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When you need help putting together a solid plan for your money, you might seek out financial consulting services. A financial consultant can offer advice and guidance on things including investing, retirement planning, and building wealth. You may also hear financial consultants referred to as financial advisors, as the terms are often used interchangeably, though there may be differences.
What is financial consulting designed to do? In simple terms, it’s all about helping clients formulate a strategy for managing their money. What working with a personal finance consultant looks like for you can depend on your situation and goals.
Key Points
• Broadly speaking, financial consultants help clients identify strategies to help them reach financial goals.
• Services offered by financial consultants may include investment management, estate planning, tax planning, and retirement planning, among others.
• Financial consultants and financial advisors may hold certificates or designations that reflect advanced training, such as Certified Financial Planner® (CFP®) or Chartered Financial Analyst® (CFA®)
• Choosing the right consultant requires evaluating the scope of services they offer, their professional certifications and designations, their fee structure, and more.
• Robo advisors typically charge less for the automated portfolio management services they provide. However, robo advisors may lack the human element that can be helpful in navigating sensitive financial decisions.
What Is a Financial Consultant?
Financial consultant broadly refers to someone who offers advice about money — be it financial or retirement planning or buying stocks or other securities — in a professional capacity. A financial consultant may work independently or be employed by a financial consulting firm, and they may offer services online or in person.
Examples of Financial Consulting Services
Financial consultants may offer a variety of services to their clients, depending on their credentials and focus. Again, those clients may be individual investors, business owners, or even nonprofit organizations. The types of services a financial consultant may offer include:
• Basic financial planning, such as creating a household budget
• Estate planning
• Tax planning and legacy planning
• College planning
• Succession planning for clients who own a business
A financial consultant’s overall goal is to help clients create a plan for managing their money. Financial consultants may work with a diverse mix of clients, or niche down to offer their services to a specific demographic or client base, such as dual-income couples with no kids, or members of the LGBTQAIP+ community.
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Financial Consultants vs Financial Advisors
The terms “financial consultant” and “financial advisor” are often used interchangeably. Both may broadly refer to professionals who offer advice in the financial services sector, whether they’re investment advisors or help with money management. There may be some subtle differences — a financial consultant may be hired for a discreet project, for example, while an advisor may offer ongoing portfolio management — but their services may overlap.
What’s important, however, are the professional credentials and the fiduciary status of the financial expert. For example, a Certified Financial Planner®, who may provide comprehensive, long-term financial planning, is registered by the CFP Board, while a Chartered Financial Analyst®, who may handle fund management or complex investment analysis, is certified by the CFA Institute®.
Some licensed professionals, such as the two noted above, may also more specifically be referred to as financial planners, which are professionals who may create a holistic financial plan taking into account the different aspects of an individual’s life or (with a CFA®) a financial group’s investments.
Other Names for Financial Professionals
Financial consultants and financial advisors can go by more specific names, depending on which professional certifications they hold. Certifications and designations signify that a consultant or advisor has completed advanced training and education in a particular area. Here are some of the most common designations for financial professionals:
• Certified Financial Planner® (CFP®)
• Chartered Financial Consultant® (ChFC®)
• Chartered Financial Analyst® (CFA®)
• Investment Advisor Representative (IAR)
• Accredited Investment Fiduciary® (AIF®)
• Certified Public Accountant (CPA)
• Certified Annuity Advisor (CAA)
Navigating the alphabet soup of designations for financial consulting services can be confusing, and it helps to understand what type of advice you need.
For instance, if you want to work with an advisor who can help with everything from budgeting to retirement planning, then you might choose a Certified Financial Planner®. On the other hand, you might want to work with a Chartered Financial Consultant® if you’re specifically seeking help with stock investments and asset management.
The main thing to know about financial consulting services is that there’s more than one option to choose from. Taking time to research a consultant or advisor’s background and qualifications can make it easier to find the right person to work with when you need consulting services.
When Would You Need Financial Consulting?
Working with a financial consultant is a personal decision. With that in mind, you might start working with a consultant at any time if you feel that you need help managing your finances. If you need more specific examples of when it makes sense to hire a financial consultant, here are a few scenarios to consider:
• Your parents pass away, leaving you $500,000 in assets. You might work with a financial consultant to figure out the best way to maximize your inheritance while minimizing taxes.
• After 15 years of marriage, you and your spouse have decided to divorce. To plan financially for the divorce, you decide to hire a financial consultant to help you create a plan for managing the assets that you’re leaving the marriage with.
• You’re a parent to a child with special needs, who will require long-term care after you’re gone. You reach out to a financial consultant to discuss setting up a trust to pay for their care when the time comes.
Financial consulting services can be an appropriate choice when you have a difficult financial decision to make or when you’re trying to navigate a situation that feels overwhelming. Winning the lottery, for instance, could leave you paralyzed with indecision about what to do with the money.
A financial consultant can also help you move through changing life stages. That can include getting married or divorced, having a child, starting or selling a business, or changing careers. Financial consultants can look at the bigger financial picture to help you get through the changes while keeping your long and short-term goals in sight.
Finding the Right Financial Consultant
Finding a financial advisor starts with taking inventory of your needs to determine what kind of advice is appropriate. Once you’ve figured out what kind of help you need, the next step is creating a list of advisors in your area that you might want to work with.
Asking questions can help you get a feel for how an advisor operates. Here are some examples of the types of questions you might want to ask:
• What kind of financial consulting services do you offer?
• Do you hold any professional certifications or designations?
• Do you specialize in working with a particular type of client?
• What is your investment style?
• How are your fees structured, and what do you charge for consulting?
• What is your preferred method of communication?
• How often will we meet?
Robo Advisor vs Financial Advisor
If you’re considering a robo advisor, then it may be a good idea to look at how the platform manages portfolios, what benefits or features are included, and what you’ll pay for its services.
Robo advisors offer automated portfolio management services. While some robo advisors may offer a certain degree of human support, they use algorithms to determine and manage portfolios that align with your goals, time horizon, and risk level. Should you choose a robo advisor vs. financial advisor? There are some pros and cons to consider.
On the pro side, a robo advisor can be a less expensive way to get portfolio recommendation and management services. The typical financial advisor cost is around 1% of assets under management per year, though this will vary depending on the service and amount of assets under management. Robo advisors may cost much less, with some offering services for a fraction of what a human advisor would.
Of course, there’s a trade-off to consider, since you typically wouldn’t be getting the same level of individualized support as you would with a financial advisor. For instance, if market volatility sets in and you’re tempted to sell off stocks in a panic, a robo advisor may not have the human support available or the personalized knowledge to talk you through it the way a human advisor could. Taking that into consideration can help you decide which one might be right for you.
The Takeaway
A financial consultant’s job is to help you feel more secure and confident when making decisions about your money. Whether you need a consultant’s services or not can depend on where you are financially right now and where you want to go in the future.
There are a range of options to choose from. A common first step in choosing a financial professional is clearly defining your goals and the scope of your needs, such as whether you may need help with a more comprehensive plan or a specific facet of your financial life.
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FAQ
Is a financial consultant the same as a financial advisor?
Financial consulting and financial advisory services are often used synonymously. Both may be used as umbrella terms for professionals within the financial sector offering advice or planning services. A financial consultant or a financial advisor may provide advice about topics ranging from investing to retirement planning to estate planning. Consultants may offer their services on a shorter, one-time basis, while financial advisors may work with clients long term.
What does a financial consultant cost?
What you’ll pay for financial consulting services can depend largely on the type of professional you’re working with. A typical financial advisor’s fee is around 1% of managed assets annually, though it’s possible to pay more or less, depending on the services you receive. Robo advisor portfolio services may cost less, though they generally lack the same degree of individualized, human support.
What does a financial consultant do?
Financial consultants help their clients create a plan for managing money. A financial consultant may work with individual investors, businesses, or organizations to offer financial advice. Financial consulting services may cover a broad scope of topics or concentrate on just one or two areas of financial planning.
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