Financial Consultant: What They Do and Why You Need One

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Overwhelmed with your finances but don’t even know where to start with getting them in order? You have a few options: bury your head in the sand, subscribe to personal finance blogs and podcasts to learn from others, or hire a financial professional. If you’ve found your way to this article, you might be leaning towards the latter.

Most of us aren’t taught the basics of building and protecting our wealth by our parents, and we’re certainly not educated about it in school. Instead, we’re just thrown into the deep end and expected to fend for ourselves when we become “adults” — often leading to complications.

Or maybe you consider yourself well-informed, but you don’t have the time or resources to manage your increasingly complex financial situation.

Either way, you can save yourself a big headache by hiring a financial consultant.

What is a Financial Consultant?

First things first: what is a financial consultant? A financial consultant provides personal finance advice and guidance to help individuals meet their goals and overcome obstacles along the way.

Think about making investments, saving for college, retirement planning, insurance, and crafting long-term plans.

We’ll go into a lot more detail shortly about exactly what kind of services financial consultants might offer and what you can expect from them. Still, for now, you need to know that they’re here to guide you on a path towards financial independence or help with your unique circumstances.

Financial Consultants vs. Financial Advisors

If you’ve already done a little research on getting financial advice, you might have also come across the term “financial advisor.” What’s the difference between the two roles, you ask?

On the surface, they look extremely similar. Both give financial advice to their clients on similar finance topics, both work directly with clients to guide them through their queries, and both can be either self-employed or work on behalf of companies.

It’s also true that both professionals may be able to buy and sell financial products on behalf of their clients.

However, there could be a few subtle differences. While financial advisors help break down the financial situation of individuals and make plans, financial professionals holding themselves out as financial consultants may be better placed to help with more specific tasks and strategies. Rather than coming up with basic plans, consultants may create complex strategies involving collaboration with other financial professionals (like accountants and investment managers).

Another potential distinction could be that financial consultants tend to limit themselves to occasional or one-off appointments with their clients. In contrast, financial advisors often foster a more long-term relationship.

Many claim that the distinction between financial consultants and advisors is just a matter of semantics, while others believe there’s a substantial difference — and to make matters even more confusing, no two financial advisors or consultants are the same.

Before you agree to work with any financial professional, it’s best to ask them how they carry out their role, how they are compensated, the areas they focus on, and why you should hire them. Assume nothing.

Specializations

The difference between financial advisors and financial consultants isn’t the only important aspect to be aware of when you start looking to hire a financial consultant or advisor. Even within the same category, not all financial professionals are made equal!

Financial consultants (and advisors) can have different specializations, meaning they’re better equipped to help with some needs more than others. If you know you need help preparing for retirement, for example, you may be able to find a financial consultant who exclusively helps clients with this.

Of course, they’ll still be able to offer some insight into other areas — don’t expect the same level of detail in their answers.

What Do Financial Consultants Do?

It would help if you had a brief understanding of what financial consultants do by now, but you’re probably wondering exactly what to expect from them.

When you first arrange to work with a financial consultant, it generally involves at least two appointments: one where the consultant tries to get an overall understanding of your goals, and another where they may begin to offer specific advice.

These recommendations will mostly relate to your expenses, income, investment assets, and goals. For example, a client might have a salary of $120,000 and be wondering how to allocate their money to afford to send their two children to college in ten years while preparing for a comfortable retirement.

Tasks financial consultants help with include:

  • Analyzing your personal assets and liabilities
  • Buying and selling investments
  • Giving recommendations on insurance policies
  • Making plans to help you reach specific financial goals
  • Creating budgets
  • Liaising with other financial professionals

However, although financial consultants can certainly help with planning and making investments, they don’t tend to deal with the finer details of complicated portfolio management and analysis. If this is your top priority, it might be a financial analyst you need to speak to or ask if the financial consultant works with a financial analyst who will play a role in overseeing your investments.

How Can Financial Consultants Help You?

Still not sure whether hiring a financial consultant is the right move for you? Don’t let your uncertainty risk keeping you from getting the guidance you deserve. There’s never a bad time to start taking your finances seriously, so even a free introductory call with a financial consultant may be well worth your time.

Let’s run through some common scenarios financial consultants can help you with.

If you’ve recently been through a significant life event that will impact your finances, like marriage or retirement, it’s a great time to bring a financial consultant on board to help you plan everything properly, especially if you’ve been through job changes and have multiple investment accounts and retirement plans that you can barely keep track of them all.

Similarly, if you’re hoping to make a big purchase such as a house or funding a child’s education, the help of a consultant can be useful to ensure you plan it out carefully.

However, although almost everyone can benefit from professional help, bringing a financial consultant on board doesn’t always make sense.

You might not be quite ready for this step if you’re starting your life and barely have enough money to meet your monthly expenses; never mind save or invest anything. A consultant may not be able to help you much if you have limited capital, but you’ll still have to fork out money on their fees. In this case, it might be a better idea to opt for a financial coach or robo-advisor instead — more on this later.

How to Find a Financial Consultant

Convinced that working with a financial consultant is the way forward? You might be wondering exactly how to find one and what to consider.

A great place to start is wealthtender.com, a website dedicated to helping people find the right financial professionals and resources for their individual needs. You’ll find directories for financial advisors and coaches, plus hundreds of personal finance blogs and podcasts worth exploring.

The world of financial consultants and advisors isn’t the Wild West — although every country (and sometimes state) has its own rules and regulations, these professionals generally can’t operate without proper licenses and certifications.

Beyond required licenses, it’s worth considering if you should hire a professional who has pursued a top financial certification to distinguish themselves from other financial consultants and advisors.

For example, a Chartered Financial Consultant (ChFC) helps clients with complex situations and has passed a comprehensive exam covering retirement planning, insurance, taxation, and investing.

Online vs. in-Person

When it comes to making such huge decisions about their finances, most people would prefer to meet someone in person to advise them. This is a great way to develop a relationship and build trust.

However, another option is to find an online financial consultant. Although it might not sound as appealing to carry out such an important process over a video call, this can make it easier to find someone who specializes in the particular area you need help with.

It can also be a great choice for anyone who lives somewhere more remote and cut-off with access to fewer options. Plus, you might save some money!

Financial Coaches

Especially if your focus is on getting out of debt or building an emergency fund, a financial coach is likely a better financial professional for you than a financial consultant or advisor. A financial coach will focus on your day-to-day money habits like budgeting, debt, and saving to help you identify which habits need to change to reach your bigger goals, then supports you while you work toward that change.

Robo-Advisors

If your budget is limited, a final option you might want to consider is using a robo-advisor: an automated tool that offers investment and financial advice, usually via an app or online platform. For instance, Betterment is a dedicated platform for retirement help, and even Vanguard has its own Digital Advisor feature.

Unless you want very simple and generic investment advice, this shouldn’t be considered a substitute for working with a trained professional. But if you already know you can’t afford anything else, it’s better than picking stocks at random and hoping for the best.

Get the Help You Need

If you’re not used to paying for financial services, the idea of spending money to hire a financial consultant might seem indulgent. Maybe you feel guilty about it.

But don’t think of this as an expense — instead, it’s an investment into your financial future. Sometimes, you need to spend a little money today to make a little more money tomorrow.

Parting with a few hundred (or thousand) dollars today could make an exponential difference to your nest egg when you retire or the financial wellbeing of your loved ones.

If that’s not worth the money, I’m not sure what is!

This article originally appeared on Your Money Geek and has been republished with permission.

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