor
Whether you need a financial consultant depends on your circumstances. If you have a fairly simple investment portfolio, you could use a robo-advisor as a low-cost way to manage those investments if you don’t feel comfortable doing it yourself.
If your investments are somewhat complex, or you need help on topics other than investment management — like estate planning, tax help or paying off debt — it may be worth working with a financial consultant, or looking into online financial planning services.
It may be a good idea to get some advice from a financial consultant when you experience major life changes or events. Getting married, having a child or changing your job can have serious implications for your finances. Talking with a professional can help you navigate these changes and make adjustments to your overall financial plan.